Metro Bank could be positioning itself as a rival to traditional peer-to-peer lending platforms, as the struggling bank seeks to bolster its lending business.
The challenger, which on Wednesday reported a £240.6m first-half loss, recently acquired ‘top three’ platform RateSetter in a deal worth up to £12m.
Goodbody analyst John Cronin has suggested that the bank may look to acquire other P2P lending platforms in order to expand its reach.
“Metro has a unique model predicated on customer service, and P2P platforms facilitate wide distribution,” Cronin told Peer2Peer Finance News.
“If they got their hands on the likes of Funding Circle, they could extend that model to become an SME community bank.”
Metro Bank’s pre-tax loss of £240.6m in the six months to June substantially exceeds the £59m loss predicted by Goodbody analysts. It compares to a £3.4m profit over the same period last year.
The majority of these losses were attributed to £112m of expected credit losses in the six months to 30 June 2020, and £97m of the losses were directly related to the coronavirus pandemic.
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The bank is still reeling from an accounting scandal in the early part of last year, when £900m in loans were revealed to have been incorrectly valued. This prompted a regulatory investigation, as well as the departure of founder and chairman Vernon Hill, and chief executive Craig Donaldson.
New chief executive Daniel Frumkin said that “while the pandemic has weighed heavily on our financial performance, we’ve made early progress delivering against the strategic priorities”.
In a post-results analysis, Goodbody’s Cronin said that “the numbers don’t inspire confidence” particularly in relation to the bank’s lending business.
He pointed towards the appointment of RateSetter founder and chief executive Rhydian Lewis to Metro Bank’s executive committee as a hint that the bank could be shoring up P2P expertise ahead of a new lending strategy.
“Metro Bank is looking to develop a distinctive niche bank that could potentially be attractive to acquirers in time given the substantial challenges facing the industry,” added Cronin.
“A scalable platform that presents material non-interest income generation capability would be desirable in the eyes of many.”
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