Monzo Bank reported its first annual profit after more than doubling its revenue last year, though it made provisions for bad loans worth more than a tenth of its lending book.
The British mobile bank posted a pretax profit of £15.4 million for the 13 months through March compared to £116 million loss a year earlier, with revenue jumping to £880 million.
The firm lent £1.4 billion to its customers during the year — a rise of 84% — while also increasing its credit loss expenses 75% to £177 million. Overdrafts and its Monzo Flex credit drove the rise. The bank said it’s “regularly taken steps to update our credit underwriting in light of loss experiences.”
Monzo said it’s in the early stages of setting up an office in Ireland that it will use to build business in the European Union, and the firm is also targeting expansion in the US. Its growth efforts meant staffing expenses rose 47% during the year.
The firm now has 9.7 million customers and deposits grew by about 88% to £11.2 billion during the year. The digital bank moved into investments in September when it launched a product with BlackRock Inc.
“In nine short years, Monzo has come from nowhere to a position where one in six UK adults has a Monzo account and we’re now the 7th largest bank in the UK by customer numbers,” Chief Executive Officer TS Anil said in a statement.
Monzo raised a total $610 million from investors in recent months, valuing the British startup at $5.2 billion. Investors include Alphabet Inc.’s independent growth fund CapitalG and Chinese venture capital firm HongShan Capital, as well as new investors such as London-based venture capital firm Hedosophia.
Monzo is the latest London-headquartered challenger bank to move into profitability after years of rapid growth and investment. Starling Bank reported its second profitable year in 2023, while Revolut made its first annual profit in 2021.
