Barclays snaps up US personal loans fintech for $800m
Barclays is set to take control of a US personal loans fintech in a deal that the lending giant hopes will beef up its loans package for its investment bank clients.
The FTSE 100 bank said it would use consumer loan platform Best Egg as an “origination engine” after snapping the firm up for $800m (£601m).
Best Egg generated consumer loans via an online platform and has faciliated over $40bn of loans for two million customers since 2013.
“The deep and sophisticated U.S. consumer finance market offers rich prospects for growth at Barclays,” the bank’s chief CS Venkatakrishnan – known as Venkat – said.
It comes amid the Venkat’s mission to reduce risk-weighted assets in the group’s investment bank.
In a post on LinkedIn last year, the banking boss outlined financial targets including a return on tangible equity in excess of 12 per cent and the goal to return over £10bn to shareholders by 2026.
Barclays was reported to have called in global consultancy giant McKinsey earlier this year as part of its bid to identify cost-saving areas across its investment banking arm.
Barclays shares were down nearly two per cent in early trading to 394.15p.
Barclays’ investment bank overhaul
Best Egg boasts near $11bn in personal loans, with the fintech eyeing an additonal $7bn by the end of the year.
The business’ loans are funded through structures including securitisation, where the firm pools its consumer loans and sells them as financial securities to investors.
Barclays reported third-quarter results last week where the bank netted £7.2bn in total income, breezing past as internal analyst consensus of £7bn. The figure was also up nine per cent year-on-year.
The lender also made a £110m “single name” credit impairment charge in its investment banking arm. The charge was related to Barclays’ exposure to Tricolor – a US auto-dealership which sent jitters through the private credit market after its collapse due to loan-defaults.
Barclays, along with its peers JPMorgan and Fifth Third Bancorp, was a warehouse lender to Tricolor.
Venkat said the exposure to Tricolor was “obviously not a surprise but the surprise was the fraud”.
“We take our credit risk management very seriously at all points in the cycle, and credit lending has to be prepared for all outcomes, including fraud,” he added.