Metro Bank buys Ratesetter for just £2.5m
Metro Bank is buying internet lender Ratesetter for £2.5m as bosses seek to reinvigorate the high street chain after an accounting scandal.
The bank will pay an extra £500,000 after completion of the deal if targets are hit, along with up to £9m more on the third anniversary of completion.
It marks a precipitous value slump for Ratesetter, one of the biggest so-called peer-to-peer lenders which allow ordinary people to make loans directly to businesses and consumers without going through a bank.
The company was given a £200m price tag in a 2017 funding round led by disgraced money manager Neil Woodford, whose investment empire fell apart last year.
Peer-to-peer firms exploded onto the UK's finance scene in the wake of the financial crisis as banks cut back on lending, but have since struggled to compete against traditional players. Shares in Ratesetter's main rival Funding Circle have dropped 78pc since it floated in 2018.
Metro has been seeking to draw a line under a major blunder last year when it miscalculated the riskiness of some commercial property loans, with shares collapsing 95pc since the mistake was made public.
Boss Craig Donaldson later resigned, as did founder and chairman Vernon Hill.
Ratesetter's expertise in personal loans could boost the struggling bank as it seeks to expand into new areas.
Daniel Frumkin, Metro's boss, said: "The ability to enhance our offer of unsecured lending to our customers is an important strategic ambition as we continue to evolve the bank and increase our returns.
"This acquisition therefore accelerates our plans, helps us to better meet the needs of our customers and further strengthens our position as the UK's best community bank."
RateSetter was founded in the UK in 2010 - the same year as Metro Bank - and at its peak had about £1bn of lending on its balance sheet. It suffered a pre-tax loss of £8m on revenues of £33m for the year to March 31, 2019.
Chief executive Rhydian Lewis said: "RateSetter and Metro Bank share a focus on delivering something better for the customer and the strategic logic of pairing Metro Bank's strong deposit base with our lending capability is compelling."
The acquisition does not include RateSetter's holding in RateSetter Australia.
Shares in Metro rose 5.2pc to 108.7p. The stock was trading above 200p before the crisis hit in February.
