WeBank Ekes Out First Profit in Second Year

(Shenzhen) – WeBank, the major Chinese online lender owned by Tencent Holdings, posted its first annual net profit in its second year of operation, thanks to surging demand for microloans among blue-collar workers and small entrepreneurs.

WeBank said Tuesday it earned a net profit of 40.1 million yuan ($5.9 million) in 2016. That compares with a net loss of 584 million yuan for the period from May 15, 2015 to December 31, 2015.

China started granting online lending licenses to nonbanks in 2015 as the country wanted to channel even more money into the financial sector. Consultancy iResearch has predicted that online loans will rise to almost 60% of the nations’ gross domestic product by 2020, up from 33.7% at the end of 2016.

Weilidai, WeBank’s microloan product, had lent out a total 360 billion yuan as of May 15, when the online lender celebrated its second anniversary. That was nine times more than its outstanding loan total of 40 billion yuan a year earlier.

However, the lender’s nonperforming loan (NPL) ratio edged up as its loan book grew. WeBank’s NPL ratio climbed to 0.32% as of end-2016, up from 0.12% at the end of 2015. WeBank’s loan-loss provisioning coverage ratio, which measures how much money a bank sets aside for bad loans, dropped to 934.11% in 2016 from 2,379.6% in 2015.

Apart from strong demand for microloans, which in China are generally between 1,000 yuan and 200,000 yuan and do not require collateral or a guarantee, WeBank also has access to 938 million monthly active users on WeChat, the messaging app also owned by Tencent.

Huang Liming, WeBank’s executive vice president, said nearly half of Weilidai’s customers are blue-collar workers and small entrepreneurs. A quarter are white-collar workers.

Over the past two years, the average size of a WeBank loan was 8,200 yuan, Huang said.

Contact reporter Leng Cheng (chengleng@caixin.com)