Monzo has become the latest British digital bank to become profitable after seeing a spike in lending and more customers depositing cash.
The bank, which says it has more than a 10th of the population as customers, managed to tip to a profit over the start of the new financial year.
It would not specify the figure but said the milestone was reached in March and that it expects to achieve a full year of profitability over the year ahead.
If profitability was the only thing we cared about, we could have actually been profitable a long time ago— TS Anil, Monzo's chief executive
It follows rival digital lender Starling Bank reporting a profit for the first time in 2021.
Nevertheless, it comes after Monzo reported losses of more than £116 million over the year to February, only slightly narrowing its losses from the previous year.
But chief executive TS Anil said profitability has “always been a choice” for the bank.
“If profitability was the only thing we cared about, we could have actually been profitable a long time ago,” he told the PA news agency.
Instead, Monzo has chosen to focus on investing in opportunities and building to reach more people, he said.
The eight-year-old lender now has around 7.4 million personal customers, making it the seventh largest bank in the UK by customer numbers.
Customer deposits increased by more than a third, with people depositing some £6 billion with the bank in the latest financial year.
“Of course, we are playing against an industry where the incumbents are large and have been around for centuries,” Mr Anil told PA.
“And so there are lots of customers who are dissatisfied with their current bank and want to try something different.”
More customers are creating savings pots than ever before— TS Anil
The chief executive said use of Monzo’s money features, such as savings pots and budgeting tools, “rose very sharply” over the year as more people looked to control their spending amid a disposable income squeeze.
“More customers are creating savings pots than ever before,” he said, with an average of 410,000 opened each month to help people earn interest on their savings.
Furthermore, more than one million of its customers use the bank’s round-up tool, which lets people round up their purchases and put the surplus cash into a separate ‘piggy bank’.
Monzo also saw lending activity soar, with its borrowing book growing by £500 million to £750 million over the latest financial year as it expanded further into buy now, pay later.
It led it to ramp up its credit loss expenses – which includes money put aside to cover expected losses from loans – to £101 million, from £14 million the prior year.
The Monzo Flex credit card means people can spread the cost of purchases interest-free over three monthly payments, or with a 24% rate to spread the cost over six or 12 monthly payments.
The jump in people turning to credit helped the lender more than double its revenues last year.
