Metro Bank to acquire UK-based P2P lender RateSetter

By Megha Bhattacharya

Metro Bank announced today that it would acquire Retail Money Market LTD ( RateSetter) for an initial consideration of £2.5 million, with additional consideration of up to £0.5 million payable 12 months after completion. The acquisition will enable the Bank to improve its lending yield as well as grow unsecured lending. The Bank will operate RateSetter as an independent platform and originate loans under both the RateSetter and Metro Bank brands. The acquisition will see co-founder Rhydian Lewis join Metro Bank’s Executive Committee and report directly to Metro Bank’s CEO, Daniel Frumkin.

Daniel Frumkin, Chief Executive Officer at Metro Bank, 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. RateSetter is an established business with a strong technology platform and a talented team who have deep experience in the consumer unsecured lending market. This acquisition, therefore, accelerates our plans, helps us to better meet the needs of our customers, and further strengthens our position as the UK’s best community bank.”

According to Metro Bank, it will use its deposit base to fund all new unsecured personal loans originated via the RateSetter platform on the Bank’s balance sheet. RateSetter will continue to manage its existing loan portfolio and Provision Fund on behalf of its current P2P investors. The acquisition is conditional upon approval from the FCA and shareholders. It will not include RateSetter’s holding in RateSetter Australia, which is being retained by RateSetter shareholders.

Duncan Chandler, Partner and head of financial services at Cavendish Corporate Finance LLP, commented,  “The deal is no surprise given the impact of COVID-19 on the fortunes and share prices of many peer-to-peer platforms. The fact that it is in three tranches and conditional is fairly typical but also indicates that Metro is treading carefully as it tries to keep its own recovery on course. But far from this deal being a one-off driven mostly by Metro’s desire to expand into more profitable areas, I suspect the ongoing economic uncertainty will mean we see other P2P platforms also pursue tie-ups with more traditional lenders, as a hedge against the downturn.”

Established in 2010 in the UK, RateSetter is a P2P lender that connects investors and borrowers and therefore does not hold deposits or loans on its balance sheet. It primarily originates unsecured personal loans and also arranges secured auto dealer financing and property financing.

Rhydian Lewis, Chief Executive Officer at RateSetter, said, “I am excited at the prospects of this combination. RateSetter and Metro Bank share a focus on delivering something better for the customer, and the strategic logic of pairing Metro Bank’s strong deposit base with our lending capability is compelling. Metro Bank is admired for its fresh approach to banking, and I am looking forward to helping the bank expand its offering and meet more customer needs.”