Funding Circle’s UK business saw its income rise by two thirds in the four months to the end of October and the firm expects second-half results to come “materially ahead” of previous guidance.
The publicly-listed peer-to-peer lending platform – which also has operations in the US, Germany and the Netherlands – reported a total income increase of 38 per cent year-on-year thanks to strong growth in its domestic market.
Funding Circle now expects to report a profit in terms of adjusted core earnings in the second half of the year, materially ahead of previous guidance of close to breakeven.
“As a result of the strong performance to date, we expect second half of 2020 total income to be ahead of the first half of 2020 and around 20 per cent higher for the full year compared to 2019,” the firm said. “Half on half cost reductions are expected to be less than the 15 per cent originally guided to due to profitable additional marketing spend associated with higher volumes.”
The business lender’s strong UK performance was boosted by its participation in the government-backed coronavirus business interruption loan scheme (CBILS). It said it has approved around £1.85bn and originated around £1.35bn of CBILS loans as at 15 November 2020, representing 24 per cent of the overall CBILS market.
However, Funding Circle warned that “the economic environment remains uncertain” and said “we continue to expect a period of significant stress going forward”.
In the US, Funding Circle’s income was up by 10 per cent year-on-year, driven by investment income.
“With the timing around any future economic stimulus uncertain, we continue to work with other lenders in the market on our US referral model and we expect to relaunch our core lending product when conditions allow,” it said.
John Cronin, analyst at Goodbody, said that Funding Circle’s trading statement points to strong momentum for the company’s UK business.
“The shift in focus at Funding Circle to concentrate on government-backed lending is clearly starting to bear fruit, while the momentum in this respect is clearly also beneficial for Starling Bank, which has an originations agreement in place with Funding Circle to fund government-backed lending on the P2P platform,” said Cronin.
Funding Circle’s shares were up by 3.79 per cent in early trading, reaching a three-month high of 96.06p per share.