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Chinese fintech Ant preps giant IPO; U.S. judge dismisses Danske Bank suit

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Receiving Wide Coverage

Stratospheric

Ant Group, “the Chinese financial-technology behemoth, will likely earn a stratospheric market valuation” of more than $200 billion “that would place it at the top of companies listing globally” when it goes public. “If attained, it would be the highest-ever valuation at the time of a deal pricing for a company going public for the first time on a major exchange. Back in 2014, Ant’s sister company, Alibaba Group, was valued at around $168 billion in its record-setting IPO, which ended up raising $25 billion.”

“Ant, formerly Ant Financial Services Group, operates Alipay, a popular payment and lifestyle app that has more than 700 million monthly active users in China. Two years ago, the company was valued at around $150 billion after raising $14 billion in private capital from domestic and global investors.”

IPO documents filed by Ant Group Tuesday show that the company had “net profit of nearly 17 billion yuan ($2.5 billion) in 2019, up sharply from 667 million yuan the previous year. Its first-half profit for the six months to June topped 21 billion yuan. Ant’s revenue last year totaled 120.6 billion yuan and was up more than 40% from 2018. Revenue for the first six months of 2020 climbed 38% to 72.5 billion yuan from the same period a year ago.”

The IPO in Hong Kong and Shanghai is “expected to raise about $30 billion in what could be the world’s largest offering, exceeding that of Saudi Aramco last year.”

Wall Street Journal

Risk assessment

“Banks and financial institutions need to assess money-laundering risks and conduct appropriate due diligence when dealing with foreign public officials and their families or associates,” according to new guidance from five U.S. regulatory agencies. “People who are considered politically exposed may pose higher risks because their funds may be the proceeds of corruption or other illicit activities, the banking regulators said in a joint statement.”

“The agencies also clarified that there are no regulatory requirements or expectations for financial institutions to have unique, additional due-diligence steps for clients who are considered politically exposed. But they said banks are required to ‘identify and report suspicious activity, including transactions that may involve the proceeds of corruption.’”

Financial Times

What might have been

In the months before its spectacular failure, Wirecard was hatching a plan to buy Deutsche Bank, a “crowning achievement for a company which within a few years had become one of the most valuable in the country, winning the label of ‘Germany’s PayPal.’ An upstart financial technology company would be running Germany’s most illustrious bank.”

“A tie-up with Deutsche Bank had another potential attraction: a deal offered the prospect of a miraculous exit from the massive fraud Wirecard had been operating. Around €1.9 billion in cash was missing from its accounts and large parts of its Asian operations were actually an elaborate sham. By blending Wirecard’s business into Deutsche’s vast balance sheet, it might be possible to somehow hide the missing cash and explain it away later in post-merger impairment charges.”

Everything must go

“Wirecard’s chairman is expected to resign with the rest of its supervisory board as early as this week, leaving the collapsed German payments company to be broken up and sold by the administrator. A Munich court is likely to announce on Tuesday that it has formally appointed the administrator to start insolvency proceedings at Wirecard, an important step that transfers power away from the company’s directors to the administrator.”

“Munich-based lawyer Michael Jaffé was appointed interim administrator at the start of July and has been working since then on preparing the company to be dismantled.” The company has been selling itself off piecemeal recently.

Paying up

JPMorgan Chase will have to pay a premium of more than 50% “to become the first foreign company to fully own a mutual fund business in China.” The bank will have to pay about $1 billion “to buy the remaining 49% of China International Fund Management.”

New York Times

Biased appraisals?

“Black homeowners face discrimination in appraisals,” even though “companies that value homes for sale or refinancing are bound by law not to discriminate," the Times reports. "Black homeowners say it happens anyway.”

“Even in mixed-race and predominantly white neighborhoods, Black homeowners say, their homes are consistently appraised for less than those of their neighbors, stymying their path toward building equity and further perpetuating income equality in the United States.”

Elsewhere

Case dismissed

A federal judge in New York Monday “dismissed a lawsuit accusing Denmark’s Danske Bank and four former top executives of defrauding shareholders by hiding and failing to stop widespread money laundering at its former Estonian branch. U.S. District Judge Valerie Caproni said shareholders in the proposed class action failed to sufficiently plead that the bank improperly reported revenue derived from money laundering or downplayed its supervision failures. She also said the plaintiffs, led by four pension funds in New York and Massachusetts, failed to show that Danske acted recklessly or with conscious disregard that its statements were false and misleading.”

The plaintiffs “sued four months after Danske said in September 2018 that an internal probe had uncovered about 200 billion euros ($236 billion) of payments made from 2007 to 2015 through its Estonian branch, with many payments appearing suspicious.”

Riding the boom

Afterpay, Australia’s biggest buy-now-pay-later lender, “on Monday said it would acquire Spain-based peer Pagantis to expand its operations into Europe, as it rides a boom in online shopping sparked by the COVID-19 pandemic,” Reuters reported. “Acceleration of online transactions during the pandemic has bolstered the popularity of alternative credit firms like Afterpay, as a growing number of young consumers who may not have access to credit cards and loans sign up on its platform to shop.”

“Acquiring Pagantis provides us with the necessary regulatory licensing, resourcing and infrastructure to expedite the launch of Afterpay into key countries in Southern Europe and beyond,” CEO Anthony Eisen said. In July Afterpay said it was expanding in the U.S. through deals with retailers including Anthropologie and Free People.

Headed for a fall

China’s state-owned banks “are set to post their first drop in first-half profits since the global financial crisis, hit by a surge in bad debt and higher loan-loss provisions due to the coronavirus pandemic,” Reuters reports. “The big five state banks including Industrial and Commercial Bank of China, China Construction Bank and Bank of China kick off their earnings season on Aug. 28.”

“Chinese commercial banks overall posted a 9.4% fall in first half net profit, while the six biggest posted a 12% profit fall from a year ago.”

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