Caixin
Nov 15, 2016 02:02 PM
FINANCE

P2P Lender Lufax Eyes Expansion in Hong Kong, Singapore

(Hong Kong) — China’s largest peer-to-peer (P2P) lender — Shanghai Lujiazui International Financial Asset Exchange Co., or Lufax — is looking to expand overseas to target wealthy Chinese investors, its chairman revealed Monday.

Lufax Chairman and CEO Gregory Gibb made the comments as the company moves toward an IPO that could be one of next year’s largest.

Lufax is preparing to launch versions of its investment platforms in Hong Kong and Singapore, and has entered “the stage for detailed planning” for such a move, Gibb told Caixin at an industry conference in Hong Kong.

“We’ve been looking for overseas partnerships for about a year and talking to all kinds of different platform providers, product providers, and people who would partner with us on the front office as well as mid- and back office,” said Gibb, a former consultant at McKinsey & Co.

Founded in 2011 as a unit of China’s second-largest insurer, Ping An Insurance Group, Lufax has made no secret about wanting to go public but has issued no details. Various media reports have said the company has been preparing for an initial public offering (IPO) that could raise US$5 billion in Hong Kong next year. Gibb declined to comment on the latest IPO developments. But media reports, citing unnamed sources, said in September that Lufax was in talks with several investment banks to underwrite the offering.

Lufax is at the forefront of a new generation of privately owned financial-service providers in China as part of Beijing’s push to breathe more life into a sector dominated by big state-run firms. P2P lending has become a particularly hot but controversial area, allowing companies like Lufax to bring together many small investors with borrowers, acting as intermediaries.

But the sector has also been plagued by irregularities, and cases of fraud and closure due to poor management occur regularly. Of the 3,600 P2P lenders set up since 2006, only 70 percent are still operating, according to research firm research website wdzj.com. Many of the closed sites have never repaid their depositors.

China’s regulators began a sector cleanup two months ago, prompting some players to call it quits. Analysts expect the decline to continue, as more companies fail to meet tough new requirements laid down by the government on Aug. 24 in an effort to bring to heel an industry that until then was lightly regulated and had mushroomed since P2P emerged on the mainland a decade ago.

As one of the industry’s earliest players, Lufax is considered a leader in the field. In January, it raised $1.2 billion from a group of investors that included Bank of China Group Investment Ltd. and Guotai Junan Securities Co., valuing the company at $18.5 billion.

Gibb said those funds will be used for technology development, talent recruitment and platform building. Part of the funding will be used to support Lufax’s overseas expansion.

“I would say the international portion of the development … will certainly become a big part of all of our investment,” said Gibb, adding that Lufax is eyeing wealthy Chinese investors who want to diversify their investment portfolios with more overseas assets.

“Our largest shareholder, Ping An Group, has a good relationship with regulatory institutions in Hong Kong and Singapore, so it is very likely (for Lufax) to build overseas platforms there,” Gibb said.

By the end of 2015, Lufax has 18 million registered users and handled transactions valued at a total of 1.6 trillion yuan ($234.5 billion), according to the company.

Contact reporter Han Wei (weihan@caixin.com); editor Doug Young (dougyoung@caixin.com)

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