Monzo has reported its first annual profit since launching in 2015 as the digital challenger bank enjoyed record growth and unveiled plans to expand into Europe.
The bank posted a pretax profit of £15.4m for the financial year ending on 31 March 2024, compared to a £116.3m loss in the previous year. Monzo hit monthly profitability for the first time at the start of 2023.
A drop-off in fintech investment since 2021 has forced neobanks to focus more on turning a profit instead of rapid expansion.
Monzo’s gross revenue increased two-and-a-half times during the latest financial year to £880m, from £355.6m in 2023, while total expenses rose 51 per cent to £499m.
Customer deposits jumped 88 per cent to £11.2bn during the period, while the bank’s assets surged 94 per cent to £13bn.
Major UK banks have received a profit boost from the Bank of England’s interest rate hikes since the end of 2021. Monzo posted a net interest income – the difference between what it pays out to savers and receives in interest from loans – of £438m for the year, up from £164m in 2023.
Revenue from Monzo’s lending portfolio soared 133 per cent to £209m, driven by an 84 per cent increase in gross lending book as it concentrated on consumer lending and pushed further into buy-now pay-later with its Flex card – launched in 2021.
However, the increased lending also resulted in a 75 per cent rise in its provisions for bad loans to £176.9m.
Digital-only banks like Monzo and Starling have exploded in popularity in recent years and pose an increasing challenge to Britain’s biggest lenders as their slick mobile-first offerings attract millions of consumers.
Monzo, known for its eye-catching coral-pink cards, now boasts roughly 9.7m customers, 2.3m of which joined last year alone. It also has around 400,000 business customers.
“This was a landmark year of record growth for Monzo,” chief executive TS Anil said on Monday. “I’ve never believed in the idea that a company has to choose between either being mission-oriented or focussed on business outcomes.
“FY2024 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.”
Alongside the results, the bank announced that it would “start laying the foundations for expansion across Europe” and was in the early stages of setting up an office in Ireland to enable this.
Monzo, which now employs almost 4,000 people, has established itself as one of the UK’s most valuable tech start-ups, notching $610m (£490m) in funding this year alone to bring its valuation to $5.2bn (£4.1bn).
Its latest set of results will fuel speculation that Monzo will soon be ready to launch a blockbuster public listing in London or New York. Anil has hinted that the firm will float at some point but has been tight-lipped on the timing or location, saying it is too early to discuss.
Anil himself is a member of fintech trade body Innovate Finance’s “Unicorn Council”, a group of CEOs formed in March that has proposed a slew of policy recommendations to make the UK a more attractive place for start-ups to launch, grow and IPO on the London Stock Exchange.
The bank is plotting a return to the US market after being told by regulators in 2021 that it was unlikely to secure a banking licence there after two years of negotiations.
The firm said on Monday that “the US market is crying out for a banking product like Monzo” and new US CEO Conor Walsh, hired last October, would help scale its business there “from tens to hundreds of thousands of customers”.
Having launching an investment product backed by Blackrock last year, Monzo is preparing to launch a pensions offering as early as this year, as well as being in the early stages of exploring partnerships with lenders to offer a mortgage product that would further boost competition with major retail banks.
Monday’s earnings mark a turnaround from 2020 and 2021, which saw Monzo’s auditors warn of “material uncertainity” over the company’s future amid a plunge in earnings from card transactions during the Covid-19 pandemic.