Digital bank Monzo breaks even for the first time

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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 and subscription fees.

Neobank, founded in 2015, posted pre-tax profits of £15.4m in the year to the end of March, up from a loss of £116.3m the previous year. Revenue more than doubled in the period to £880m, as fintechs’ net interest income – the difference between what banks pay on deposits and what they earn from loans – rose 167% to £438m pounds thanks to higher interest rates.

Monzo’s revenue was also boosted by transaction fees, with net transaction income rising from £60.9m to £167m despite customers spending less abroad due to the cost of living crisis. Revenue from subscriptions including Monzo Plus, Monzo Premium and Monzo Business rose to £27.4m, up from £19.5m the year before.

“I have never believed in the idea that a company has to choose between being mission-driven or focusing on business results,” said CEO TS Anil. “[The last year] has proven that Monzo is doing both – and that our strategy of putting customers at the heart of everything we do is working at scale.”

“We have achieved scale, growth and profitability, and we have all the right elements to capture the massive opportunity ahead,” he said.

Monzo said its loan book grew 84% to generate about a quarter of its total revenue. Monzo has a £1.4bn loan portfolio including overdrafts, unsecured personal loans and Monzo Flex, a buy now, pay later credit card.

Due to the loan growth, the neobank also increased its provision for expected credit losses to £176.9m, up from £101.2m as many of its customers struggled to repay their loans and fall into debt.

The company, which is preparing its second attempt to launch in the US, has also announced plans to enter the European market by first entering Ireland, where it said it is opening an office.

It comes after Monzo this year secures a funding round worth £489.5m led by Alphabet’s CapitalG investment fund and valued at more than £4 billion.