Petr Kellner’s push into China was meant to turbo-charge one
of eastern Europe’s biggest fortunes. Instead, the Czech billionaire saw a
listing of his consumer lender collapse, followed by a fight to contain the
impact of the coronavirus pandemic.
of eastern Europe’s biggest fortunes. Instead, the Czech billionaire saw a
listing of his consumer lender collapse, followed by a fight to contain the
impact of the coronavirus pandemic.
That has cost him $2.5 billion since January, with mounting
questions about what’s next for his Asian expansion. In November, Kellner’s
Home Credit NV scrapped a plan for a $1.5 billion initial public offering in
Hong Kong after investors demanded a lower valuation. Now China’s slowing
economy and shrinking consumer loans following strict lockdowns are adding to
the woes for a company that has most of its loan book in that country.
questions about what’s next for his Asian expansion. In November, Kellner’s
Home Credit NV scrapped a plan for a $1.5 billion initial public offering in
Hong Kong after investors demanded a lower valuation. Now China’s slowing
economy and shrinking consumer loans following strict lockdowns are adding to
the woes for a company that has most of its loan book in that country.
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Threat to Xi
Threat to Xi
Kellner’s fortune, now at $10 billion, has dropped the most
this year among the richest eastern Europeans outside of Russia, mostly because
of a $1.5 billion plunge in the value of his stake in Home Credit. It’s now
worth an estimated $2.8 billion, based on the performance of publicly traded
peers, according to the Bloomberg Billionaires Index.
this year among the richest eastern Europeans outside of Russia, mostly because
of a $1.5 billion plunge in the value of his stake in Home Credit. It’s now
worth an estimated $2.8 billion, based on the performance of publicly traded
peers, according to the Bloomberg Billionaires Index.
“The coronavirus pandemic unfortunately won’t remain without
a negative effect on the Home Credit business,” company spokesman Milan Tomanek
said in an email. “Quantifying the impact at this moment, when the pandemic
hasn’t ended yet, would be speculation.”
a negative effect on the Home Credit business,” company spokesman Milan Tomanek
said in an email. “Quantifying the impact at this moment, when the pandemic
hasn’t ended yet, would be speculation.”
Petr Kellner's net worth has slumped this year
Born in Czechoslovakia in 1964, Kellner studied economics
and worked as a salesman for an office-equipment distributor shortly after the
Communist Party fell in the 1989 Velvet Revolution. Then the newly capitalist
state began selling assets such as industrial firms and refineries using a
unique approach: it handed out vouchers exchangeable for company shares.
Kellner, like many others, took advantage. He set up a fund in 1991 and, with
the help of outside investors, acquired stakes in 202 companies. It wound up
handling the sixth-biggest batch of assets offered for sale at the time,
according to the firm, which then became known as PPF Group NV.
and worked as a salesman for an office-equipment distributor shortly after the
Communist Party fell in the 1989 Velvet Revolution. Then the newly capitalist
state began selling assets such as industrial firms and refineries using a
unique approach: it handed out vouchers exchangeable for company shares.
Kellner, like many others, took advantage. He set up a fund in 1991 and, with
the help of outside investors, acquired stakes in 202 companies. It wound up
handling the sixth-biggest batch of assets offered for sale at the time,
according to the firm, which then became known as PPF Group NV.
Foreign Ownership
Today, PPF’s operations span finance, telecom, biotech, real
estate and engineering, and Kellner controls about 99% of the company. Its Home
Credit unit, started in 1997, is one of the largest consumer lenders in central
and eastern Europe.
estate and engineering, and Kellner controls about 99% of the company. Its Home
Credit unit, started in 1997, is one of the largest consumer lenders in central
and eastern Europe.
The push into China came in 2007. Home Credit operates in
countries with little consumer-finance penetration and where demand for
consumer loans is growing with improving disposable incomes, according to a
prospectus for its IPO. The company, registered in Amsterdam, is the only
consumer-finance firm in China owned entirely by foreign investors and held 28%
of the nation’s consumer-loan balance at the end of 2018, the prospectus
showed. It also expanded in Vietnam, India, Indonesia, the Philippines and
Kazakhstan, according to its website.
countries with little consumer-finance penetration and where demand for
consumer loans is growing with improving disposable incomes, according to a
prospectus for its IPO. The company, registered in Amsterdam, is the only
consumer-finance firm in China owned entirely by foreign investors and held 28%
of the nation’s consumer-loan balance at the end of 2018, the prospectus
showed. It also expanded in Vietnam, India, Indonesia, the Philippines and
Kazakhstan, according to its website.
Increasingly Apparent
With China’s economy reopening, the impact of the lockdowns
will become increasingly apparent. When it comes to consumer lending, the
balance of short-term loans from financial institutions dropped more than 20%
to 7.8 trillion yuan ($1.1 trillion) in April from the end of last year,
according to data from the People’s Bank of China.
will become increasingly apparent. When it comes to consumer lending, the
balance of short-term loans from financial institutions dropped more than 20%
to 7.8 trillion yuan ($1.1 trillion) in April from the end of last year,
according to data from the People’s Bank of China.
“Fewer people are willing to take longer trips and fewer
people will buy a luxury handbag or an automobile right now as they might not
be considered necessities when you can choose to work from home,” said James
Chang, a partner at PwC China. “These factors are continuing to affect
negatively the volume of new consumer loans.”
people will buy a luxury handbag or an automobile right now as they might not
be considered necessities when you can choose to work from home,” said James
Chang, a partner at PwC China. “These factors are continuing to affect
negatively the volume of new consumer loans.”
Growth in China’s market for consumer loans had already
started to slow before Covid-19 hit as regulators sought to curtail
unsustainable lending practices. For Home Credit, the introduction last year of
an interest-rate cap that led to a review of its product offerings and a
reduction in fees and commission income was a major hit, even though it managed
to report a 9.5% increase in net loans to Chinese customers to almost 12
billion euros ($13 billion) for 2019.
started to slow before Covid-19 hit as regulators sought to curtail
unsustainable lending practices. For Home Credit, the introduction last year of
an interest-rate cap that led to a review of its product offerings and a
reduction in fees and commission income was a major hit, even though it managed
to report a 9.5% increase in net loans to Chinese customers to almost 12
billion euros ($13 billion) for 2019.
For popular domestic lending platforms such as Alibaba Group
Holding Ltd.’s Ant Financial Services Group, the pandemic has actually led to
more business. Chinese lenders sought out the firm’s digital technology after
they were forced to shutter branches, and its MYbank, which cut interest rates,
is on track to issue a record 2 trillion yuan of new loans to small- and
mid-size companies this year, up almost 18% from 2019.
Holding Ltd.’s Ant Financial Services Group, the pandemic has actually led to
more business. Chinese lenders sought out the firm’s digital technology after
they were forced to shutter branches, and its MYbank, which cut interest rates,
is on track to issue a record 2 trillion yuan of new loans to small- and
mid-size companies this year, up almost 18% from 2019.
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Spree
Spree
In its Hong Kong IPO, Home Credit sought a valuation of 10
billion euros, people familiar with the matter said at the time. When investors
pushed back, the company decided to pull the deal. Tomanek, the spokesman, said
there are no plans to revisit a listing.
billion euros, people familiar with the matter said at the time. When investors
pushed back, the company decided to pull the deal. Tomanek, the spokesman, said
there are no plans to revisit a listing.
Kellner’s business in China has caused some controversy back
home. Late last year, PPF and Home Credit sought to fend off allegations in
local media that the lending arm had hired a public relations agency to help
improve China’s image in the country. Home Credit said its goal was only to
“rationalize the public debate” and “weaken extreme positions in the public
sphere” by presenting facts about doing business and life in the Asian nation.
home. Late last year, PPF and Home Credit sought to fend off allegations in
local media that the lending arm had hired a public relations agency to help
improve China’s image in the country. Home Credit said its goal was only to
“rationalize the public debate” and “weaken extreme positions in the public
sphere” by presenting facts about doing business and life in the Asian nation.
PwC’s Chang remains confident that Home Credit and its owner
will recover. Domestic consumption will be a major driver for China’s economy,
and the industry holds promise for the medium to long term, he said. A
September report by the National Institution for Finance & Development
projected rapid growth in the next five years, with consumer loans comprising
more than 25% of China’s credit-loan market.
will recover. Domestic consumption will be a major driver for China’s economy,
and the industry holds promise for the medium to long term, he said. A
September report by the National Institution for Finance & Development
projected rapid growth in the next five years, with consumer loans comprising
more than 25% of China’s credit-loan market.
“They are from eastern Europe, they saw how an economy
develops, so they know how to reach their customers and how to design products
for different scenarios like buying a new smartphone,“ Chang said of Home
Credit.
develops, so they know how to reach their customers and how to design products
for different scenarios like buying a new smartphone,“ Chang said of Home
Credit.
— With assistance by Peter Laca, Pei Yi Mak, Jack Witzig,
Lenka Ponikelska, and Tom Metcalf
Lenka Ponikelska, and Tom Metcalf
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