The rare show of concern by major investment banks highlights the loss of confidence by investors and regulators in what used to be one of China's hottest sectors, growing to over $200bn of annual originations from almost nothing in 2012. GS gave up the mandate for 360 Finance, Citi has dropped Jiayin Group, and both CS and JPM walked away from CNFinannce Holdings in recent months.
A string of bank resignations in the same industry could indicate a problem that’s deeper than issues with individual companies, said Philippe Espinasse, former head of Asia equity capital markets at Nomura Holdings Inc. More clarity on the regulatory oversight of Chinese P2P businesses may be needed, he said. “There probably have been too many IPOs in this sector trying to come to market at the same time, with the objective of raising too much money on the back of what are sometimes flimsy and opaque investment cases,” Espinasse said. “A bit of a cooling-off might be a good idea.”