PrimeCredit, Hong Kong’s biggest nonbank consumer finance group, is up for sale again as its shareholders started early discussions with at least two potential investors in the past few weeks, according to people familiar with the matter.
The subprime lender is said to be valued at no less than US$600 million, with Hong Kong’s first virtual lender, ZA Bank, and local online fund and peer-lending firm Elephant Club among the interested buyers, they said.
The negotiations suggest the three shareholders of PrimeCredit have revived efforts to dispose of the business since the coronavirus outbreak halted the plan in April. The current sale process is led by its majority shareholder China Travel Financial Holdings, a unit of China Tourism Group, the people added.
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China Travel Financial, Pepper Australia and York Capital Management bought PrimeCredit from Standard Chartered in early 2015 for an undisclosed sum. Sources said that deal was worth about US$600 million, which involved carving out HK$5.9 billion of residential mortgages to the Bank of East Asia, leaving the consortium with unsecured personal loans originated by its Hong Kong and Shenzhen money-lending units.
ZA Bank, which is partly owned by ZhongAn P&C Online, does not comment on market rumours, a spokeswoman said in reply to the Post. PrimeCredit, China Travel Financial and Elephant Club did not immediately reply to emails seeking comments.
PrimeCredit was founded in 1977 and operates under a money-lending licence enforced by the police. The licence allows it to charge as high as 60 per cent in effective annual interest for loans to borrowers with weak creditworthiness who typically would have difficulties getting credit from traditional banks. Its 34 branches across the city also offer credit cards.
The sale comes at a time when the Hong Kong economy is struggling to rebound from its worst recession on record. In the face of high unemployment, weaker home equity and a slump in businesses, bad loans have risen to 0.79 per cent in June from 0.57 per cent a year earlier, according to the Hong Kong Monetary Authority.
“It would be hard for the shareholders to demand a big premium on the assets, given the potential risk of weakening asset quality against the recession backdrop in the loan portfolio,” said Tom Chan, chairman of the Hong Kong Institute of Securities Dealers. “An increasing number of people are losing their jobs, and lenders are generally more cautious in granting new loans where the credit history is not good.”
PrimeCredit had a loan portfolio equivalent to about US$1 billion at the start of the year, and a customer base of 260,000, according to people familiar with the business. The company builds its size and volume through online advertising campaigns and its mascots known as PrimeCredit Brothers or its Cantonese iteration Anxin Brothers.
When the consortium acquired PrimeCredit from Standard Chartered in 2015, it had about US$1.15 billion in assets under management and some 132,000 customers. The purchase, advised by Goldman Sachs and Citigroup, was supposed to help extend their footprint in the key hubs of Hong Kong and Shenzhen to other Asian markets.
China Travel Financial is part of China Tourism Group, the nation’s largest travel operator and one of the three Chinese state-owned enterprises headquartered in Hong Kong. Its current talks with ZA Bank and Elephant Club are in very early stages and there is no assurance that a deal could be agreed upon, people familiar said.
ZA Bank started its virtual banking operations in March and has recruited 190,000 customers in its first six months, giving it a head start over seven other competitors. Elephant Club, established in 2016 by a veteran fund manager, is said to be keen on expanding its business and customer base via acquisitions.
“In 2015 the local economy was in much better condition, which attracted investors like China Travel,” said Chan of the institute. “Now, it probably wants to sell it off to focus on its domestic tourism business in China, which has slowly recovered from the impact of viral outbreak.”
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