gg
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Post by gg on Aug 3, 2020 8:08:59 GMT
Would investors benefit from the FSCS guarantee? I doubt it.
gg
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Post by angel19 on Aug 3, 2020 8:13:33 GMT
As a footnote, when the much heralded Woodford invested in Ratesetter in 2015 and then 2017 the business was valued at £150m and then over £200m. So maybe Metro have themselves a bargain!
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robski
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Post by robski on Aug 3, 2020 8:13:48 GMT
So they will run it as 2 loan books in effect, p2p investor and metros own funds
All new loans will go to metro, the existing loans will wind down for investors
Whether they will continue to process RYIs will be up to them, they may decide its uneconomical, just let the book wind down with minimum effort
The equation will change a lot, if the existing loan book is only people dealing with running it down the balance of income to expense will shift. No new business evaluations for larger loans no credit scoring etc etc
Platform risk will fall for us, possibly the risk of a sight shortfall in PF may go up
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Greenwood2
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Post by Greenwood2 on Aug 3, 2020 8:17:04 GMT
Once everyone knows that RS is closing it's doors lenders will mostly be removing funds rather than re-investing or adding funds (particularly with the current interest rate haircut). I would think there will be very little lender funds available for new loans or RYI. And yet, 5-Year reinvestment is happening right now with the haircut, and the announcement actually reduces the risk of total platform failure. Access investors may not have understood they were making a long-term 5-Year investment. But 5-Year investors would have to be pretty feebleminded not to understand, given the product is clearly labelled '5-Year'. Anyway, we shall see soon enough. But RateSetter cannot just shut down operations, otherwise they will be up sh!t creek if the deal falls through, which is still possible. I think some lenders were willing to ride it out (and keep re-investing) on the assumption rates would eventually go back up. I think that it is now extremely unlikely to happen. Just because you know an up to five year investment can be for five years doesn't mean you have to carry on investing in that product if you can see the writing on the wall, I stopped re-investing a few months ago. Whether RS can keep going until the purchase with a dwindling lending base is an interesting point.
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chris1200
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Post by chris1200 on Aug 3, 2020 8:20:21 GMT
The only hope I can think of for RYIs (or at least those nearer the front of the queue) is that, at some point before completion, RS halts new lending (as part of the transition away from P2P), but re-investing is still permitted. In that situation, presumably (perhaps wishful thinking), all such re-investment would go to RYIs. I would guess there wouldn’t be much, but some investors clearly have no clue and are just letting re-investment continue. Don’t see why that would change dramatically as long as RS doesn’t stop it.
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iRobot
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Post by iRobot on Aug 3, 2020 8:27:39 GMT
Would investors benefit from the FSCS guarantee? I doubt it. gg Current P2P 'investors' (lenders)? If so, 'no' on the monies lent out and 'yes' on any sums held in RS' client account. That's the same as it ever was. (And as it always should be.)
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cb25
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Post by cb25 on Aug 3, 2020 8:32:30 GMT
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pip
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Post by pip on Aug 3, 2020 8:44:42 GMT
Am I the only one who feels a little bit sad. Ratesetter was once a fun exciting British company and at one point there really was a feeling that companies such as this, and Zopa, FC etc. could be the next big tech companies and the sky was the limit. Now it seems that it will be little more than a trading name of metro banks to flog its loans.
In these times we desperately need some British tech companies to compete on the world stage, not seeing it at present.
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Greenwood2
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Post by Greenwood2 on Aug 3, 2020 8:47:04 GMT
Extract: '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.' Seems rather contradictory? Are they possibly going to do the same as Zopa Bank, which intends I think to pre-fund all new loans and then distribute them between Zopa bank and the Zopa P2P platform. If Metro Bank did the same and distributed loans between the Metro Bank and the RS platform, that would be really good. It needs some clarification.
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tjtl
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Post by tjtl on Aug 3, 2020 8:51:16 GMT
I think this is mixed news for investors. On the one hand it should provide certainty as to the platform's continued survival, on the other Metro are not standing behind any of the existing credit risk on the portfolio.
The price Metro is paying is dismal- £2.5m up front, the rest dependant on performance criteria (which I suspect are all around future growth of the loan book, not around "making sure poor blooming investors get their money back").
As the loan book continues to reduce we should expect the % of non-performing loans to only increase.
Where Ratesetter, once the darling of the P2P sector, and very much the Gorilla, can be valued at £2.5m (up to £11m) , so 1% of the last funding round, it is a stark confirmation of the effective death of P2P in the UK.
Perhaps I am alone in feeling genuine sadness , not just for those who have lost money (the equity investors, I don't care about the PE investing but am thinking of the senior employees), or those that will now lose their jobs (as iRobot lints out there will be redundancies), or even us poor loan-investors (won't need to go to the barber for the haircut that is coming) - but also for the concept of P2P- a good idea- it just hasn't worked.
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robski
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Post by robski on Aug 3, 2020 9:02:06 GMT
Extract: '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.' Seems rather contradictory? Are they possibly going to do the same as Zopa Bank, which intends I think to pre-fund all new loans and then distribute them between Zopa bank and the Zopa P2P platform. If Metro Bank did the same and distributed loans between the Metro Bank and the RS platform, that would be really good. It needs some clarification. Doesnt seem any contradiction to me They buy platform, sell loans under branding of either but using same "new" platform, using Metros funds They segregate the P2P side and run it down Seems pretty clear
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ceejay
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Post by ceejay on Aug 3, 2020 9:04:30 GMT
I'd agree this is good news for investors, because it reduces somewhat the risk of complete platform failure.
Not eliminate, of course - things could go so badly for the RS business unit that it is folded anyway, or of course Metro might fail and bring them down. But, on the whole, reduced risk I think.
Yes, Metro are saying that they won't underwrite the PF if that gets overstretched, which is pretty much what they would have to say. Nevertheless if it were only slightly overstretched then they might well feel that chucking in a little extra underwriting might be the right thing to do to protect their investment, so there's a small upside there.
Long term, I think we are seeing the end of RS as a viable place for retail investors, though I think the writing was on that particular wall some time ago, possibly even pre Covid. But at least our chances of getting out (relatively) unscathed have just improved.
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chris1200
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Post by chris1200 on Aug 3, 2020 9:05:00 GMT
For Access-style investors, not so great... no new money flow into the existing loan book once MetroBank takes over means they will probably become de-facto term investors, but at a bad rate of interest compared to actual term investors. So we’re basically presuming that, come acquisition, re-investment from existing investors will no longer be allowed? I guess it does seem that way on the face of it... Then bye-bye RYIs! Thinking about this again, even if new lending (via P2P) stops at completion of the acquisition, it's theoretically possible that re-investment could continue to be allowed as long as there are RYI requests. In this way, RYI request processing could continue (even if minimally) as long as the loanbook winds down, right? (Trying to be optimistic here...)
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Post by lingield on Aug 3, 2020 9:19:45 GMT
It is very difficult to see what is going to happen here. I suspect that Metrobank do not want to take over the existing loan portfolio for regulatory reasons. I am not sure how provisioning and regulatory capital requirements work but I suspect that taking over the existing Ratesetter loan book would make this significantly more expensive for Metrobank. I suspect that there is plan to remove the retail investors from the equation, but that this was too difficult to do at this stage. I would hope that the FCA would not bless a transaction which see retail investors suffer, but that may be naive of me.
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Post by diversifier on Aug 3, 2020 9:34:25 GMT
For Access-style investors, not so great... no new money flow into the existing loan book once MetroBank takes over means they will probably become de-facto term investors, but at a bad rate of interest compared to actual term investors. So we’re basically presuming that, come acquisition, re-investment from existing investors will no longer be allowed? I guess it does seem that way on the face of it... Then bye-bye RYIs! That’s one possibility, just stopping the secondary market entirely. The benefit from Metro/RS’s point-of-view is that this is a whole chunk of admin and logistics, with no revenue attached to it, and there are cost-savings. One fewer major IT system integration - most banks consist of layer upon layer of Russian-dolled legacy IT systems, which are a nightmare to integrate in the first place, and have almost become the central day job to keep running for decades. So I think that will be a major consideration To Avoid. However, it doesn’t absolutely say that, and no *new* investment for investors doesn’t mean no re-investment, and hence not necessarily no RYIs. They could just make the secondary market a swap-shop for loans approaching maturity. The downside for investors, is that you’ve then got the full reinvestment flows seeking a rapidly shrinking pool of investable loans. Essentially, the opposite problem we’ve got now. I don’t think it can remotely soak up the Access-type RYIs, that lot is *still* just going to be locked in for the duration of the loans. However, the 5yr reinvestors would probably see reduced matching interest rates, in equilibrium. The thing that does worry me slightly: if Metro will own the PF, and they are entitled to do interest-rate and capital haircuts of investors to support it (as they are). Would they take a more negative view of the future default rate than current, and imposing earlier or larger haircuts than RS management might do in their place? It’s always a judgement call, however apparently objective the process, it’s easier to decide on one side of the estimate if you’ve got only downside risk on the other side. However, the FCA should keep them honest, as they will have to apply the same internal risk metrics on Metro own new lending as this legacy business, which would make Metro look unstable to the regulator.
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