Jack Ma-backed Ant’s profit fell 65% due to 7 billion yuan fine

Ant Group’s quarterly profit fell by 65 per cent, dented by a one-time fine that signalled the end of China’s years-long crackdown on the tech industry.

The Hangzhou-based company contributed 846 million yuan (S$159.3 million) of profit to its affiliate Alibaba Group Holding, a filing showed on Thursday. Based on Alibaba’s one-third stake in Ant, that translates to an estimated 2.6 billion yuan in profit for the fintech company’s June quarter.

That compares with a 17 per cent rise in Ant’s profit in the previous three months. Its earnings lag a quarter behind Alibaba’s.

Ant’s profit would have grown to 9.6 billion yuan, excluding the seven billion yuan fine in July. Ant declined to comment in an e-mailed statement.

Beijing slapped more than US$1 billion (S$1.35 billion) of fines on Ant and Tencent Holdings in July, reining in its national champions that amass data on hundreds of millions of people. Ant is awaiting a financial holding company licence, which would pave the way for a revival of an initial public offering (IPO).

Ant proposed to buy back as much as 7.6 per cent of its shares in July, giving investors a chance to reduce exposure to the firm. Under the repurchase plan, the company’s valuation was trimmed to about US$79 billion, far below its peak of US$280 billion before its IPO was scrapped three years ago.

Investors including Warburg Pincus, Canada Pension Plan Investment Board, Carlyle Group and Singapore’s GIC are among top foreign shareholders that are not participating in the buyback, Bloomberg reported in August.

Fidelity and T. Rowe Price Group have agreed to sell some shares. Alibaba has decided not to sell any of its stake.

Ant is also preparing to break off its international business, along with blockchain and database management services, people familiar with the matter have said.

Billionaire Jack Ma, who has largely remained out of public sight in recent years, ceded control of Ant earlier this year amid a broader retreat.

To look for growth, Ant is leveraging the payments network it built for Alipay to collaborate with digital wallets around Asia for transactions outside their home markets.

Initially catering to Chinese tourists travelling outside the country, the company has expanded the service into a backbone for cross-border payments known as Alipay+ that can be used by different wallets. For example, when customers of GCash from the Philippines travel to South Korea, they can pay with GCash when they see the Alipay+ logo displayed at merchants.

Another budding source of revenue comes from Alipay+ D-store, which allows businesses to build digital stores across platforms including Chope, AlipayHK and Touch ‘n Go. The company plans to generate income from servicing brands like Burger King that want an online presence in various apps.

Ant’s Singapore digital wholesale bank also started offering loans to small and medium-sized businesses in November 2022.

Ant received approval from the Chinese government to roll out products powered by its large language model Bailing to the public in November.

Chinese tech firms from Alibaba to Tencent Holdings to Baidu have joined start-ups Baichuan and Zhipu to release ChatGPT-like products, joining a global race to capitalise on the potential of generative artificial intelligence.

Ant, the owner of Alipay, can leverage the popularity of the mobile payment service to gain more data and insights on user habits.

In September, Ant unveiled two applications powered by its financial large language model. One is known as Zhixiaobao, which answers questions for customers, and the other, Zhixiaozhu, is an assistant for financial professionals.

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