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Peer2Peer Finance News | September 25, 2017

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Metro Bank steers clear of unsecured consumer lending

Metro Bank steers clear of unsecured consumer lending
Anna Brunetti

METRO Bank, the challenger lender that partnered with Zopa, is steering clear of unsecured consumer finance as it sees it as highly uneconomical at the moment, its chief executive has said.

The firm, which announced a tie-up with the UK’s largest and oldest P2P platform in 2015 to increase its lending in that space, is now scaling back that segment of its business due to an unattractive risk/return balance.

Read more: UK consumers and businesses shrink their borrowing ahead of Brexit headwinds

Metro Bank’s head Craig Donaldson said that while the group’s relationship with the P2P player remains very beneficial, it is not lending in any considerable scale through it at present.

“We have a really good relationship with Zopa, and a lot of cultural overlap [with their business], and we expect to continue our collaboration,” Donaldson told Peer-to-Peer Finance News during a media conference call on Wednesday.

“However, [that line of lending] has contributed very little to our first-quarter results […] as we are just not willing to lend at those rates.

“The risk/return dynamic is just not right at the moment.”

Read more: Zopa plans to launch bank

The firm is making a conscious decision not to play in the broader unsecured personal loan space as “rates of 2.7-2.8 per cent just don’t make economic sense for us,” he said.

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The lender reported a 33 per cent first-quarter surge in pre-tax profits on Wednesday, with a record £1bn leap in deposit growth – 13 per cent more than in the previous quarter – and a further £600m contribution from lending activity, which was an 11 per cent increase from the end of last year.

The first-quarter results, which strengthen expectations that the firm will deliver its first year of net gains since it set out to challenge the country’s high-street banks seven years ago, still fell short of boosting its loan to deposit ratio, which slipped to 72 per cent from 74 per cent a quarter earlier.

Zopa declined to comment.