Pan Gongsheng, vice governor of the People’s Bank of China, said earlier that Ant Group will launch five major reforms, including “the overall application for establishment as a financial holding company, and all institutions engaged in financial activities will be regulated as financial holding companies. A report cited by the foreign news agency pointed out that after the regulatory constraints, Ant Group’s valuation may be similar to that of banks or other mainstream financial institutions, or from the previous US$320 billion, significantly reduced to between US$29 billion and US$115 billion, a drop of more than 90%.
The report points out that the regulated Ant Group will face restrictions on all aspects of its business, including online lending, payments, wealth management and insurance, and its turnover growth will be pulled down to between 10% and 20% from 30% in November last year, thus dragging down earnings prospects.
Ant Group’s valuation will likely be similar to that of banks or other mainstream financial institutions. If Ant Group is considered a traditional bank, even a fast-growing bank like China Merchants Bank (03968) may be valued at no more than RMB 487 billion to RMB 492 billion. And in an unfavorable scenario, the market may evaluate Ant based on the MSCI China Financial Index, which would then be valued at between RMB186 billion and RMB245 billion.
The report also points out that Jack Ma currently holds a controlling stake in Ant Group, and with or without Ma, Ant Group, a Chinese fintech giant, could see its greatness decline in the future.
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