Monzo has posted an annual profit as it gears up to break into the US market and broaden its reach across Europe.
TS Anil, Chief Executive, hailed this as a "landmark year of record growth" for the digital bank, which boasts nearly 10million customers. The bank reported a pre-tax profit of £15.4million for the financial year ending in March, marking a turnaround from the pre-tax loss of £116.3million in the previous year.
Monzo, which made waves when it debuted in the fin-tech world in 2015, is reaping benefits from more customers depositing bigger sums in their accounts. Customer deposits soared by 88% to £11.2 billion, with Monzo rolling out more features including cash and stocks and shares ISAs (individual savings accounts).
In line with other UK banks, Monzo's revenue soared due to higher interest rates implemented recently to curb inflating living expenses. With profitability now achieved, Monzo outlined its plans of establishing an outpost in Dublin as a "gateway"to its European expansion.
Though no specific date was disclosed for the opening of the Dublin office, it is expected to start operations in the "coming months". Monzo, now standing as the seventh largest bank in the UK, has also set its sights on the US market and has appointed a new leadership team in the region to spearhead this venture.
Martin Lewis’ MSE website shares tip to get free £175 and 7% interest on savingsThe decision follows a move to withdraw an application for a banking licence in the country in 2021 when it was informed that approval was unlikely. In the meantime, Mr Anil revealed that the bank saw record numbers of savings pots created over the past year. These are places where customers can set money aside for a specific goal or round up everyday spending and put the cash in a "piggy bank".
This year saw a 42% increase in card spending compared to last year. Monzo, which provides overdrafts, credit cards and loans, disclosed that its expected credit losses (ECLs) soared by 75% year on year to £176.9million.
The ECL is the sum it sets aside to cover losses it anticipates when customers cannot repay the money they have borrowed. The rise was driven by an expanding lending book as well as an increase in some customers falling into arrears on their payments amid the broader cost-of-living crisis, according to the bank.
Losses, as a percentage of average lending balances, rose to 9.75% from 7.58% year on year. Mr Anil stated that Monzo is focused on "making sure we lend to customers who we believe can pay us back".
"In many ways, it is flattering to me that we get compared to banks that have been around for much longer, centuries in most cases, because it establishes that we are a player at scale and we are building a company for the ages," said the chief. "And yet, we are still in the infancy of our journey with a huge runway ahead of us."
He stated that an increasing number of customers will want to use technology to manage their finances.