Metro Bank in 'early talks' to buy peer-to-peer lender RateSetter

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Metro Bank logo at one of their branches. (Dave Rushen/SOPA Images/LightRocket via Getty Images)

Troubled challenger bank Metro (MTRO.L) has confirmed it is in early talks to acquire peer-to-peer lender RateSetter.

Metro Bank said in a statement on Monday it had entered into exclusive deal talks with RateSetter, but said discussions were “at an early stage.” The statement followed a report from Sky News on Sunday evening revealing the deal talks.

Metro Bank said a takeover could “accelerate the company's stated strategy to grow its unsecured consumer lending book.”

“There can be no certainty at this stage that a formal agreement will be reached, nor as to the terms of any agreement,” the bank said. “A further announcement will be made if and when appropriate.”

Shares in Metro Bank rose 1.9% amid a wider market sell-off.

Founded in 2010, RateSetter is one of the UK’s biggest peer-to-peer lenders. The company’s online platform connects borrower with individuals willing to lend their money out directly, essentially sidestepping banks. RateSetter says it has over 84,000 customers and has lent £3.6bn ($4.5bn) over its platform since inception.

Accounts show RateSetter made a pre-tax loss of £8.2m on revenues of £33.2m in the 12 months to 31 March 2019.

Any deal would mark the first time a high street bank in Britain has acquired a peer-to-peer lender.

The timing of the potential transaction is likely to raise eyebrows. Metro Bank, which was also founded in 2010, is currently in turnaround mode after a disastrous 2019. Metro Bank lost £130m last year after a loan miscalculation issue that battered the company’s share price.

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are both investigating Metro Bank over the loan issues. Regulators are also investigating self-reported sanctions issues at the bank.

The backdrop of COVID-19 could also complicate talks. RateSetter recently reduced interest payouts to customers, citing a rise in loan payment holidays among borrowers and an expected increase in loan defaults. The company has also reduced new lending and warned customers that trading of loans on its platform is taking longer than usual.