‘Big three’ peer-to-peer lending platform RateSetter has been acquired by Metro Bank for an initial consideration of £2.5m, with up to £9.5m to be paid out after the completion of the deal.
Up to £0.5m is set to be payable 12 months after the completion of the acquisition, and a further £9m will be paid on the third anniversary of the transaction date, subject to key performance criteria. It had previously been reported that the deal could be valued at between £25m and £50m.
RateSetter will continue to operate as an independent platform under the Metro Bank banner, however its loans will be funded by Metro Bank’s balance sheet going forward, rather than by retail lenders.
Rhydian Lewis (pictured), co-founder and chief executive of RateSetter, has been appointed to Metro Bank’s executive committee, and will report directly to Metro Bank’s chief executive Daniel Frumkin.
“I am excited at the prospects of this combination,” Lewis said.
“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.
Read more: Why is Metro Bank eyeing RateSetter?
“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.”
In its last financial statement, RateSetter announced revenue of £33m for the year ending 31 March 2019. Since RateSetter was founded in 2010, it has originated £4bn of lending, primarily in unsecured personal loans, car financing and property financing.
Metro Bank intends to use the acquisition to grow its unsecured lending business. The bank has noted that RateSetter’s originating and underwriting capacity could boost Metro Bank’s lending yield by approximately eight per cent.
“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,” said Daniel Frumkin, chief executive at Metro Bank.
“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.”
RateSetter’s Australian business not been included in the transaction, and it will continue to be retained by RateSetter shareholders. By 30 June 2020, RateSetter Australia had a book value of £13.7m, which “will be distributed on a pro-rata basis to existing shareholders by means of a reduction in capital at or around completion of Metro Bank’s acquisition of RateSetter”, according to a market update.
Read more: What’s happening at RateSetter?