By Daniel Lanyon on Monday 12 October 2020
AltFi’s Alternative Lending State of the Market Report 2020 reveals digital banks may well prove to be even bigger investors in non-bank loans.
Starling Bank is looking at additional opportunities to put its deposit base to work through alternative lenders including potential purchases of originators, according to Declan Ferguson, chief strategy officer at Starling Bank.
In the past year, as exclusively revealed by AltFi, Starling Bank has been busy deploying hundreds of millions of pounds into consumer loans via alternative lender Zopa and SME loans via Funding Circle.
The bank funded the loans from its hefty £3bn deposit base in two separate deals of up £300m with each lender.
AltFi can further reveal, as covered in the recently published AltFi Alternative Lending State of the Market Report 2020, that Starling Bank is on the hunt for new deals and has also looked at acquisitions of loan originators.
“This led us to have conversations with non-bank lenders to have what we would call a forward flow arrangement,” he said.
Ferguson said Starling’s deposit base serves as a cheap source of funding for lending platforms, and that the performance of the Zopa loans it invests in has been strong thus far.
He said it is too early to comment on the performance of the Funding Circle loans. “It’s really a way to augment the balance sheet for us,” Ferguson added.
Aked whether the business had considered simply acquiring one such lender, Ferguson said, “I’d be lying if I said we hadn’t looked at a few of those,” he said.
Metro Bank’s recent acquisition of consumer p2p lender RateSetter has brought the potential for deals between challenger banks and alternative lenders and a number of other fintechs such as Revolut and OakNorth have both floated the prospects of hunting for M&A bargains during the pandemic.
And don't miss the launch webinar!
We're also hosting a free launch webinar to mark the 2020 edition of the report on 21 October where our team and some of the report's contributors will be discussing its findings in more detail and answering your questions.