Metro Bank buys RateSetter to expand unsecured loans
By Sean Farrell
Date: Monday 03 Aug 2020
(Sharecast News) - Metro Bank has agreed to pay an initial £2.5m to buy the peer-to-peer lender RateSetter to expand in unsecured lending and increase returns.
The challenger bank could end up paying £12m for RateSetter if it meets targets. Metro will pay an extra 0.5m subject to performance a year after the deal completes and up to £9m more three years after completion if performance criteria are met.
RateSetter was founded in 2010 to connect lenders and borrowers directly while charging them fees. It is one of many peer-to-peer lenders that sprang up after the financial crisis as banks restricted their lending. Metro said it was the UK's most popular peer-to-peer lender and had served more than 750,000 people. RateSetter posted an £8m loss in the year to March 2019.
Metro Bank is trying to increase its returns after under-reporting the riskiness of £900m of commercial property loans and other assets. The bank, which launched 10 years ago, said RateSetter would add to its net interest margin in the first full year of ownership.
The bank said it would operate RateSetter as an independent platform run by co-founders Rhydian Lewis and Peter Behrens. Lewis will join Metro's executive committee and report to Chief Executive Daniel Frumkin.
Metro said it would use its deposit base to fund new personal unsecured loans made by RateSetter, which will manage its existing peer-to-peer loans with Metro taking on no risk for these loans.
Frumkin said: "The ability to enhance our offer of unsecured lending to our customers is an important strategic ambition as we continue to evolve the bank and increase our returns."
Metro shares rose 3.6% to 107p at 11:25 BST.
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