中国互联网：随着监管力度的加大蚂蚁和腾讯在金融科技领域的表现如何

1、GlobalResearch14 January2019China Internet SectorChinaUBSEvidenceLabinside:howareAntandTencent faringinfintechgivenincreasingregulation?ChinaAdjusting to more regulations but significant opportunities remain intactWhilefintechregulationshaveledAntFinancialandTencenttoadjustsinceour HYPERLINK /shared

2、/d2ml5e3NiEj deep HYPERLINK /shared/d2ml5e3NiEj dive more than a year ago, we still see significant long-term opportunities, based on our updated analyses in collaboration with our banks analyst May Yan and UBS EvidenceLabdata.Thelatterssurveysonpayments,creditandassetmanagementin 2018 reveal that t

3、he two platforms dominated competitors. Between the two, Tencent is catching up with Ant in payments, while Ant is maintaining its lead in credit and asset management. Our price targets for Alibaba and Tencent assume 9% and 17% sum-of-the-partsvalueforAntandTencentsfintechbusiness,respectively.Regul

4、ation impacting near-term profits of Ant and TencentTherehasbeenincreasingregulationoffintech,frompeer-to-peer(P2P),microlending, NetUnion,moneymarketfundstofinancialholdingcompanyrules.Anotablechange has been Peoples Bank of Chinas requirement on custodian funds that willeliminate interestincomepre

5、viouslyearnedbypaymentplatformsby2019(weestimatearound Rmb40bn+forthesetwoplatformsalone).Webelievefurtherdevelopmentoffinancial product marketplaces and new revenue streams will offset the impact on Ant and Tencent over time.Tencents progress in mobile payments continuesInUBSEvidenceLabs2018annuals

6、urvey,consumersmobilepaymentusageexceeded cash in all 13 scenarios for the first time since the survey was launched. Ant and Tencentimprovedpenetrationacrossallcitytiersandusecases.Importantly,usageof Tencentimprovedsignificantly,with30%ofrespondentschoosingitasthemostused payment method in 2018, up

7、 from 10% in 2017 and 5% in 2016. While Ant is the market leader in most usage scenarios, we expect Tencent to continue to narrow the gap.Ant maintains its lead in other financial servicesFinancialproductsmarketplacesallowAntandTencenttoleveragethelargeusertraffic anddatainsightsaccumulatedfrompayme

8、nts,andcapturehigh-marginrevenue.Ant is more popular than Tencent on most metrics, according to UBS Evidence Lab data. Ants average account balance is 2x higher and it has 4x more assets under management than Tencent. It also has the most popular online credit (Jiebei and Huabei) and investment (Yue

9、bao)products.Valuation comparisonInternet ServicesEquitiesJerry HYPERLINK mailto:jerry.liu Internet ServicesEquities+852-29717493May HYPERLINK mailto:may.yan +852-29717157Wei Xiong HYPERLINK mailto:wei.xiong wei.xiong+86-213-8668883Angela Xu, CFA HYPERLINK mailto:angela.xu +852-37124671Navin Killa H

10、YPERLINK mailto:navin.killa +852-29717594Shareprice(LC)Market cap (US$ m) PE2018E2019E2020EPEG P/Sales2018E2019E2020E 2020/18ECAGRSalesEarningsTencentAlibaba331.2151.3394,031393,28134.7x29.3x24.1x31.4x27.9x21.9x1.4x1.3x8.3x6.5x5.2x7.5x5.3x3.9x27%21%38%22%Above data as at 11 January 2019. Source: Reu

11、ters, UBS estimates HYPERLINK /investmentresearch /investmentresearchThisreporthasbeenpreparedbyUBSSecuritiesAsiaLimited. ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURESBEGIN ONPAGE25. UBSdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbe aware that the firm may

12、have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.AlibabaChina Internet sectorUBS Research THESIS MAP a guide to our thinking and whats where in this report HYPERLINK l _book

13、mark1 OURTHESISINPICTURESMOSTFAVOREDLEAST FAVOREDAlibaba,TencentNAPIVOTALQUESTIONSQ: Will regulations tighten further for Ant andTencent?Yes,weexpectmorefromPeoplesBankofChinaisas it aims to risk and of payment Ant and are facing tighter and New on holding companies could costs for both. Over time,

14、we expect them to the as adoptmobileandotherfintechproducts,andby HYPERLINK l _bookmark2 Q: How will the payment market share evolve between Ant and Tencent?We expect Tencent to gain share. While Ant maintains its slightly higher share of third-party paymentsinmostusecases,weexpectthegapbetweenthetw

15、otocontinuetonarrow.Overall,we expectmobilepaymentstotakemoremarketsharefromcashandotherpaymentmethods.There shouldbebroad-basedincreasesinpenetrationacrossusagescenariosandcitytiers,basedonthe UBSEvidenceLabsurveyofChineseconsumers. HYPERLINK l _bookmark3 Q: Will Tencent and/or Ants financial produ

16、ct marketplaces gain traction?Yes, both are making progress, but Alibaba is better positioned. We believe diversified financial services would be a key area for non-banking financial institutions to improve their revenue and profitability. We observe continued investments from Alibaba/Ant Financial

17、and Tencent to enrich their offerings, mainly credit, wealth management and insurance products. Ant maintains its advantagesasacomprehensivefinancialservicesplatform,accordingtoUBSEvidenceLabsurvey results,andweexpectitsstronggrowthmomentumtocontinue. HYPERLINK l _bookmark4 UBSVIEWWebelieveincreasin

18、gregulatoryheadwinds,especiallycentralisationofcustodianfundsandlikely financial holding company compliance have, and will continue to, impact on the near-term profitability of payment institutions. However, we remain positive on the long-term revenue and profitability upside for Ant and Tencents fi

19、ntech business. Tencent is further narrowing the gap with Ant in payments, though Ant still maintains a strong lead in credit, asset management and insurance products.EVIDENCERegulationishavingabigimpactonthebusiness.PBOCrequirespaymentinstitutionstoput100% of custodian funds in interest-free centra

20、l deposits by 14 January 2019. Based on Tencent managements comments and third-party data, we estimate Tencent and Ant could lose over Rmb40bn from the elimination of interest income from custodianfunds.TheUBSEvidenceLabsurveyindicatedthatmobilepaymentusagesurpassedcashinallsurveyed scenariosforthef

21、irsttimein2018.Tencentmademeaningfulimprovementsinuserrecognitionand gained share from Ant. Of the survey respondents, 30% chose Tencents WeChat Wallet as their primarypaymentmethodin2018,significantlymorethaninprioryears.However,Antcontinuesto lead in other financial products, according to the UBS

22、Evidence Lab survey. For example, Ants averageaccountbalanceisstill2xhigherandassetsundermanagement4xhigherthanTencents.WHATSPRICEDIN?We believe the market is concerned about revenue and profitability impact due to intense competition between the two platforms and a tightening regulatory environment

23、. While many investors have a sense of the speed of mobile payment adoption, and particularly Tencents improvement here, they are less familiar with the momentum and traction both Ant and Tencent have in other financial services.Third-party mobile payment market size400200%300150%200100%10050%00%201

24、2201320142015201620172018E 2019E 2020EThirdpartymobilepaymentvalue(inRmbtrn)YoYSource: PBOC, UBS estimatesChinaInternetSectorUBSResearchOURTHESISINPICTURES HYPERLINK l _bookmark0 return 45040035030025020015010050080%70%60%50%40%30%20%10%0%100%80%60%40%20%Third-party payment market size forecast (Rmb

25、 trn)OldNewOldNewOld2018E2019E2020EUpsidecaseBasecaseDownsidecaseAverage usage in 13 surveyed online and offline consumption scenariosCashAlipayWeChat20172018Payment method most often used for online transactions within ChinaWe forecast the third-party payment market to reach Rmb348trn in 2020, 20%

26、higher than our previous estimate of Rmb291trnMobile payment usage has surpassed cash in all surveyed consumption scenarios, and adoption of Alipay and WeChat Wallet has increasedfurther30% of survey respondents chose Tencents WeChat Wallet as their primary payment method in 2018, significantly more

27、 than in previousyears0%201620172018AlipayWeChatWalletOthers2017201820172018Amount maintained in (Rmb)Alipay1,933.3WeChat864.41,962.01,060.9Frequency of use (x times/week)Alipay2.7WeChat2.3However, Ant has maintained its lead in diversified financial services; for example, Alipays account balance is

28、 still 2x that of WeChat Wallets3.9ChinaInternetSectorUBSResearchPIVOTALQUESTIONS HYPERLINK l _bookmark0 return Q: Will regulations tighten further for Ant and Tencent?UBS VIEWYes, we expect more regulation. We observe increasing regulatory pressure from Peoples Bank of China (PBOC) on payment insti

29、tutions since 2017, as PBOCaimstostrengthenfinancialriskmanagementandimprovetransparency ofthird-partypaymentservices.AntandTencentarefacingtighterregulatory requirements,includingreducedinterestrevenueandborrowingcapacity,and lower profitability in their payment businesses. New regulations on finan

30、cial holding companies could further increase compliance costs for Ant Financial and Tencent.Over time, we expect them to mitigate the negative impact, as consumers increasinglyadoptmobilepaymentsandotherfintechproducts,andbyfurther diversifying their revenue streams. We remain positive on the growt

31、houtlook for third-party mobile payments overall, and expect the market to exceed Rmb300trn by 2020.EVIDENCEPBOC requires payment institutions to put 100% of custodian funds in interest-free central deposits by 14 January 2019. This will entirely eliminate interestincome,whichtheseinstitutionsprevio

32、uslyearned.Tencentexpectsto lose high single-digit of current other revenue from Q119 onwards. We estimate Tencent and Ants interest income from custodian funds was over Rmb40bn in 2018.Newregulationhadalreadylimitedoff-balancesheetsandasset-backedfund raisingsinceDecember2017,thatwereheadwindsforAn

33、tandTencent(see our HYPERLINK /shared/d2tp538mccsD report for more details). Ant Financial and Tencent are also identified as typicalfinancialholdingcompaniesthatwillbesubjecttoupcomingregulation on financial holding companies which we expect in2019.WHATS PRICED IN?Webelievethemarketisconcernedabout

34、therevenueandprofitabilityimpact ofatighteningregulatoryenvironment,butinvestorslackvisibility.Theyhave priced in the loss of interest revenue from custodianfunds.Regulatory changes will impact near-term profitabilityPBOC aims to put 100% of custodian funds in central deposits by January 2019, elimi

35、nating the interest income earned by payment institutions. PBOC initially required 20% of custodian funds on average to be deposited centrally, and gradually raised the percentage requirement throughout 2018.The latestpolicyreleasedinJune2018targetstocover100%ofcustodianfundsby14 January 2019.Tencen

36、t expects to lose high single-digit current other revenue from Q119 onwards. Based on our analysis and company data, we estimate the interest income from custodian funds would be above Rmb40bn in 2018 for Tencent and Ant.Tencenthasbeenraisingitsowndepositratiosince2017.AsofQ318,about 40% of the fund

37、s under Tencents custody still earned interest. There is a lack of disclosure from Ant, but we expect similar progress in its custodian fund management.We expect reduced interest income to negatively impact the margin profile of payment businesses. Apart from losing a high-margin revenue source, pay

38、ment institutions could also lose their advantages in negotiating favourable service fee terms with banks, as they will no longer be able to provide large and stable assets to banks, and this could increase the costs to process payment transactions.However,giventheirlargemarketshare,weexpectAntandTe

39、ncent to weather the negative impact better than smallerplatforms.Figure 1: Average percentage of custodian funds required for central depositSource: PBOCFigure 2: Impact of interest income on Tencents other revenueRmb mQ117Q217Q317Q417Q118Q218Q318EQ418EQ119EQ219EQ319EQ419EOther revenue7,5569,65412,

40、04414,08415,96217,49620,29921,83023,94326,24429,84032,745Interest income on custodian funds2,5622,9933,4063,8083,2793,7714,2234,6453,9354,4494,8995,296% of interest income lost0%0%10%20%25%42%65%95%100%100%100%100%Including interest income in fullOther revenue7,5569,65412,38514,84616,78219,08023,044

41、26,24327,87830,69334,73838,041Segment gross margin21.9%22.4%22.5%26.8%29.0%31.1%32.0%35.6%33.9%34.6%34.7%35.4%Excludinginterestincomeinfull Otherrevenue4,9946,6618,97911,03813,50315,30918,82121,59823,94326,24429,84032,745Segmentgrossmargin-18.2%-12.5%-6.9%1.5%11.8%14.2%16.7%21.8%23.0%23.5%24.0%25.0%

42、Source: Company data, UBS estimatesMany payment institutions have started to charge users service fees as a waytooffsetthelossofinterestincome.Tencentintroducedaservicecharge of 0.1% for credit card repayment on 1 August 2018, regardless of the payment amount. This is unlike the service charge it in

43、troduced on 1 December 2017 that appliedonlytouserswithaccumulatedrepaymentsaboveRmb5,000.Tencentand Anthadalsoaddedservicefeesforcashwithdrawalsfromaccountbalancesprior to this.In addition, Ant Financials Techfin strategy will also further diversify Ants revenue streams. Ant Financial emphasises em

44、powering financial institutions with advanced technology capabilities, covering a wide range of scenariossuchascreditassessment,insuranceclaimsprocess,riskmanagement, and payment security. According to All Weather TMT (17 May 2018), Ant nnas technoogy erices reenue ontrbuton nreaed from 14% n 2015 t

45、o 34% in 2017, and could reach 65% in 2021.The addition of Net Union could further affect the economics of payment institutions; however, there appear to be delays in full adoption. As we elaborated in a HYPERLINK /shared/d2yrfXPCXQezc9h previous note, PBOC originally planned to have Net Union take

46、overallonlinepaymentspaymentinstitutionsprocessby30June2018,potentially affectingtherevenue-sharingschemeunderthecurrentdirectconnectionmodel. Tencent disclosed in Q318 that it had largely completed the transition to Net Union. As of December 2018, several commercial banks have announced the closure

47、oftheirdirectconnectionmodel,includingBankofCommunications,CITIC BankandBankofChina.AccordingtoPBOCdata,NetUnionprocessedatotalof 33.7bn transactions, amounting Rmb12.7trn in Q318, and accounting for 24% of thetotalthird-partypaymenttransactionvalueinQ3.Weexpectrapidramp-upof Net Unions scale andcap

48、abilities.We believe financial services are more important in driving payment institutions revenue and profitability than the payment business. According to Analysys, 50% of the payment value is related to personal transactions (eg, utilities bills and P2P transfers) and we believe this would be a b

49、reakevenbusinesslongtermatbest.Paymentinstitutionscanearncommissions byofferingpaymentacquisitionservicestomerchants.However,theconsumption- related transaction value is only about 10% of the total, and payment institutions often provide discounts to merchants and subsidies to consumers to gainmarke

50、t share.Figure 3: Revenue and costs for payment institutionsTransaction typePersonal (eg, transfers, utilities)ConsumptionFinancial% of total transaction amount50%10%40%Commissionincome0.10%0.38-0.45% (for key accounts) 0.55-0.6% (for normal merchants)0.2-0.25%Transactioncosts0.1% (to banks) plus op

51、erating0.1-0.15% (to banks) plus operating costs0.1-0.15% (to banks) plus operating costsSource: AnalysysWill regulation of financial holding companies be a disruption?Regulation of financial holding companies under way. In the PBOCs recent FinancialStabilityReport,AntFinancialandTencent(inadditiont

52、oSuningandJD) are identified as typical financial holding companies that will be subject to regulation of financial holding companies, expected in 2019. PBOC has already selected Ant Financial as one of the five financial holding companies in a pilot schemetotestitsabilitytomanagerisksassociatedwith

53、suchfirms.Withanaimofforestallingsystemicrisk,thisupcomingregulationwilltargetareas such as market access, capital adequacy, liability to asset ratio, ownership structure, corporate governance, aggregate risk control at the group level and connected-party transactions.Ant Financial and Tencent are l

54、ikely to face stricter regulatory scrutinyand highercompliancecosts.ThelargeuserbasesandinfluenceofAntFinancialand Tencent underpin their substantial potential to not only tap into the markets of variousfinancialservices,buttoalsoputthemontheradaroffinancialregulators looking to monitor institutions

55、 that may pose a threat to the countrys financial system. According to a Caixin report (19 November 2018), the regulators have shortlisted 50 financial institutions as potential domestic systemically important financial institutions (D-SIFIs), and inclusion of Ant Financial and Tencent is also under

56、considerationduetothecomplexityoftheirrelationswithotherpartsofthe financialsystemandpotentialcontagionrisktothefinancialsystem. Althoughthe two companies are not conventional financial institutions, the vast payment transaction volumes and fast-expanding financial services offered through their pla

57、tforms could have significant impact on financial stability. The upcoming rules for D-SIFIs will likely enforce more stringent capital adequacy, corporate governance and information disclosurerequirements.Effective supervision without curbing innovation is also a regulatory goal. With stricter scrut

58、iny down the road, greater compliance costs for Ant Financial andTencentseeminevitable.Thatsaid,webelievetheregulatorswillalsocarefully balanceeffectivesupervisionwithtechnologicalandfinancialinnovation.Although regulatorshaverolledoutdetailedrulesandrestrictions,theserulesarefocusedon risk preventi

59、on and there should be little impact on user experience for the most part. In addition, the inclusion of Ant Financial in the pilot scheme for financial holding company regulation also demonstrates the regulators efforts in figuring out the most effective yet least disruptive way to supervise the te

60、ch giants. As such,wedonotviewregulationasadeal-breakerforAntFinancialandTencents ambitions to build comprehensive financial productmarketplaces.Third-party payment market continues to growOn the positive side, quarterly data on third-party payment transaction value so far has been higher than we pr