As the online-lending sector in the United Kingdom continues to grow strongly, Citigroup has announced that it will provide funding for mortgages to LendInvest Ltd, a fintech firm. The four-year old startup currently manages lending capital of approximately half a billion pounds for institutional investors and is in plans to securitize before selling the loans with funding from Citigroup. Terms of the deal were not disclosed but deals involving big bank funding and securitizations are rarely done for amounts under 200 million pounds.
While peer-to-peer lenders match borrowers and investors online, LendInvest finances the loans it provides by tapping the funding lines of banks as well as its own capital. The origination and management of mortgages by LendInvest is done using proprietary software and this occurs online entirely leading to the reduction of overhead expenses. This also makes the management of complex portfolios easier.
“A lot of what we do is fintech, but a lot of it’s also old-school finance. That’s a model that will allow us to be a more sustainable business,” said the chief executive officer and co-founder of LendInvest, Christian Faes.
As proof of the evidence it has with regards to its risk-scoring approach for every loan funded by Citigroup the online lender will also invest its own capital. This is part of the reason why the U.K. property investment team of Citigroup got attracted to LendInvest.
The deal between Citigroup and LendInvest comes at a time when the property market in the United Kingdom is facing uncertainty due to Brexit. Per online property portal Rightmove Plc, the prices of homes rose by the slowest annual rate in over five years last August.
The Financial Conduct Authority and the Bank of England have in the recent past issued warnings over rising levels of consumer debt. In Q3 the new online-loans volumes rose to approximately 733 million pounds as fixed-income investors looking for higher yields placed their bets on the sector. This was an annual increase of 22%.
The deal between LendInvest and Citigroup is not isolated in the sector as there have been others this year. Three months ago Funding Circle Ltd, peer-to-peer lender focused on small-and-medium-sized enterprises, received 160 million pounds from Aegon NV a Dutch insurer.
The deal also coincides with a plan by Citigroup to sell its Hilton hotels’ co-branded credit card portfolio to American Express which will see the lender record a pretax gain of $150 million.