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Digital bank Monzo has broken even for the first time as the London-based fintech benefits from higher interest rates and growth in transaction fees and subscriptions.
The neobank, founded in 2015, posted a £15.4mn pre-tax profit in the year to the end of March, up from a £116.3mn loss the year before. Revenue more than doubled in the period to £880mn, as the fintech’s net interest income — the difference between what banks pay on deposits and what they earn from loans — rose 167 per 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 due 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.
“I’ve never believed in the idea that a company has to choose between either being mission-oriented or focused on business outcomes,” said chief executive TS Anil. “[The last year] proved Monzo is doing both — and that our strategy of placing the customer at the heart of everything we do is working at scale.”
“We’ve achieved scale, growth and profitability, and we have all the right components to seize the huge opportunity ahead,” he said.
Monzo said its loan book had grown by 84 per cent to generate about a quarter of its total revenue. Monzo has a £1.4bn lending portfolio that comprises overdrafts, unsecured personal loans and Monzo Flex, its buy now, pay later credit card.
As a result of the lending growth, the neobank also increased 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 company, which is preparing its second attempt to launch in the US, also announced plans to enter the European market by first entering Ireland, where it said it was opening an office.
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.