Chow Tai Fook Jewellery Group bids for Standard Chartered's Anxin Credit

According to people familiar with the matter, Chow Tai Fook Enterprises Ltd., a subsidiary of Hong Kong's wealthy Zheng Yu's family, is one of the bidders of Standard Chartered PLC's Hong Kong consumer credit business, Prime Credit.

According to people familiar with the matter, Chow Tai Fook Enterprises Limited has already passed the first round of bidding for Essence Credit. The Standard Chartered Group announced the sale of Anxin Credit earlier this year as part of its business restructuring plan.

The Standard Chartered Group is headquartered in the UK with approximately 90% of its profits coming from emerging markets. People familiar with the matter said the bank sought the second round of bidding for Anxin Credit as early as this week. The first round of bidding was completed in April.

Despite its profitability, Essence Credit is not part of Standard Chartered's core business in Asia, which includes traditional banking products for consumers and businesses. The loan business of Anxin Credit is very different from the traditional retail bank loan of Standard Chartered Group, which usually requires the creditor to have a good credit status. Hong Kong's Essence Credit specializes in high-interest loans with a simple procedure of no more than HK$50,000 (US$6,449). This lucrative business has attracted the interest of many bidders.

According to people familiar with the matter, in addition to Chow Tai Fook Enterprises Limited, the bidders include United Asia Finance Ltd. and a bank headquartered in Southeast Asia. The valuation of Anxin Credit is said to be between US$500 million and US$700 million.

Analysts said that UAF may be looking to acquire Essence Credit as a way to further expand its Hong Kong operations. According to a person familiar with the matter, the company has partnered with JPMorgan Chase & Co., Morgan Stanley and UBS AG on a potential $500 million Hong Kong listing deal. Sun Hung Kai, the parent company of Asia United Finance, declined to comment.

According to people familiar with the matter, the sale of Anxin Credit has previously attracted some private equity firms and Japanese leasing and financial services company Orix Corp. Ask, but Orix is ​​not planning to bid.

The Cheng Yu Yu family holds a controlling stake in Chow Tai Fook Jewellery Group Ltd., the world's largest jewellery chain, and has an interest in casinos, real estate development, terminals, telecommunications and other fields.

Zheng Yuxi’s jewellery career began in 1940, when he was only 15 years old and fled from South China, which was occupied by Japan, to the Portuguese colony of Macau, which is 70 miles (about 113 kilometers) away. According to a 2003 biography, Zheng Yuqi escaped the attack of the robbers, but the bicycle was stolen by Japanese soldiers. He could only walk to Zhuhai on foot and finally boarded a ship to come to Macau.

If the successful acquisition of Anxin Credit, the Cheng Yu-tung family will further diversify its holdings and will take a share of the lucrative Hong Kong consumer credit market.

Despite the fierce competition, the profit margin of the consumer credit industry in Hong Kong remains high. For the six months ended June 30, 2013, Anxin Credit achieved a profit after tax of 251 million Hong Kong dollars, a year-on-year increase of 5% (this is the latest data available). However, the impairment charge increased from HK$125 million in the same period last year to HK$170 million.

Analysts said that Hong Kong's credit outlook remains strong, given that Hong Kong's unemployment rate is still low and that real estate prices have not fallen sharply so far. According to Dominic Chan, an analyst at BNP Paribas, the macro outlook looks good, which is good for financial institutions engaged in subprime credit.

Just a few months before Essence Credit was on sale, Standard Chartered unexpectedly announced restructuring of the company and management changes. The main component of the restructuring was the merger of wholesale banking and retail banking.

A spokesman for Standard Chartered said the bank is exploring "strategic opportunities," but she did not comment further.

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