Acquisition of RateSetter
3 August 2020
Legal Entity Identifier: 213800X5WU57YL9GPK89
METRO BANK PLC
Acquisition of RateSetter
Delivers strategic ambition to enhance unsecured lending capability
Metro Bank PLC ("Metro Bank" or "the Company") today announces that it has agreed to acquire Retail Money Market LTD ("RateSetter") for initial consideration of £2.5 million, with additional consideration of up to £0.5 million payable 12 months after completion subject to the satisfaction of certain criteria and further consideration of up to £9 million payable on the third anniversary of the completion of the transaction, subject to the satisfaction of certain key performance criteria. The acquisition does not include RateSetter's holding in RateSetter Australia which is being retained by RateSetter shareholders.
RateSetter was founded in 2010 and is the UK's most popular peer-to-peer lender with over 750,000 people having invested or borrowed through the platform. In its financial year ending 31 March 2019, the company reported revenue of £33 million, a pre-tax loss of £8 million and gross assets of £42 million. Since inception, the business has originated £4 billion of lending. The business primarily originates unsecured personal loans, and also arranges secured auto dealer financing and property financing. As a peer-to-peer platform, RateSetter connects investors and borrowers and therefore does not hold deposits or loans on its balance sheet.
As part of its strategy to enhance returns, Metro Bank has previously signalled its ambition to grow unsecured lending. RateSetter's originating and underwriting capability will enable the bank to rapidly accelerate this ambition via an existing, scalable platform. The acquisition presents an attractive opportunity for Metro Bank to improve its lending yield, with RateSetter having achieved an average total gross yield of 8 percent for the financial year ending 31 March 2020, and is expected to be net interest margin enhancing in the first full financial year of ownership.
Metro Bank will operate RateSetter as an independent platform and originate loans under both the RateSetter and Metro Bank brands. The acquisition brings a talented team including co-founders Rhydian Lewis and Peter Behrens and CFO Harry Russell. Rhydian Lewis will join Metro Bank's Executive Committee and report directly to Metro Bank's CEO, Daniel Frumkin.
Following completion, Metro Bank will use its deposit base to fund all new unsecured personal loans originated via the RateSetter platform on Metro Bank's balance sheet. RateSetter will continue to manage the existing RateSetter loan portfolio and Provision Fund on behalf of its existing peer-to-peer investors, with Metro Bank assuming no credit risk for these existing loans.
The transaction will be funded from existing cash resources, whilst the final fair value and goodwill elements will be determined as part of the Company's year-end accounting process. The acquisition is anticipated to reduce the Company's CET1 ratio by circa 0.3% at 30 June 2020 on a pro forma basis.
The acquisition is conditional upon approval from the Financial Conduct Authority and shareholders holding at least 60 percent of RateSetter's shares acceding to the relevant transaction documents and is expected to close by the fourth quarter this year. The board of directors of RateSetter unanimously recommends the transaction and that shareholders of RateSetter accede to the relevant transaction documents. Shareholders holding 45.7 percent of RateSetter's shares have signed the relevant transaction documents at the date of this announcement. Once RateSetter shareholders holding 60 percent of RateSetter's shares have signed or acceded to the relevant transaction documents, it is expected that RateSetter shareholders who have not signed or acceded to the transaction documents will be dragged into the transaction, resulting in Metro Bank acquiring 100 percent of RateSetter's shares at completion.
Daniel Frumkin, Chief Executive Officer at Metro Bank 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. RateSetter is an established business with a strong technology platform and a talented team who have deep experience in the consumer unsecured lending market. 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."
Rhydian Lewis, Chief Executive Officer at RateSetter said: "I am excited at the prospects of this combination. 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. Metro Bank is admired for its fresh approach to banking and I am looking forward to helping the bank expand its offering and meet more customer needs."
ENDS
RateSetter's holding in RateSetter Australia, which had a book value at 30 June 2020 of £13.7 million, will be distributed on a pro-rata basis to the existing RateSetter shareholders by means of a reduction in capital at or around completion of Metro Bank's acquisition of RateSetter.
The information contained within this Announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 and was authorised for release by David Arden, Chief Financial Officer.
Enquiries
For further information on this announcement, please contact:
Metro Bank PLC
Investor Relations
Jo Roberts
+44 (0)20 3402 8900
Media Relations
Tina Coates / Abigail Whittaker
+44 (0)7811 246016 / +44 (0)7989 876136
Teneo
Charles Armitstead / Haya Herbert ‐ Burns
+44 (0) 7703 330269 / +44 (0) 7342 031051
About Metro Bank
Metro Bank is celebrated for its exceptional customer experience. Its mobile app and online service achieved the top spot in the Competition and Market Authority's Service Quality Survey among personal and business current account holders in February 2020; the bank also ranked in the top two for overall service and store service for personal and business customers. It was awarded 'Best All Round Personal Finance Provider' at the Moneynet Personal Finance Awards 2019.
Offering retail, business, commercial and private banking services, it prides itself on giving customers the choice to Bank however, whenever and wherever they choose. Whether that's through its network of stores open seven days a week, early until late, 362 days a year; on the phone through its UK-based 24/7 contact centres; or online through its internet banking or award-winning mobile app: the bank offers customers real choice.
The bank employs around 3,500 colleagues and is headquartered in Holborn, London.
Metro Bank PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London, WC1B 5HA. 'Metrobank' is the registered trademark of Metro Bank PLC.
It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Most relevant deposits are protected by the Financial Services Compensation Scheme. For further information about the Scheme refer to the FSCS website www.fscs.org.uk.
All Metro Bank products are subject to status and approval.
Metro Bank PLC is an independent UK bank - it is not affiliated with any other bank or organisation (including the METRO newspaper or its publishers) anywhere in the world. Please refer to Metro Bank using the full name.
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