RateSetter is confident that it can grow Metro Bank’s unsecured lending despite widening its losses in 2020.
According to RateSetter’s financial results for the year up to 31 March 2020, the platform – which was acquired by Metro Bank in September – saw its losses before tax widen from £8.3m in 2019 to £8.6m in 2020. This was driven by an increase in overheads, partly offset by an improvement in gross profit.
RateSetter achieved a core income of £29.3m in 2020, down from £29.7m in 2019, while its gross profit rose from £18.9m in 2019 to £19.5m in 2020, driven by improved loan management fee margins, following the launch of new investor products and lower introducer commissions.
RateSetter said going forward the platform will generate revenue via a commission arrangement with Metro Bank for the origination, underwriting and servicing of unsecured lending.
The platform, which will stop investment withdrawals from 26 March, added that if the volume of its future lending and commission is not enough to cover its costs, Metro Bank plans to provide further financial support.
However, RateSetter said it does not have an unconditional guarantee of financial support from the bank and therefore is dependent on it continuing to honour its proposals, if required.
“Given these factors and having considered the risks and uncertainties to which the group’s business model is exposed, the directors expect that the group will have sufficient financial resources to meet its obligations (including regulatory capital requirements) for the foreseeable future (being a period of at least 12 months from the date of this report),” said Rhydian Lewis (pictured), chief executive of RateSetter.
RateSetter’s originations totalled £734m in the year to 31 March 2020, down slightly from £771m in the same period the previous year.
The platform’s loans under management dropped from £855m in 2019 to £831m in 2020, with the average value of loans under management higher than the previous year.
Meanwhile, Metro Bank’s financial results today showed that the bank has extended more than £120m in unsecured consumer loans and aims to continue growing this with plans to offer RateSetter’s products in its branches.