(Bloomberg) -- MYbank, the two-year-old Chinese online lender that already has 3.5 million small-business customers, plans to push deeper into a segment that's long been shunned by the country's largest banks.
MYbank wants to capitalize on its links to billionaire Jack Ma's Alibaba Group Holding Ltd. by offering loans to the more than 10 million smaller merchants that use the company's e-commerce platforms, MYbank President Huang Hao said in a June 29 interview. Ant Financial, Alibaba's financial affiliate, owns 30 percent of the online lender.
Huang is looking to win “as many as possible” of China's 70 million to 80 million small businesses as customers, most of which have no access to bank loans because they lack collateral. MYbank was one of the first Chinese lenders -- along with Tencent Holdings Ltd.'s WeBank -- to be established completely with private investment under a trial program unveiled in 2014.
“We are in a different stratum from the traditional banks,” said Huang, 43, who was previously head of electronic banking at China Construction Bank Corp. “We are like capillaries reaching every part of the society. It could be a small restaurant, a breakfast stand, no other financial institution would have served them before.”
Formally known as Zhejiang E-Commerce Bank Co., MYbank was able to more than quadruple its lending through 2016, taking its outstanding loans to 33 billion yuan ($4.9 billion). Interest generated from those loans helped MYbank report a profit of 316 million yuan last year, rebounding from the 69 million yuan loss it had in the final seven months of 2015 after it started operations, according to an earnings statement posted on June 28.
Risk Control
Its nonperforming-loan ratio was around 1 percent, Huang said, lower than the national average of 1.74 percent. The bank's technology, which runs loan applications through more than 3,000 computerized risk-control strategies, has kept delinquencies in check, he said.
Still, last year's lending explosion came at a cost, dragging its capital adequacy ratio down to 11.07 percent by December from 18.51 percent a year earlier. While the bank has no immediate plan to boost its buffers, it will consider measures including issuing asset-backed securities to keep capital at an appropriate level, Huang said.
MYbank charges its small-business customers lending rates between 5 percent and 14 percent annually, with many paying 7 percent to 8 percent, Huang said. That level is lower than the rates paid by similar clientele in some Chinese cities. For example, small businesses in the eastern city of Wenzhou paid an average of 15 percent for loans from underground banks, according to a private lending network in the city that tracks the data.
Huang's firm has also tried to shelter itself from funding volatility and surging interbank borrowing costs -- a byproduct of China's campaign against financial leverage -- by attracting more deposits. By encouraging remote account openings, MYbank lured 23 billion yuan of deposits from its customers at the end of December, up from almost zero a year earlier, he said.
MYbank and Tencent's WeBank are among eight private lenders that had started operations by the end of last year, according to the China Banking Regulatory Commission, with assets totaling 180 billion yuan and loans amounting to more than 80 billion yuan.
To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net, Heng Xie in Beijing at hxie34@bloomberg.net.
To contact the editors responsible for this story: Marcus Wright at mwright115@bloomberg.net, Jessica Zhou at jzhou75@bloomberg.net, Darren Boey, Edwin Chan
With assistance from Jun Luo, Heng Xie
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