Metro Bank in exclusive talks to buy peer-to-peer lender RateSetter

LONDON (Reuters) - British challenger bank Metro MTRO.L is in exclusive early stage talks to buy peer-to-peer lender RateSetter, the bank said on Monday in response to media speculation.

FILE PHOTO: People walk past a Metro Bank in London, Britain, May 22, 2019. REUTERS/Hannah McKay

Metro Bank, one of the banks set up after the global financial crisis to challenge established players such as Barclays BARC.L and RBS RBS.L, was hit last year by an accounting scandal that cost it its chairman and CEO and reduced its market value by 90%.

The bank this year said it was cutting back growth plans after plunging into the red.

Analysts said the deal would offer Metro a strong revenue source in its push into unsecured consumer lending, on the basis of the spread between RateSetter’s charges to borrowers and the amount it pays to lenders.

RateSetter will benefit from a capital injection as it grapples with a surge in customers withdrawing funds.

RateSetter, launched in 2010, has grown to be one of Britain’s leading peer-to-peer platforms, although, like others, it has struggled in recent months to honour promptly a high volume of customers’ withdrawal requests.

Some customers have waited up to three months rather than the usual wait of a day or so.

RateSetter said it has delivered 55 million pounds ($68.93 million) in release requests since the start of the novel coronavirus outbreak and was processing withdrawal requests in chronological order.

A spokesman for the lender declined to comment on the merger talks.

Peer-to-peer lending firms, which match lenders with borrowers via online platforms, have grown steadily in Britain since 2005, managing more than 5.3 billion pounds in 2019, independent research firm 4thWay data shows.

However, some have struggled. Two firms - Lendy and Funding Secure - collapsed in recent years, prompting the Financial Conduct Authority to tighten regulation in June 2019.

Sky News reported the merger talks late on Sunday.

Reporting by Carolyn Cohn and Lawrence White; editing by Rachel Armstrong and Barbara Lewis