Microsoft Word – Ant’s Aggressive Strategy.docx
“Ant Financial has got just enough bullets to cause a small–scale financial crisis.” Economist with a State Owned Bank.
l Growing Market Share. Ant Financial has quickly taken market share from traditional banks, trust companies and other financial firms. Eventually, the regulators may reduce Ant’s consumer lending business to prevent losses by the bigger banks.
l Undercapitalized “Bank.” We estimate that Ant’s outstanding credit stands at 49x Ant Cash Now’s registered capital. This 2% capital adequacy ratio is far below the CBRC 8% requirement for commercial banks.
l Little Oversight. Ant Financial has lending data for Ant Credit Pay as it utilizes a “virtual credit card” and tracks user purchases. However, there is little data on Ant Cash Now’s loans issued directly to users. This raises red flags about potential defaults.
l Main Driver Behind Securitization. In 3Q 17, Alibaba and its finance units accounted for 82% of consumer credit ABS. This is a significant concentration of risk.