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TENCENT HOLDINGS LIMITED

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ZhongAn, StanChart-backed lenders take early lead in HK digital bank race

05/04/2021 | 05:42am EDT
FILE PHOTO: Illustration of virtual banks Mox Bank, ZA Bank and Livi Bank

HONG KONG (Reuters) - Online-only banks in Hong Kong backed by China's ZhongAn Online P&C Insurance and Britain's Standard Chartered moved ahead of newly launched rivals as they garnered 70% of deposits last year, the lenders' annual reports showed.

The numbers give the first glimpses of the performances of Hong Kong's eight so-called virtual banks, which launched last year and could offer lessons to peers in Asia, with Singapore's digital banks set to kick off operations next year and Malaysia set to follow.

The eight banks had total customer deposits of HK$15.8 billion ($2.03 billion) at the end of 2020, their annual reports showed. Of this, ZA Bank, operated by a unit of ZhongAn, and StanChart-backed Mox Bank had deposits of HK$6.04 billion and HK$5.2 billion, respectively, at year-end.

Deposits are key for the online-only banks as they are a source of cheap funding and their primary route for brand-building.

The lenders which began operating between March and December, are seeking to win business with improved user experience, technology and promotional rates.

"Mox and ZA have done a good job of engaging with customers and building a brand, whereas some of the other banks' websites or app store ratings are a bit underwhelming," said Ben Quinlan CEO of financial services consultancy Quinlan & Associates.

Up to HK$76 billion worth of revenue could be up for grabs for virtual banks by 2025, Quinlan & Associates has estimated.

Other Hong Kong virtual banks are backed by Tencent, Xiaomi and Ant Group. Zhong An was the first among the eight virtual lenders to launch, while Mox was in the middle of the pack.

Still analysts say digital banks are unlikely to make a large dent on high street behemoth HSBC as well as Bank of China Hong Kong and Standard Chartered, which are also cutting fees and boosting their digital services.

All eight banks posted losses last year, as expected, as they focused on setting up operations, building brands and attracting deposits, the annual reports showed. The banks are starting to move into revenue generating segments such as business lending and wealth management, senior executives have said.

"Getting a large deposit base quickly can be a good indicator of more efficient onboarding and how consumers perceive early products, services, the overall user experience," said Andrew Gilder, who leads EY's Asia-Pacific banking and capital markets practice.

"It'll be important for their longer term viability also that they roll out new products such as loans and credit cards to make the most of these customer numbers and drive profitability."

($1 = 7.7665 Hong Kong dollars)

(Reporting by Alun John; Editing by Anshuman Daga and Muralikumar Anantharaman)

By Alun John


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
BOC HONG KONG (HOLDINGS) LIMITED 1.39% 29.15 End-of-day quote.24.04%
STANDARD CHARTERED PLC -0.65% 516.6 Delayed Quote.10.88%
TENCENT HOLDINGS LIMITED -1.72% 600 End-of-day quote.6.38%
XIAOMI CORPORATION -0.98% 25.25 End-of-day quote.-23.95%
ZHONGAN ONLINE P & C INSURANCE CO., LTD. -2.73% 42.8 End-of-day quote.18.23%
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Financials
Sales 2021 591 B 91 939 M 91 939 M
Net income 2021 148 B 22 969 M 22 969 M
Net cash 2021 130 B 20 168 M 20 168 M
P/E ratio 2021 33,0x
Yield 2021 0,34%
Capitalization 4 727 B 735 B 735 B
EV / Sales 2021 7,78x
EV / Sales 2022 6,39x
Nbr of Employees 85 858
Free-Float 60,2%
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Number of Analysts 54
Average target price 650,14 CNY
Last Close Price 496,93 CNY
Spread / Highest target 75,2%
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Hua Teng Ma Executive Chairman & Chief Executive Officer
Chi Ping Lau President & Executive Director
Shek Hon Lo Chief Financial Officer & Senior Vice President
Chen Ye Xu Chief Information Officer
Yu Xin Ren COO & President-Interactive Entertainment Group
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