Fintech Unicorn Lufax plans to spin off its peer-to-peer lending business


Chinese fintech unicorn Lufax Holding Ltd. is considering shedding its once high-flying but controversial peer-to-peer (P2P) lending business as it considers a public listing, but no final plan has been set, Caixin has learned.

P2P loans, once a boon to individuals and businesses in dire need of cash, have come under increased government scrutiny in recent years amid a series of fraud cases, which were partly due to lax supervision.

Lufax, controlled by the financial titan based in Shenzhen and Shanghai Ping An Insurance (Group) Co. of China Ltd.plans to exit its P2P lending business, Reuters reported Thursday. In a press release the same day, the company neither confirmed nor denied the report.

Lufax has long considered divesting itself of the P2P business because the deal could be an obstacle to a listing, a source at a P2P lending company based in the southern coastal city of Shenzhen told Caixin.

Lufax has completed its Series C funding round at a valuation of $39.4 billion, Ping An said in its annual report 2018 in March. Valuation has more than doubled $18.5 billion valuation from the previous funding cycle in 2016.

Lufax is now under relatively high pressure to complete an initial public offering, Che Ning, an internet finance expert, told Caixin. The uncertain outlook for the P2P lending industry has increasingly weakened its insistence on operating a P2P business, Che said.

Shanghai Lufax Internet Finance Information Services Co. Ltd., a subsidiary operating the P2P lending business, is trying to reduce outstanding loans under its management and reduce the number of lenders and borrowers in accordance with industry-wide regulatory requirements, Lufax said in the communicated. The statement added that Shanghai Lufax’s online lending business is operating normally.

“Not a single (P2P lending) company is reassuring,” said an industry source citing financial regulators in Shanghai. Shanghai authorities are quite negative towards P2P lending platforms, including big players like Shanghai Lufax, several industry insiders told Caixin. In contrast, financial regulators in Shenzhen have a different attitude towards the industry, they said.

Another subsidiary of Lufax, Qianhai JinniuDai (Shenzhen) Internet Financial Services Co. Ltd., based in Shenzhen, also runs a P2P lending business.

End of June, Shanghai-Lufax (link in Chinese) managed 98.4 billion yuan ($14.3 billion) of outstanding loans and Qianhai JinniuDai (link in Chinese), 68.1 billion yuan, making them two of the largest P2P lending platforms in China. It is unclear how Lufax will handle the relationship between the two subsidiaries.

Lufax has yet to make a final decision on how to transform, several P2P lending industry insiders said.

In China, P2P lending companies are only subject to registration, which means they generally face looser regulation than licensed financial institutions.

Earlier this month, regulators overseeing the country’s internet finance sector told a meeting they would license a small number of P2P lending firms with sufficient capital and professional management capabilities. to apply for licenses for online consumer credit or microcredit companies.

However, it is quite difficult to obtain a consumer credit license due to the high thresholds, and there are still no clear national regulations for online microcredit companies, said a senior executive from a P2P lending company.

Currently, no P2P lending company has been granted permission to transform into an online consumer finance or microcredit company.

Since 2010, China’s banking regulator has issued less than 30 licenses for setting up consumer finance businesses. The watchdog requires each of these companies to contribute a registered capital of at least 300 million yuan, which is higher than most microcredit companies.

Apart from P2P lending, Lufax also handles other online wealth management operations. At the end of last year, it had 375 billion yuan in loans under management, according to Ping An’s annual report.

Contact reporter Lin Jinbing ([email protected])

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