As Ant Group was working in August towards its giant IPO, at least two smaller Chinese banks with existing ties to the fintech firm decided to stop sourcing new consumer loans from it, people with knowledge of the matter said.
For its lending business, Ant originates demand from retail consumers and small businesses and passes that on to about 100 banks for underwriting, earning fees from the lenders and putting its own balance sheet at minimum risk. With its unique business model and the absence of peers in China and elsewhere, analysts say Ant has mainly thrived as a technology platform away from banking sector's regulations despite its bouquet of financial offerings.
The people, who received the PBOC guidance and have direct knowledge of the banks' actions, declined to be named and didn't want the lenders' names to be mentioned as they were not authorised to speak to the media. Ant is targeting a valuation of about US$250 billion or more in its IPO, similar to the market cap of Industrial and Commercial Bank of China , the No.1 bank by assets globally.