Jack Ma, Show Them How to Run a $280 Billion Bank

How bad is the damage from China’s plan for Ant Group Co. to become more like a bank? Before regulators put the brakes on the planned initial public offering, Jack Ma’s fintech platform was weighing in at 4.4 times its book value, versus two times at traditional global banks. In other words, Ant could be worth less than half what it was two weeks ago. At the latest pre-IPO round, the company was priced at $280 billion. Now, its value could be just $140 billion, some analysts say.

Actually, no. Banks — contrary to what some would have you believe — can be quite lucrative. Even within the conventional banking space, there’s plenty of variation. Winners emerge. China Merchants Bank Co., with a vibrant retail franchise, and Bank of Ningbo Co., which has a successful regional small business loan operation, both boast a handsome 15% return on equity.

Things start looking even better when tech is used to drive economies of scale. Take WeBank Co., whose largest shareholder is Tencent Holdings Ltd., with a 30% stake. China’s first and largest digital bank, it reported a 28% return on equity last year, up from around 9% in 2016. Compare that to the 11% to 12% (and declining) for the big lenders.