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China search giant Baidu plans to open online bank
Posted On Nov 18 2015
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The Baixin Bank, a venture between Baidu and China Citic Bank, will be the country’s first lender formed by an Internet company and a traditional bank, Baidu said in a statement.
China’s main search engine Baidu plans to launch an online bank with financial services group Citic, the two companies said today, as the Internet firm seeks to compete with rivals moving into banking. Alibaba owns 30 percent of MYbank, which opened in June, through Ant Financial.
Trade in shares of China Citic Bank, which halted Monday, will resume Wednesday. However, it’s worth noting that banks launched by Alibaba and Tencent have not met with the success anticipated. Note that China’s nine largest banks, which are all state-owned, favor lending to large, state-owned groups. The search giant has been fighting for a banking license since early 2014. WeBank President Cao Tong resigned in September, vice-president Zheng Xinlin recently resigned (as recently confirmed by the bank), and the bank is playing down expectations of expansion.
“This is a huge market because traditional banks can hardly offer such services in rural areas or even target college students due to the high costs required for risk control”, he said. WeBank is an internet platform through and through, but one with a banking license. Most of these firms offer loans to small companies and individuals.
He declined to disclose the shareholding structure, saying the bank, with a proposed share capital of RMB2 billion, has yet to apply to the China Banking Regulatory Commission for a direct banking licence.
Baixin is also expecting to use CITIC Bank’s 1,300 branch network to comply with a ruling that requires bank customers to be physically present in order to open bank accounts. That is that the company is working in partnership with an established banking organization – CITIC has a few $767 billion in assets – rather than going it alone as Alibaba and Tencent have done. The FT writes that “Citic did not reply to requests for comment on Tuesday”.
