Tencent-backed Internet bank, WeBank, has saw rapid growth in its revenues and profits. It has become one of the most profitable Internet banks in China with a valuation of RMB247.8 billion (US$35 billion). WeBank is the second most valuable private enterprise in the Greater Bay Area after the fashion behemoth SHEIN (US$90 billion).
WeBank’s 2022 annual report paints a picture of rapid growth and widespread influence. With 360 million effective individual customers, WeBank had a 31.03% increase in revenue to 35.364 billion yuan, and a 29.82% rise in net profit, amounting to 8.937 billion yuan.
Established on December 16, 2014, WeBank has at least 360 million people nationwide utilizing its small consumer loans and other services for their daily needs. Its shareholders include Tencent, holding a 30% stake, and two other major investors, Baiyeyuan Investment Group and Liye Group, each with a 14.29% share.
Industry data shows that the scale of China’s internet consumer credit has risen from RMB18.7 billion yuan in 2014 to RMB9.1 trillion yuan in 2018, with an annual compound growth rate of 370%.
WeBank’s revenue has transitioned from 580 million yuan at a net loss in 2015 to a turn of fortunes around by 2016, largely through its microloan service, Weilidai. This service alone contributed 80% of the bank’s profit that year. Over the next seven years, WeBank’s revenue soared 154 times of its original figure.
WeBank’s loan services are backed by its ability to attract customer deposits. According to its disclosure, from 2015 to 2022, the customer deposit amounts at WeBank were respectively 145 million, 3.29 billion, 5.34 billion, 154.8 billion, 236.29 billion, 261.96 billion, 301.77 billion, and 355.4 billion yuan.
Despite its performance, WeBank’s daily earnings of 24.48 million yuan still trail far behind the 3.7 billion yuan earned daily by the ‘Big Six’ national state-owned banks (Agricultural Bank of China, Bank of Communications, Industrial and Commercial Bank of China, Postal Savings Bank of China, China Construction Bank, and Bank of China) in 2022.
WeBank’s business model is built on two pillars: personal finance and corporate finance. The bank was launched at a time when internet finance was just beginning to flourish. Its flagship product, Weilidai, a micro-credit loan service based on social data risk control, was a game-changer. Subsequent services targeting small and micro-businesses further expanded WeBank’s product matrix.
The bank’s profits primarily stem from interest margins, with net interest income and net non-interest income constituting its revenue. Its annual report shows that in 2022, the bank’s revenue was RMB35.364 billion yuan, consisting of net interest income (70.61%) and net non-interest income (29.39%). Weilidai, in particular, has been a major contributor, serving over 60 million loan customers by the end of 2022.
However, WeBank faces challenges too. The bank’s non-performing loan ratio has been on the rise. WeBank’s non-performing loan ratio rose from 1.2% in 2020 and 2021 to 1.47% in 2022.
On the other hand, the growth rate is gradually slowing down. WeBank’s total assets in 2022 amounted to RMB473.86 billion yuan, with the year-on-year growth falling to 8%, compared to 32.36%, 18.95%, and 26.65% in the years 2019 to 2021, respectively.
Moreover, the pandemic has altered consumer behaviors, with young people increasingly prioritizing savings over spending. This shift raises questions about the future vitality of consumer loan products like Weilidai.