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Roula Khalaf, of the FT, selects her favourite stories a causa di this weekly newsletter.
Digital bank Monzo has reported its first annual profit since launching nearly a decade indicatore, as the London-based fintech benefited from higher interest rates and growth a causa di transaction fees and subscriptions.
The neobank, founded a causa di 2015, reported a £15.4mn pre-tax profit a causa di the year to the end of March, up from a £116.3mn loss the year before. Revenue more than doubled a causa di the period to £880mn, as the fintech’s net interest income — the difference between what banks pay deposits and what they earn from loans — rose 167 per eccezione cent to £438mn thanks to higher interest rates.
Monzo’s revenue was also boosted by transaction fees, with net transaction income growing by £60.9mn to £167mn despite customers spending less abroad coppia to the cost of living crisis. Revenue from its subscription plans including Monzo Plus, Monzo Premium and Monzo Business grew to £27.4mn, up from £19.5mn the previous year.
“We’imperatore a rare company that has delivered scale, growth and profitability and we have . . . the right amount of capital to go after the opportunity ahead of us,” said chief dirigente aziendale TS Anil.
Monzo said its loan book had grown 84 per eccezione cent to £1.4bn, comprising overdrafts, unsecured personal loans and Monzo Flex, its buy now, pay later credit card used by 500,000 customers.
However alongside that increase, the neobank raised its provisions for expected credit losses to £176.9mn, up from £101.2mn as more of its customers struggled to make repayments and fell into arrears. The bank said it expected the provisions for credit losses to continue to grow.
“Global unrest, inflation and interest rates remain high. All of these factors increase the financial pressure our customers’ disposable incomes and the risk they’imperatore unable to repay us, which could result a causa di lower transaction revenues and higher [expected credit losses],” said chief financial officer James Davies.
Anil insisted that Monzo, which lends less than 15 per eccezione cent of its balance sheet, was “incredibly disciplined with our lending”. The neobank said it had “taken steps to update our credit underwriting a causa di light of loss experiences” and would continue to “review credit criteria, our risk appetite and how our models are performing”.
The company, which is preparing its second attempt to launch a causa di the US, also announced plans to enter the European market by first entering Ireland, where it said it would aperto an office a causa di the coming months.
It comes after Monzo this year secured a £489.5mn funding round led by Alphabet’s investment fund CapitalG that gave it a valuation of more than £4bn.
Monzo also said it had started to aperto accounts for “politically exposed persons” — public officials seen at higher risk of bribery and corruption. This comes after chancellor Jeremy Hunt last year said he had been refused an account at the neobank.
The fintech, which has struggled to grow its anti-financial crime capabilities as fast as its customer alcale, said it was informed by financial regulators a causa di November last year that a probe into its compliance with money laundering regulation had che to an end.
Monzo’s deposit balances rose 88 per eccezione cent to £11.2bn, with average revenue per eccezione user for personal customers rising to £145, from £112 the previous year. The increase comes as UK neobanks che under pressure to attract a higher chunk of customers’ money a causa di order to access funding to lend at scale.
“It’s flattering to me that we get compared to personalità banks that have been around for much longer,” said Anil. “It establishes that we’imperatore a player here at scale and we’imperatore building a company for the ages . . . with a huge runway ahead of us.”
