London’s largest listed fintech today saw its biggest-ever single-day share drop after a surge in profits was eclipsed by an earnings forecast that fell short of analyst expectations.
Money transfer business Wise, which yesterday had been worth £8.6 billion, today saw more than £1 billion of its market cap vanish after shares fell as much as 23% when markets opened. The stock has now fallen by nearly a third over the past two months.
The tumbling stock comes despite a huge rise in profits over the past year as the firm was boosted by higher interest rates.
Wise today posted a more than tripling of pre-tax profits of £481 million in the 12 months to the end of March, while turnover jumped by a quarter to top £1 billion for the first time.
The fintech, which does not have a UK banking licence, said it was unable to pay interest to account holders in a number of territories including the UK, where regulations prohibit it from doing so. The firm had set a target of returning 80% of interest income back to customers, which it had not met.
Wise said it would use the profits to cut prices for customers, adding: “Striving to reduce prices sustainably over time is an important form of investment for Wise.”
But the prospect of lower prices appears to have disappointed shareholders, who were unimpressed with the concomitant 15-20% underlying income growth forecast for its next fiscal year, which looked set to fall well short of the 31% growth in the previous year.
Wise defended the move, pointing out that cheaper money transfer fees was a key driver in its popularity with customers, adding that clawing market share from rivals “can only be achieved through building the best global infrastructure while driving growth through relentlessly pursuing incremental improvements in price, speed and convenience.”
“The announced guidance is disappointing at first glance given the price reduction,” Jefferies analysts said. “However, we think the cuts boost confidence in medium-term growth.”
