The program is seeing strains and is on the verge of running out of money. The bank made a risky move in February as the coronavirus pandemic was reaching its apex in China, deciding to slash interest rates and open up the credit taps in a broad manner.
Now, after months of lending, the bank is feeling the weight in the form of 2 trillion yuan ($282 billion) slated for small- to medium-sized business (SMB) loans this year. That number is up around 18 percent from 2019, and firm President Jin Xiaolong said MYbank is not lowering its expectations for the year.
MYbank’s loan algorithms work by calculating the real-time payments and data for borrowers who often do not have much credit history.
The initiative by the program to lend trillions of yuan will now offer up a dose of risk for the firm and for its biggest shareholder, Ant Financial, also owned by Ma. If the push for lending causes defaults, that could put a dent in Ant’s plans to go public. Ant is worth $150 billion and stands on shaky ground with the crisis’s financial upheavals.
MYbank is a part of the open banking strategy that could net Ant around 65 percent of its profits by the year 2021. The open banking strategy also includes a consumer lending platform and a technology group selling cloud computing to lenders.
By comparison, open banking only comprised 35 percent of Ant’s profits in 2017.
Deferred payments and rolled-over loans didn’t seem to help the situation in China, where non-paid loans were up to 2.04 percent by March. One of the country’s biggest lenders, China Merchants Bank, saw its unpaid micro-finance loans almost double from last year.
The problem could compound or contract depending on how well China continues to recover from the coronavirus pandemic, but Jin said he’s still confident the bank can hit its target.