Monday 15 June 2020 8:22 am

Metro Bank confirms talks to buy peer-to-peer lender Ratesetter

Metro Bank has confirmed it is in exclusive talks to buy the owner of peer-to-peer lender Ratesetter, but said that discussions are at an early stage.

The challenger bank said there was no certainty that it would reach an agreement with Money Market, following a Sky News report that the pair were in talks late on Sunday. 

Read more: Colombian billionaire Jaime Gilinski beefs up Metro Bank stake

Ratesetter was launched in the UK in 2010. At its peak, the peer-to-peer had around £1bn of lending on its balance sheet, but the coronavirus pandemic has exacerbated a funding squeeze, Sky News reported. 

Shares in Metro Bank rose over two per cent in early trading after the lender confirmed the talks. 

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News of the discussions is likely to take many in the City by surprise, as many were expecting Metro Bank to focus on its core strategy following the appointment of new chief executive Dan Frumkin in February. 

The challenger bank entered the coronavirus crisis in poor shape after the discovery of a loan book error last year led to a collapse in its share price, forced out its chief executive and other top bosses, and triggered an ongoing regulatory investigation.

Last month, Metro Bank warned it faces “significantly higher” volumes of bad loans due to the economic downturn caused by Covid-19 at its annual general meeting. 

Metro Bank said the level of impairments would depend on the magnitude and length of the slowdown and it had seen a reduction in customer transaction volumes, which it said may result in lower than expected fee income.

Finance chief David Arden reiterated the company would consider asset sales to bolster its balance sheet if necessary.

Read more: Metro Bank shares fall despite rise in customer deposits

Peer-to-peer lending firms, which match lenders with borrowers via online platforms without the involvement of a bank, have grown steadily in Britain since 2005, managing more than £5.3bn in 2019, according to data from research firm 4thWay.

However, several providers have struggled, with two firms – Lendy and Funding Secure – collapsing in recent years, prompting the Financial Conduct Authority to bring in tighter regulation of the sector.