Metro Bank PLC buys RateSetter back book at par value

PLC () has snapped up a portfolio of unsecured peer-to-peer loans for £384mln cash to accelerate its plan of enhancing returns.

Following the challenger bank’s acquisition of the RateSetter last summer, this deal sees it acquire the peer-to-peer platform’s back book of primarily unsecured consumer loans, which are currently owned by a large number of retail investors.

It is part of boss Daniel Frumkin’s strategy of increasing the lender’s exposure to unsecured personal lending.

With the portfolio being acquired at par value, in what is a related-party transaction, the exact amount of the consideration “is expected to be less as the portfolio will continue to amortise between announcement and expected completion in April 2021, following a two month notice period for retail investors,” the bank said.

While “amortising rapidly”, the portfolio’s aggregate book value was £384mln as at January 29, 2021, with an average total gross yield of close to 8% and an average weighted loan term of two years remaining.

With Metro’s pro forma CET1 ratio standing at circa 16.3% as of the end of last September, the acquisition is expected to reduce this by circa 0.6%.

In a statement, Frumkin said: “The addition of this portfolio to our loan book is a further step towards growing our presence in the unsecured lending market. It builds on our acquisition of the RateSetter platform – a well-established business with a strong technology platform that is enabling us to rapidly expand our unsecured lending offering.”