DealStreetAsia’s analysis of regulatory filings shows that ANEXT lost S$29.8 million in 2023, compared to S$27.2 million a year earlier – despite a sevenfold revenue increase. The sharp increase in revenue appears to have not been quite enough to offset much higher operating expenses, which grew 52.5% year-on-year to S$45.9 million. Further, ANEXT’s cost-to-income ratio was roughly 187%, indicating that for every dollar of income generated, over S$1.87 was spent on operational and administrative costs.
“While growth is imperative, it’s more important to ensure the growth is sustainable. The increase in operating and staff costs resulted from more investments made in technology, risk management and our people,” ANEXT said in a LinkedIn post.
That said, ANEXT’s business saw significant improvements in terms of deposits and lending. Customer deposits jumped 370% to S$295 million in 2023, including S$39.6 million from a “related party.” Loans and advances rose to S$222.2 million.
Given Ant’s experience with SME lending in China, we do not doubt that if it is patient, it can likely build a viable business in Singapore. Unlike Grab and Sea Group, Ant is not serving the retail market in the city-state and thus the pathway to profitability is more straightforward. If Ant is truly focused on small firms that typically have difficulty securing credit from large lenders and is able to adroitly assess their risk profiles, then it may indeed cultivate a strong market niche eventually.
ANEXT sees a significant opportunity with foreign-owned businesses in Singapore. In a recent news release, Ant said that as of the end of May, 31% of the bank’s customers are foreign-owned businesses from 78 countries, including China, Japan, South Korea and the SEA region. The bank also served a growing number of foreign-incorporated businesses through its embedded finance partners, Ant added.
Auguring well for ANEXT is that Ant seems willing to spend whatever it takes to make the digibanks successful. The Chinese tech giant has already invested US$500 million in the venture and we would not be surprised to see additional significant capital injections before long.