(Bloomberg) -- Brexit may be roiling Westminster and inflating prices on supermarket shelves, but don't tell that to financial institutions eyeing the U.K.'s burgeoning online-lending industry.
In the latest sign of confidence in the sector, Citigroup Inc. has agreed to provide a fintech firm called LendInvest Ltd. with funding for mortgages, the startup said in a statement Wednesday.
Four-year-old LendInvest, which already manages 500 million pounds ($663 million) in lending capital for institutional investors, plans to eventually securitize and sell the loans funded by Citigroup. While the firms didn't disclose the terms, deals involving securitizations and big bank funding are rarely executed for less than 200 million pounds.
Unlike peer-to-peer lenders, which match investors and borrowers on their websites, LendInvest taps bank funding lines and its own equity capital to finance its loans. The London-based firm utilizes proprietary software to originate and manage mortgages entirely online, which reduces overhead expenses and makes it easier to manage complex portfolios. To back up its risk-scoring approach, LendInvest will put its own equity capital into every loan that Citigroup funds.
‘Old-School Finance'
"A lot of what we do is fintech, but a lot of it's also old-school finance," said Christian Faes, LendInvest's co-founder and chief executive officer. "That's a model that will allow us to be a more sustainable business."
The deal comes as the U.K. property market is clouded by uncertainty around Britain's departure from the European Union. Home prices increased at their slowest annual pace in more than five years in August, according to Rightmove Plc, an online real estate portal. The Bank of England and the Financial Conduct Authority have recently issued warnings about the rising level of consumer debt.
Even so, fixed-income investors hungry for yield helped drive up the volume of new online loans to 733 million pounds in the third quarter, a 22 percent increase this year, according to the Peer-to-Peer Finance Association. LendInvest's deal caps a flurry of investments in the industry. In August, Dutch insurer Aegon NV placed 160 million pounds with Funding Circle Ltd., a London-based peer-to-peer lender that arranges loans for small- and medium-sized businesses.
Members of Citigroup's U.K. real estate investment team liked LendInvest's plan to uses its funds to underwrite buy-to-let mortgages, a 40 billion-pound market where investors seek rental income. The deal was also welcomed by the British government, LendInvest said. The government is eager to showcase the U.K. as a fintech hub as the drama around Brexit unfolds.
"LendInvest's push into buy-to-let is a great example of fintech moving into more hard-to-disrupt markets that could be otherwise left behind by financial innovation," said Chris Philp, a parliamentary private secretary with the Treasury, according to the startup's statement.
To contact the reporter on this story: Edward Robinson in London at edrobinson@bloomberg.net.
To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Andrew Blackman
©2017 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
