Despite Regulatory Clampdown, Ant Group Posted $3.4 Billion Profit

Despite Regulatory Clampdown, Ant Group Posted $3.4 Billion Profit

Ant Group Co.’s profit rose to $3.4 billion in the December quarter after Chinese regulators thwarted its record initial public offering and told it to scale back its sprawling business, reported Bloomberg.

Billionaire Jack Ma’s fintech giant contributed nearly 7.2 billion yuan to Alibaba Group Holding Ltd.’s earnings, a company filing showed Thursday. Based on Alibaba’s one-third stake in Ant, that translates to 21.8 billion yuan ($3.4 billion) in profit, up 50% from 14.5 billion yuan in the previous three months. Ant’s earnings lag one quarter behind Alibaba’s.

The tally underscores the earnings powers Ant boasted before authorities demanded China’s largest fintech company fold its financial business into a holding company, curtailing its growth prospects. Regulators have issued a battery of proposals that threaten to curb Ant’s dominance in online payments and scale back its expansion into consumer lending and wealth management.

While Chairman Eric Jing has promised staff that the company will eventually go public, it’s likely to be worth much less than before the crackdown that saw the IPO halted in November. Fidelity Investments halved its valuation estimate for Ant to about $144 billion in February, compared with $295 billion assigned in August.

Ant isn’t alone in facing the clampdown. The government imposed wide-ranging restrictions on the financial divisions of 13 companies including Tencent Holdings Ltd. and ByteDance Ltd. Units of Inc., Meituan and Didi Chuxing were also among companies summoned to a meeting where regulators handed out stricter compliance requirements in April.

The growth is attributed to Ant Group’s success in the non-money-market mutual funds. Ant Group became China’s largest seller of non-money-market mutual funds in the first quarter, industry data showed, disrupting a market dominated by banks despite a regulatory crackdown.

Part of the authorities demand from Ant and Alibaba is to reduce the size of Yu’ebao, China’s biggest money market fund managed by Ant-controlled mutual fund house Tianhong.

Founder of Alibaba

Reuters reported that outstanding non-money-market mutual funds sold by Ant’s fund sales arm were worth 890.1 billion yuan ($138.23 billion) at the end of the first quarter of 2021, according to data released late Thursday by the Asset Management Association of China (AMAC).

China Merchants Bank (600036.SS) took the second spot at 707.9 billion yuan, followed by Industrial and Commercial Bank of China, the country’s biggest lender.

It was the first such ranking released by AMAC, highlighting the rapidly growing clout of independent fund advisers that sell funds via mobile apps and the internet, by-passing bank outlets.

“It’s.. about the strength of big-tech-company-backed IFAs (independent fund advisers), how far they have reached, how deep their client base is and how adaptive they are to the market trends,” said Ivan Shi, director at Z-Ben Advisors, a consultancy.

“It also speaks to how much service and tool development different tech companies have put into their IFA platforms.”

Ant (Hangzhou) Funds Sales Co’s main distribution channel is Ant’s ubiquitous payment platform Alipay.

Shi said Ant’s top rankings could also reflect lower risk appetite as investors shift away from equities funds to fixed-income products, which are popular on Alipay.

“If you log into the Alipay app, a lot of the products they are promoting are short-term bond funds, fixed income products. That’s a very quick response to market trends, so that’s going to catch a lot of outflows from equity products.”

According to AMAC’s ranking, Shanghai Tiantian Fund Distribution ranked fifth during the first quarter, while other tech-driven sales platforms, including Tencent’s fund sales unit and Baidu’s Du Xiaoman Fund Sales, far lagged Ant.

Revenues at Ant’s fund sales company more than tripled to 6.01 billion yuan in 2020 from a year earlier, public disclosures showed

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