ZOPA’S struggle to raise last-minute funding so it can launch its banking brand should not be seen as a sign of trouble for the peer-to-peer lending sector, an analyst claims.
The P2P lender announced yesterday (3 December), almost a year after receiving a banking licence with restrictions, that it has raised £140m from IAG Silverstripe to help meet its capital requirements and gain full permissions.
But John Cronin, an analyst for Goodbody, said the difficulties in raising the funds were not due to worries about P2P lending.
“Zopa’s current difficulties stem from the fact that it is incurring material costs associated with its provisional banking licence and its foray into other lending segments, i.e., beyond its roots in P2P lending,” Cronin said.
“While there has been much commentary about the P2P sector’s travails lately, we still believe that the proposition is a sensible one and is here to stay.”
Cronin said it is unsurprising to see problems surface among less well-run businesses such as Lendy and warned that investors should be aware of the risks when chasing “eye-watering returns”.
He also predicted that platforms will become more reliant on institutional funding but said there will still be a place for “savvy” retail investors, highlighting RateSetter as an “important proposition”.
However, not everyone has been so effusive about Zopa’s entry into banking.
Lee Birkett, founder of P2P lending platform JustUs, said it would bring extra pressure to the platform.
“From a personal perspective, I don’t feel real value can be attained by Zopa moving to a traditional banking model, with permanent capital adequacy calls the bigger you get,” he said.
“Any return on equity is hard to find, just look at the listed challenger bank share performances, rushed consolidations and those banks de-listing in the last couple of years.”