Monzo hit profitability after its loan volume for the period ending February 2023 soared to £759.7m.
The British neobank Monzo Bank has revealed it reached monthly profitability for the first time in 2023 following a surge in lending. In its annual report for the year ending February 2023, the online bank said it had become profitable two months into the year. Monzo said it achieved a 382 per cent increase in net interest income to £164.2 million thanks to increased lending activity. Additionally, the prominent London-based digital bank also posted a net operating profit of £214.5 million ($266.1 million) for the year ending February 2023. earnings saw Monzo double its results year-on-year (YoY) compared to the previous year. net operating income of £114 million.
Discussing Monzo’s profitability during a session with the media, CEO TS Anil pointed out:
“Profitability has always been a choice because we balance continuing to invest in growth with profitability. We could have chosen to be profitable a few quarters ago.
The British online bank’s chief financial officer, James Davies, described it as “a diversified and stabilizing income business”. Davies further stated that Monzo was primarily helped by its “large, growing, personal and business customer base”.
For the year ending February 2023, Monzo suffered a substantial loss of £116.3 million. However, that deficit was slightly smaller than the net loss of £119million recorded a year ago.
Monzo Profitable Run came amid the UK cost of living crisis
Monzo refrained from revealing the profits it is currently making, but said it was on track to achieve full-year 2024 profitability. The digital bank has benefited from the growth of new income stream over the last period. These include its lending and subscription business, which now sees a total of 350,000 paid accounts.
Monzo’s commendable revenue outflow came amid rising inflation and high costs of living for UK consumers. The British challenger bank’s lending volume for its latest annual run tripled year-on-year to £759.7m. However, Anil disputed suggestions that Monzo’s earnings performance was due to the UK’s cost of living crisis. Instead, the CEO explained that the difficult situation reflected the importance of Monzo’s products, including savings pots and budgeting tools.
Monzo is not the first UK challenger bank to achieve monthly profitability
Despite Monzo’s recent profitable run, the company is not the first UK digital bank to achieve this feat. In 2021, Starling hit profitability for the first time after neobank revenue rose 600% to £97.6m from £14m. At the time, challenger bank CEO Anne Boden described the situation as “very much on track” to achieve full-year profitability by 2022.
Last June, UK bank Allica also achieved monthly profitability and posted a pre-tax profit of £3 million for the second half of 2022. Commenting on the digital bank’s booming 2022 year earlier this month, the CEO of Allica, Richard Davies, enthused:
“Allica enters 2023 with an excellent platform to continue to grow and expand its offer to SMEs.”
In addition, Davies explained that the neo-bank had already experienced growth in its profitability for the first quarter of the year. According to the CEO, Allica’s profitability in the first quarter of 2023 was due to “very cautious capital and liquidity positions”.
Tolu is a Lagos-based cryptocurrency and blockchain enthusiast. He likes to demystify crypto stories to the essentials so that anyone, anywhere can understand without too much background knowledge. When not immersed in crypto stories, Tolu loves music, likes to sing, and is a movie buff.