RateSetter CEO claims £4.9m loss was “deliberate”
RateSetter, the UK's second biggest peer-to-peer consumer lender, has announced a pre-tax loss of £4.9m ($6.4m), despite revenues of £18m. The loss was attributed to a change in business strategy, as RateSetter stopped charging up-front fees, instead opting to charge customers for the duration of loans. A spokesperson confirmed 63% of loan fees are repaid in this manner, compared to none three years ago. RateSetter CEO and co-founder Rhydian Lewis said the switch allowed the company to ensure the "sustainability" of the company.

Neil Woodford-backed P2P lender RateSetter reports loss as it seeks sustainable future

Peer-to-peer (P2P) lender RateSetter, which is backed by fund manager Neil Woodford, has reported a revenue rise of nearly 50 per cent to £18.5m in its 2015/16 accounts.

The figures

The company said the results, which reported a £4.9m pre-tax loss compared with a profit of £476,000 the year before, are in line with expectations set out at the start of the year.

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Loans under management for the period were up by 70 per cent, from £431m on 31 March 2015 to £581m a year later. The number of active investors, meanwhile, grew from 18,608 to 31,036.

And RateSetter said these figures have since risen to £640m and 36,310 respectively.

Why it’s interesting

The P2P lender said its profits in the previous two financial years – to March 2014 and March 2015 – proved its business model “works and is sustainable”.

In 2015, the company began to charge a greater proportion of fees over the lifetime of loans rather than up front when they are written. Without this change, RateSetter would have reported a pre-tax profit.

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RateSetter said the new model “creates a more sustainable recurring income stream as more money comes in over the term of loans, reducing pressure to lend in order to generate revenue when credit conditions are poor. Importantly, it also aligns RateSetter’s interests with those of its investors as it provides a financial incentive to only approve loans which perform.”

RateSetter received £20m equity investment from Neil Woodford's investment funds, and Artemis in March last year.

What the company said

Founder and chief executive Rhydian Lewis: