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The latest capital injection brings LendInvest’s total raised in debt and equity from investors to £1.8 billion ($2.2 billion), per a press release. As of April 2019, the fintech, which specializes in property loans, has lent out over £2 billion ($2.4 billion) to borrowers, making it one of the biggest nonbank players in the UK’s mortgage industry.
For NAB, one of Australia’s biggest banks, the investment sees it join a range of institutional players funneling capital through LendInvest, joining the likes of HSBC, Citi, and Nomura.
Here’s what it means: LendInvest will deploy the latest tranche of cash to double down on its Buy-to-Let efforts — a wise strategy given the challenges of the UK’s retail mortgage segment.
- LendInvest has already provided a sizable £370 million ($447 million) in Buy-to-Let loans. That figure is notable given it first entered the space toward the end of 2017, following a £40 million($48 million) funding line from Citi. That it’s loaned out close to $500 million in less than two years suggests there’s ample demand in the space for its products. One such reason could be its entirely digital offering for Buy-to-Let customers; in fact, it claims to have been the first fintech to offer that service. Given the nature of these loans — commercial as opposed to retail — the speed and convenience of digital channels likely makes them appealing to borrowers. And LendInvest will likely use the latest tranche of funding to double down in this segment, saying NAB’s funding line will expand its capacity to lend in the Buy-to-Let market.
- The alt lender has also set its sights on the UK’s retail mortgage market — an increasingly tough battleground. NAB’s backing comes shortly after LendInvest secured a £200 million ($242 million) funding line from HSBC. The startup earmarked that investment, which was announced in April of this year, for its first foray into the UK’s retail mortgage segment. It plans to launch its first home loan product — a short-term bridging finance for terms of up to 12 months — by the end of this year. But the UK’s £200 billion ($242 billion) retail mortgage market has become increasingly cut-throat, with incumbents led by HSBC driving a price war. As a result, several smaller lenders have been forced to halt new lending, while some have abandoned the sector entirely. While diversifying its business to tap into the UK’s huge retail mortgage market makes sense, LendInvest’s decision to use its latest funding line to double down on the Buy-to-Let segment — a market it’s strong in — is a wise move that can act as a buffer against potential challenges its prospective retail operations may face.
The bigger picture: Amid greater regulatory scrutiny on alt lenders, we expect to see players like LendInvest lean on incumbent banks even more.
UK regulations are restricting retail consumers’ ability to invest through the likes of LendInvest — making NAB’s backing all the more important. Amid concerns about retail consumers’ exposure to risk via investments made by marketplace platforms, the UK’s financial watchdog has introduced new rules restricting the amount of money these individuals can invest through these platforms.
As these regulations begin to limit the retail capital base for the likes of LendInvest, institutional capital will become even more significant. LendInvest’s ability to raise large sums from the likes of NAB and HSBC suggests that, despite these challenges, it’s well placed to manage these regulatory changes. However, we anticipate smaller players may not bode so well, and that’s likely to be a boon for the likes of LendInvest as it limits the competition.
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