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Chinese online lender Dianrong cutting thousands of staff, closing stores: sources
DIANRONG, a Chinese peer-to-peer (P2P) lender backed by Tiger Global Management and Standard Chartered plc (StanChart), is cutting thousands of staff and closing stores, according to people familiar with the matter, as it tries to reduce costs and comply with authorities' efforts to shrink the industry.
Shanghai-based Dianrong plans to lay off as many as 2,000 employees and is shutting about 60 of its 90 brick-and-mortar outlets, which helped verify borrowers' identities and qualifications, said one of the people, who asked not to be identified because they are not authorised to speak publicly.
Disgruntled current and former employees have in recent days taken to social media to demand compensation.
The moves show that even the biggest players in China's online lending industry haven't been spared in the government crackdown on financial risk.
Authorities stepped up their efforts to shrink the market as many platforms failed, causing financial woes for thousands of individuals.
The P2P sector, once one of the fastest-growing areas of the shadow banking system, is now estimated to be worth US$114 billion, according to data compiled by Shanghai-based Yingcan Group, from a peak of about US$200 billion.
Dianrong said in an email that it "continues to optimise" its structure in response to regulatory policies and industry changes.
The company has now settled with unhappy former employees, it added.
Earlier this month Chinese officials said they had frozen about 10 billion yuan (S$2.01 billion) of assets of more than 380 P2P lenders in an escalated investigation into illicit financing.
The operation spanned 16 countries and regions and had led to the arrests of 62 suspects implicated in P2P frauds since June.
Founded in 2012, Dianrong has raised funds from investors including from Tiger Global, Singapore's sovereign wealth fund GIC Pte, StanChart and Orix Corp.
The firm was valued at US$1.2 billion at the last round of financing, and at one stage the online lender was considering an initial public offering.
Dianrong started shrinking its business about 10 months ago, partly in response to regulatory pressure, one of the people said.
The number of Chinese P2P lenders may drop by 70 per cent this year to as few as 300, according to a Yingcan Group estimate. Only about 50 firms will survive, analysts at Citigroup Inc predicted. BLOOMBERG