In line with its strategy of increasing its exposure to unsecured personal lending, Metro Bank PLC announces the acquisition of a portfolio of loans from peer-to-peer investors who have invested through the Retail Money Market Ltd (“RateSetter”) platform for a cash consideration of up to £384 million (the “Acquisition”).
The exact amount 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 Portfolio had an aggregate book value of £384 million as at 29 January 2021, with an average total gross yield of circa 8%. The Portfolio consists primarily of unsecured consumer loans and is amortising rapidly, with an average weighted loan term of 2 years remaining. It is a well-seasoned portfolio delivering a consistent credit performance.
The Portfolio is being acquired at par value. As announced on 18 December, the Company’s pro forma CET1 ratio was circa 16.3% and pro forma total capital plus MREL ratio was circa 24.2% as at 30 September 2020. On completion, the Acquisition is expected to reduce the 30 September 2020 pro forma CET1 ratio by circa 0.6% and the pro forma total capital plus MREL ratio by circa 0.9%.
Commenting on the acquisition, Daniel Frumkin, Metro Bank’s Chief Executive Officer 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. We continue to deliver against Metro Bank’s strategic priority of optimising our balance sheet and asset mix, whilst positioning ourselves to better serve customer needs as the UK’s best community bank.”
The Portfolio is currently owned by a large number of retail investors through the RateSetter platform. Under the terms of the loan agreements, an agent acts as custodian of the loans on behalf of the lenders (the “Agent”). The Agent is RateSetter, which is a wholly owned subsidiary of Metro Bank, and, as such, is a related party in accordance with LR 11.1.4R (2). Due to the size of the Acquisition it will constitute a ‘smaller related party transaction’ falling within LR 11.1.10R. Accordingly, Metro Bank has obtained written confirmation from a sponsor that the terms of the Acquisition are fair and reasonable as far as Metro Bank’s shareholders are concerned.