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Digital bank Monzo reported its first annual profit since launching nearly a decade ago, as the London-based fintech benefited from higher interest rates and growth in transaction fees and subscriptions.
Neobank, founded in 2015, reported pre-tax profits of £15.4m in the year to the end of March, compared with a loss of £116.3m a year earlier. Revenue more than doubled to £880m in the period, as the fintech’s net interest income — the difference between what banks pay on deposits and what they earn on loans — rose 167 per cent to £438m thanks to higher interest.
Monza’s revenue was also boosted by transaction fees, with net transaction income rising by £60.9m to £167m despite customers spending less abroad due to the cost of living crisis. Revenue from its subscription plans including Monzo Plus, Monzo Premium and Monzo Business rose to £27.4m, up from £19.5m the previous year.
“We are a rare company that has achieved scale, growth and profitability, and we have . . . the right amount of capital to take advantage of the opportunity in front of us,” said TS CEO Anil.
Monzo said its loan book grew 84 per cent to £1.4bn, including overdrafts, unsecured personal loans and Monzo Flex, its buy-now, pay-later credit card used by 500,000 customers.
However, alongside that increase, neobank increased provisions for expected loan losses to £176.9m, up from £101.2m, as more of its customers struggled to make repayments and fell into arrears. The bank announced that it expects loan loss provisions to continue to grow.
“Global unrest, inflation and interest rates remain high. All of these factors increase the financial pressure on our clients’ disposable income and the risk that they are unable to repay us, which could result in lower transaction income and higher [expected credit losses]», said Chief Financial Officer James Davies.
Anil insisted that Monzo, which lends less than 15 percent of its balance sheet, has been «incredibly disciplined with our borrowing.» Neobank said it had «taken steps to update our credit insurance in light of loss experiences» and would continue to «review credit criteria, our risk appetite and how our models work».
The company, which is preparing its second attempt at a US launch, also announced plans to enter the European market by first entering Ireland, where it said it would open an office in the coming months.
It comes after Monzo secured a £489.5m funding round earlier this year led by Alphabet’s investment fund CapitalG, valuing it at more than £4bn.
Monzo also said it has started opening accounts for «politically exposed persons» — public officials who are at greater risk of bribery and corruption. This comes after Chancellor Jeremy Hunt said last year that he had been refused a Neobank account.
The fintech, which has struggled to grow its anti-financial crime capabilities as quickly as its client base, said it was informed in November that the UK’s main financial regulator was no longer assessing criminal liability relating to its compliance with antitrust regulations. money laundering, although a civil investigation is ongoing.
Monza’s deposit balances rose 88 per cent to £11.2 billion, with average revenue per customer for personal customers rising to £145, from £112 the previous year. The increase comes as Britain’s neobanks are under pressure to attract more of their customers’ money to access funding for more lending.
«I’m flattered that we’re being compared to big banks that have been around for a lot longer,» said Anil. «This confirms that we are a big player here and that we are building a company for the ages. . . with a huge runway in front of us.”
This story has been amended since first published to clarify the status of the UK financial regulator’s investigation
