Metro Bank narrows losses as RateSetter loans breach £1bn



RateSetter’s loanbook helped Metro Bank to narrow its losses during the first half of 2022, with the bank’s consumer lending business exceeding £1bn for the first time.

During the first half of 2022, consumer lending increased to 10 per cent of Metro Bank’s loanbook, up from seven per cent at the end of 2021 and two per cent in 2020. This is largely down to the challenger bank’s acquisition of peer-to-peer lender RateSetter, announced in late 2020, in a deal worth up to £12m.

Consumer loan originations averaged £105m per month, up from £50m in 2021 – and looking ahead, the bank expects this trajectory to continue.

Consumer balances stood at £1.3bn at the end of June, up from £890m at the end of 2021, driven by strong growth via the RateSetter platform. Total expected credit losses reduced to 4.4pc, down from 4.7pc at the end of last year, which the bank put down to continued growth in new lending.

Read more: RateSetter loans boost Metro Bank balance sheet

Path to profitability

Over the six-month period, losses at Metro Bank narrowed to £60.2m, down from £245.1m in 2021.

Chief executive Daniel Frumkin said the bank’s turnaround plan remained on track, with monthly breakeven expected in the first quarter of 2023. This plan focuses on improving the bank’s lending mix and maximising risk-adjusted returns on capital.

Looking ahead, he said the bank would continue to expand its product offering with the launch of a motor finance proposition later this year under the RateSetter brand.

“Our RateSetter proposition has been highly effective in allowing us to quickly and efficiently transition into higher yielding assets,” he said.

“The quick turnover of balances due to the short duration of lending also allows us to take advantage of rising interest rates, as old balances attrite and are replaced with higher yielding front book loans. This approach will also allow us to quickly pivot back towards a focus on mortgage lending, should rates to return to more normalised levels and appropriate risk-adjusted returns be made following a successful AIRB accreditation.”

Following the completion of the purchase of the RateSetter back book from peer-to-peer investors in April 2021, the provision fund has ceased to have liability for further claims. This has resulted in a release of £18m of assets and liabilities held at fair value through profit and loss.

Read more: Richard Lees joins RateSetter board