WeBank, a joint venture led by Chinese gaming and social network group Tencent Holdings, gave out its first individual loan on Jan 4, witnessed by Premier Li Keqiang.

With 30 percent of the total shares, Tencent is the largest shareholder of the Chinese mainland's first-ever private Internet bank and one of five privately funded banks given approval to open in China with a registered capital of 3 billion yuan ($482 million).

Investment firms Baiyeyuan Investment and Liye Group each own 20 percent, while seven other shareholders make up the remaining 30 percent.

In Monday's trading, shares of Tencent rose 0.6 percent to close at HK$113.5 apiece, outperforming the benchmark Hang Seng Index which dropped 0.7 percent to 23,721.3.

"We believe the launch of WeBank will serve as a profitability catalyst for Tencent in the near future," said Kevin Tam, a Hong Kong-based senior analyst covering telecom and technology sectors at Core Pacific-Yamaichi International. "WeBank has huge potential to contribute a lot to the company's earnings."

The name of the first Internet-based bank comes from WeChat, Tencent's wildly popular instant messaging and social networking app. Tam noted the massive user resource amassed through the WeChat platform could be made the most of by WeBank.

"The vast user resource on WeChat will allow Tencent to make more aggressive moves in mobile transactions and mobile payment," said Tam.

However, a key challenge for WeBank lies in how to convert social network users, which account for the vast majority of WeChat's user base, to financial services users, said Huang Jinyang, a Shanghai-based consultant for one of the "Big Four" accounting firms. "The conversion will take quite a long time," said Tam. "The O2O (online-to-offline) channel is where Tencent will rely to collect financial services users."

And the lending to small- and medium-sized companies, and individual customers, whose demand for loans have long been unsatisfied, is which WeBank is believed to focus on, said Tam. Small or privately owned companies, providing about 60 percent of the mainland's GDP and about 75 percent of new jobs, have long struggled to obtain loans from State-owned banks, which prefer lending to larger, State-owned groups, said Stephen Wong, adjunct associate professor at the University of Hong Kong.

"The less improved banking and credit allocation system on the mainland lends WeBank a big role to play," said Huang.

Before the launch of WeBank, Tencent had dipped its toes in Internet finance waters several times by virtue of Caifutong (Tenpay), Tencent's third-party payment platform. In March last year, Tencent and mainland Internet giant Alibaba planned to offer payment products based on virtual credit cards and payments made through so-called Quick Response. The plans, however, were suspended by the People's Bank of China due to security concerns.

Earlier in January 2014, Tencent rolled out its first financial services product for WeChat via the money market fund, Licaitong. "WeBank is expected to help Tencent get a foothold in the country's burgeoning Internet finance, where dire threats from heavyweights like Alibaba and JD.com are vividly felt," said Huang. "So far, Internet finance is not the domain where Tencent enjoys an advantage."

An affiliate of e-commerce leader Alibaba has also been cleared to launch an Internet-based bank in partnership with Fosun International.

sophia@chinadailyhk.com

(HK Edition 01/06/2015 page9)