Metro Bank in talks with RateSetter for a potential merger

Following media speculation, Metro Bank (LON: MTRO) confirmed on Monday that it is in discussion with RateSetter to explore the option of a potential purchase of the peer-to-peer lender. As per the bank, the talks are currently at an early stage.

Shares of the company are presently 5% down on Monday. At £1.0 per share, Metro Bank is roughly 50% down year to date in the stock market after recovering from a low of 71 pence per share in late May. Learn more about how to invest in the stock market.

Metro Bank loses 90% of its market value on an accounting scandal

The British challenger bank was founded in the aftermath of the global market crash in 2008-09 and competes with the bigger names like RBS and Barclays. The retail and commercial bank met with a massive accounting scandal in 2019 that resulted in a management shift and pushed its market value down by 90%.

As the bank struggled with pulling out of the red zone, it announced earlier in 2020 that it will be slashing its growth plans for the current financial year.

RateSetter was also founded at the start of the decade in 2010. The current chairman, Paul Manduca, of RateSetter has previously chaired the UK-based insurance giant, Prudential.

According to 4^thWay (independent research firm) data, peer-to-peer lending companies have seen significant growth in the United Kingdom since 2005. In 2019, such firms managed over £5.3 billion. RateSetter and its competitors offer online platforms to connect lenders with borrowers.

Several of such lenders, however, also lost the battle with Funding Secure and Lendy being two of the prominent names that collapsed in recent years. Such incidents pushed the British Financial Conduct Authority (FCA) into introducing tighter regulations.

Metro Bank reports an increase in bad loans due to COVID-19

Metro Bank’s announcement regarding a potential merger with RateSetter was first announced by Sky News on Sunday.

The news comes only weeks after the London-headquartered retail and commercial bank reported a significant increase in bad loans due to the Coronavirus pandemic that has so far infected a little under 300,000 people in the United Kingdom and caused more than 41,500 deaths. The bank also reported a £77 million increase in total deposits in the first quarter.

At the time of writing, Metro Bank has a market cap of £170.83 million.