Monzo hit profitability after lending volume for the period ending February 2023 swelled to £759.7m.
Britain’s Newbank, Monzo Bank open Made a monthly profit for the first time in 2023 after increasing lending. In its annual report for the year ending February 2023, the online bank said it became profitable two months into the year. Monzo said it achieved a 382% increase in net interest income of £164.2m, driven by higher lending activity. Moreover, the prominent London-based digital bank also generated net operating income of £214.5m (US$266.1m) for the year ending February 2023. The positive earnings results doubled Monzo’s results year-on-year compared to the previous year. Net operating income of £114 million.
While discussing Monzo’s profitability in a media session, CEO TS Anil noted:
“Profitability has always been an option as we balance staying invested in growth with profitability. We could have chosen to be profitable a few quarters ago.”
British Online Banking’s chief financial officer, James Davies, described it as “a company with diversified and stable revenues”. Monzo has been helped primarily by its “large and growing customer base, both personal and commercial,” Davies said.
For the year ending February 2023, Monzo made a significant loss of £116.3m. However, this deficit was slightly less than the net loss of £119m in the same period last year.
Monzo’s lucrative run came amid the UK’s cost of living crisis
Monzo declined to disclose how much profit it is currently making but said it is on track to become profitable for the full year in 2024. The digital bank has benefited from growth in new income streams over the past period. These include lending and subscriptions, which now see paid accounts totaling 350,000.
Monzo’s commendable revenue outing came amid soaring inflation and the exorbitant cost of living for British consumers. The UK rival bank’s lending volume for its latest annual cycle tripled year-on-year to £759.7m. However, Anil disputed suggestions that Monzo’s revenue performance was due to the cost-of-living crisis in the UK. Instead, the CEO explained, the predicament reflects the importance of Monzo’s products, including savings and budgeting tools.
Monzo is not the first British Challenger Bank to report a monthly profit
Despite Monzo’s recent earnings, the company is not the first British digital bank to achieve this feat. In 2021, Starling achieved profitability for the first time after revenue from the new bank rose 600% to £97.6m from £14m. At the time, Anne Boden, chief executive of the rival bank, described the situation as “very much on track” for full-year 2022 profitability.
Last June, Allica Bank in the UK also reported a monthly profit and saw a pre-tax profit of £3m for the second half of 2022. Commenting on a glowing 2022 for the digital bank earlier this month, Allica CEO Richard Davies said:
“Alica entered 2023 with an excellent platform to continue to grow and expand its offering to include small and medium enterprises.”
In addition, Davies explained that the new bank has already seen profitability growth for the first quarter of the year. According to the CEO, Allica’s profitability for the first quarter of 2023 was due to “very prudent capital and liquidity positions.”
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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify cryptocurrency stories down to the bare essentials so that anyone anywhere can understand without much background knowledge. When not deep into cryptocurrency stories, Tolo enjoys music, loves to sing, and is a movie lover.
