Business Standard

MY bank deepens push for businesses big banks won’t touch

- BLOOMBERG NEWS

MY bank, the two-year-old Chinese online lender that already has 3.5 million smallbusin­ess customers, plans to push deeper into a segment that’s long been shunned by the country’s largest banks.

MY bank wants to capitalise on its links to billionair­e Jack Ma’s Alibaba Group Holding by offering loans to the more than 10 million smaller merchants that use the company’s ecommerce platforms, MY bank President Huang Hao said in a June 29 interview. Ant Financial, Alibaba’s financial affiliate, owns 30 per cent of the online lender.

Huang is looking to win “as many as possible” of China’s 70 million to 80 million small businesses as customers, most of which have no access to bank loans because they lack collateral. MY bank was one of the first Chinese lenders — along with Tencent Holdings’s We Bank — to be establishe­d completely with private investment under a trial programme unveiled in 2014.

“We are in a different stratum from the traditiona­l banks,” said Huang, 43, who was previously head of electronic banking at China Constructi­on Bank. “We are like capillarie­s reaching every part of the society. It could be a small restaurant, a breakfast stand, no other financial institutio­n would have served them before.”

Formally known as Zhejiang E-Commerce Bank, MY bank was able to more than quadruple its lending through 2016, taking its outstandin­g loans to 33 billion yuan ($4.9 billion). Interest generated from those loans helped MY bank report a profit of 316 million yuan last year, rebounding from the 69 million yuan loss it had in the final seven months of 2015 after it started operations, according to an earnings statement posted on June 28.

Its nonperform­ing-loan ratio was around one per cent, Huang said, lower than the national average of 1.74 per cent. The bank’s technology, which runs loan applicatio­ns through more than 3,000 computeris­ed risk-control strategies, has kept delinquenc­ies in check, he said.

Still, last year’s lending explosion came at a cost, dragging its capital adequacy ratio down to 11.07 per cent by December from 18.51 per cent a year earlier. While the bank has no immediate plan to boost its buffers, it will consider measures including issuing asset-backed securities to keep capital at an appropriat­e level, Huang said.

MY bank charges its small-business customers lending rates between five per cent and 14 per cent annually, with many paying seven per cent to eight per cent, Huang said. That level is lower than the rates paid by similar clientele in some Chinese cities. For example, small businesses in the eastern city of Wenzhou paid an average of 15 per cent for loans from undergroun­d banks, according to a private lending network in the city that tracks the data.

Huang’s firm has also tried to shelter itself from funding volatility and surging interbank borrowing costs — a byproduct of China’s campaign against financial leverage — by attracting more deposits. By encouragin­g remote account openings, MY bank lured 23 billion yuan of deposits from its customers at the end of December, up from almost zero a year earlier, he said.

MY bank and Tencent’s We Bank are among eight private lenders that had started operations by the end of last year, according to the China Banking Regulatory Commission, with assets totalling 180 billion yuan and loans amounting to more than 80 billion yuan.

 ?? PHOTO: REUTERS ??
PHOTO: REUTERS

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