RateSetter’s losses widen to £23.3m after wholesale lending write-off

RATESETTER reported record revenues in the last financial year but saw its losses increase after taking a one-off £14m hit on a borrower rather than exposing investors on its provision fund.

The peer-to-peer lender’s latest annual accounts for the 12 months to 31 March 2017 showed a 38 per cent rise in revenue to £23.7m but a pre-tax loss of £23.3m – widening from a £5.3m loss a year before.

Part of this loss was due to RateSetter’s decision to acquire Adpod, a struggling advertising company that had borrowed from one of RateSetter’s former wholesale lending partners.

The company said in July that it would absorb any losses as opposed to using the provision fund, and its latest accounts show it has made a one-off goodwill impairment of £14.1m to cover this.

“As this loan was outside RateSetter’s credit policy and was an exceptional case, RateSetter believed it was right for it as a company to absorb any losses from this loan, as opposed to the provision fund doing so,” it said on Wednesday.

It has been a busy year for the lender, with the number of active lenders up 36 per cent to 42,049 and borrowers increasing 27 per cent to 204,000.

In May, RateSetter announced that it had completed a £13m equity raise, with backers including Woodford Investment Management and Artemis. The raise valued RateSetter at £195m.

In July the platform passed the £2bn lending milestone and it gained full authorisation from the Financial Conduct Authority in October.

But it has also faced issues after winding down the wholesale lending segment of the business. RateSetter’s transparency came under the spotlight, after it told investors in May that it had made “interventions” on some of its former wholesale lending partners – acquiring two and buying a stake in another – after they fell into financial difficulty.

The Adpod acquisition was only disclosed at a later date, leading to RateSetter’s departure from the Peer-to-Peer Finance Association for breaching its rules on transparency.

Speaking to Peer2Peer Finance News this month, RateSetter’s co-founder Rhydian Lewis (pictured) said the issue was a technical issue rather than a credit issue and was now behind them.

“The past year was an important one for RateSetter, we showed that we are a resilient business, with the strength and maturity to deal with challenges and emerge stronger as a result,” Lewis said in a statement accompanying the results announcement.

“As we go into 2018, we are very confident that the investment we have made over the last two years provides a strong foundation from which we can efficiently grow our business. We will launch our Innovative Finance ISA before the end of the tax year and expect to attract £500m within a year. We expect to return to profitability next year.”