Metro Bank in talks to acquire UK P2P lender RateSetter

Written by Ruby Hinchliffe
15th June 2020

Metro Bank is in advanced talks to acquire RateSetter, one of the UK’s largest peer-to-peer (P2P) lenders, Sky News reports.

In April, RateSetter said it wanted to act as the consolidator in a deal, rather than be the acquired

The deal discussions are exclusive, but they have not yet led to a transaction. The deal value is unknown, but it is understood that RateSetter would be bought up at “a knockdown valuation”.

The high street lender, which last year faced an accounting scandal that knocked off 89% of its market share, has this year focused its efforts on rebuilding the bank’s management team, cutting costs, and in February revealed it was slashing two thirds of new branch openings.

The acquisition, set to close “sometime next month” if it is agreed, will therefore come as a surprise to the industry, as many understood the bank to be doubling down on its core strategy under new permanent CEO Dan Frumkin.

Sky News reported back in April that RateSetter was looking for a sale or merger opportunity in which it was to act as a consolidator, “rather than potentially being acquired”.

Though it did have roughly £1 billion in loans on its balance sheet at one time, the coronavirus seems to have hindered the P2P lender’s progress.

Whilst the likes of Funding Circle managed to get accredited by the British Business Bank to issue coronavirus aid during the pandemic, many lenders have still not been accredited and have had to rely on selling loans to third-party investors which ran out – and some practically closed – for a time due to the crisis.

The acquisition would give the bank a new lending platform, and fits in with its wider focus on developing lending technology, which saw it partner with ezbob in March to create a lending platform specifically for small and medium-sized enterprises (SMEs).

With a market capitalisation of barely £180 million, the bank has made a bold move to diversify at a time when the economy is still so uncertain.

RateSetter, which is being advised by bankers at Lazard on the talks, had been examining a fundraising among its other strategic options.

Launched in 2010, RateSetter has since seen more than 700,000 people invest or borrow on its platform. In April, its loan portfolio stood at roughly £800 million, and had attracted £280 million in subscriptions to its Innovative Finance ISA.

The P2P lender is being advised by Lazard bankers on the talks with Metro Bank – both parties have declined to comment on the deal.