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Ping An offers up a glimpse of China’s bank reboot
[HONG KONG] Ping An Insurance is offering up a bet on China's bank reboot. The financial giant is preparing a roughly US$1 billion Hong Kong listing for OneConnect, which helps mid-sized mainland financial firms plug their technology gaps with artificial intelligence-enhanced credit checks, cloud computing and apps. Beijing wants more lenders to keep cash flowing into the private sector, but there is pressure to clean up bad debts, too, and few smaller players can manage both. It's a dilemma that should leave a lucrative niche.
OneConnect, backed by SoftBank's gargantuan Vision Fund, is the latest of Ping An's new-generation ventures to go public, as the Chinese behemoth turns itself into a financial-technology powerhouse. Last year, it listed the unit behind healthcare platform Good Doctor, though it held off online lender Lufax, due to regulatory scrutiny, and OneConnect, when markets tumbled.
There is plenty to like, though, as the startup comes back. Part IBM, part credit-rating agency with a touch of consultancy, it serves mid-tier banks, insurers and funds, building online banking tools, setting up searches for new customers through messaging app WeChat, and beefing up risk management with credit checks and facial-recognition software. Customers applying for big loans, for example, are interviewed online with technology that reads their expressions to determine whether they're being truthful. The proposal is alluring even without gimmicks: large parts of China's US$40 trillion banking system are struggling, leaving little to invest in much-needed IT overhauls. The startup serves around 450 of over 2,000 Chinese banks.
There is regulatory risk, of course: banks and funds are under close scrutiny from Beijing and any flashpoint, say a problematic default, would mean costly regulatory and political backlash. There are questions around consistency too: Bloomberg reports Ping An tempered valuation expectations after OneConnect didn't quite perform as expected, reducing the amount on offer from US$3 billion and pushing the price tag to US$8 billion. That's barely more than the US$7.5 billion it was valued at last year.
Beijing's own banking ambitions, however, should ultimately work in OneConnect's favour. Ping An's backing is hard to replicate, too. After a rollercoaster year for technology listings in 2018, realistic pricing will only help.
China's Ping An Insurance is preparing for an initial public offering of its OneConnect unit, which provides financial-management technology to small and medium-sized banks and other financial institutions, Bloomberg reported on Feb 25, citing people with knowledge of the matter.
Ping An plans to list the startup in Hong Kong as soon as the second half of 2019, valuing OneConnect at roughly US$8 billion, the report said.
Ping An initially aimed to raise as much as US$3 billion from the IPO (initial public offering) in 2018 before volatile markets forced it to delay the sale, according to Bloomberg. OneConnect tempered its valuation expectations and may offer a smaller stake after its business performance wasn't as strong as initially projected, the report added.