Hong Kong virtual bank Ping An OneConnect to expand lending to retail SMEs to capture post-Covid growth opportunities, CEO says

Ping An OneConnect Bank, the Hong Kong virtual lender indirectly owned by mainland Chinese insurer Ping An Insurance, plans to increase lending to small and medium-sized enterprises (SMEs) in the retail sector to capture growth opportunities in the post-Covid-19 era, its CEO said.

"After the border between Hong Kong and mainland China reopened in January, the number of visitors to Hong Kong has multiplied," Ping An OneConnect's Micheal Fei Yiming said in a media briefing on Tuesday. "The resumption of cross-border travel has provided a growth engine for the retail sector. We are strongly confident that the local retail sector is reviving again."

More than 10 million visitors arrived in Hong Kong in the first five months of this year, according to Tourism Board data. Last year, the city recorded only 34,982 arrivals in this time frame, and 27,549 the year before.

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Ping An OneConnect last week introduced a revolving loans target for retail SMEs that are using payment company eftPay to accept electronic payments. The bank will use eftPay data to assess the credit quality of retailers, who can each get a credit line of up to HK$300,000 (US$38,461), Fei said.

The virtual bank works with Tradelink Electronic Commerce, a government-backed e-commerce services provider, for client referrals. It also uses Tradelink data for credit assessments.

Unlike traditional lenders, which offer loans against property or other assets as collateral, virtual banks such as Ping An OneConnect use big data and other trading or payment information to access firms' credit quality. This allows many SMEs, which previously could not get bank loans, to get credit from lenders such as Ping An OneConnect as long as their business data is sound, Fei said.

"This is financial inclusion and a major contribution of virtual banks to our society," he added.

The Hong Kong Monetary Authority, the city's de facto central bank, licensed eight virtual banks to promote fintech development, as well as the provision of better banking services at lower cost. These banks can only offer online services and started operations during the pandemic in 2020.

All eight such banks have yet to make a profit. Ping An OneConnect reported the lowest loss among all for 2022 - a net loss of HK$157 million that was 27 per cent lower than 2021's.

"In the past two years, we have been delivering our performance, which is actually quite satisfactory," Fei said. "It is just a matter of time for us to break even. To achieve that, our team will need to cover more industries, bring in more partnerships and introduce more products to satisfy the needs of SME companies."

There were more than 360,000 SMEs in Hong Kong as of March, according to government data. These firms accounted for 98 per cent of business establishments and employed more than 44 per cent of Hong Kong's workforce in the private sector.

"Right now, we only have just over 1,000 SME clients out of the 360,000 SMEs in Hong Kong," Fei said. "There is a lot of room for growth."

Such firms are still facing a lot of challenges this year, he added. "The external environment and the economic recovery are still not stable. This has put a lot of pressure on SMEs."

The overall quality of Ping An OneConnect's loan book remains healthy, but the bank will continue to monitor the asset quality of its SME clients, Fei said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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