UK Neobank Monzo Attains First-Time Monthly Profitability Following Lending Surge

UTC by Tolu Ajiboye · 3 min read
UK Neobank Monzo Attains First-Time Monthly Profitability Following Lending Surge
Photo: Monzo / Facebook

Monzo hit profitability after its lending volume for the period ending February 2023 ballooned to £759.7 million.

British neobank Monzo Bank has revealed it attained monthly profitability for the first time in 2023 following a lending surge. In its annual report for the year ending February 2023, the online bank said it became profitable two months into the year. Monzo said it earned a 382% increase in net interest income which amounted to £164.2 million, driven by a surge in lending activity. Furthermore, the prominent London-based digital bank also realized a net operating income of £214.5 million ($266.1 million) for the year ending February 2023. The positive earnings outcome saw Monzo double its results year-over-year (YoY) from the previous net operating income of £114 million.

Discussing Monzo’s profitability in a media session, chief executive officer TS Anil pointed out:

“Profitability was always a choice as we balance continuing to invest in growth with profitability. We could have chosen to be profitable a few quarters ago.”

The British online bank’s Chief Financial Officer, James Davies, described it as “a business with diverse and stabilizing revenue”. Davies further said Monzo was primarily helped by its “large, growing, personal and business customer base”.

For the year ending February 2023, Monzo sustained a substantial loss of £116.3 million. However, this deficit was slightly lower than the £119 million net loss reported in the year-ago period.

Monzo Profitable Run Came amid UK Cost-of-Living Crisis

Monzo refrained from revealing how much profit it is currently making but said it is on track to attain full-year profitability in 2024. The digital bank benefited from growth in newer income streams during the last period. These include its lending and subscription businesses, which now see paid accounts totaling 350,000.

Monzo’s commendable revenue outing came amid rising inflation and expensive living costs for British consumers. The UK challenger bank’s lending volume for its last annual run tripled YoY to £759.7 million. However, Anil disputed suggestions that Monzo’s revenue performance was due to the UK’s cost-of-living crisis. Instead, the CEO explained the predicament reflected the importance of Monzo’s products, including savings pots and budgeting tools.

Monzo Is Not the First British Challenger Bank to Attain Monthly Profitability

Despite Monzo’s recent profitable run, the company is not the first British digital bank to achieve that feat. In 2021, Starling hit profitability for the first time after the neobank’s revenue shot up 600% to £97.6 million from £14 million. At the time, the challenger bank’s CEO Anne Boden described the situation as “very much on track” to attain 2022 full-year profitability.

Last June, the UK’s Allica Bank also hit monthly profitability and saw a pre-tax profit of £3 million for H2 2022. Commenting on the digital bank’s glowing 2022 earlier this month, Allica CEO Richard Davies enthused:

“Allica has entered 2023 with an excellent platform to continue to grow and expand its offer to SMEs.”

In addition, Davies explained that the neo-bank had already experienced growth in profitability for the first quarter of the year. According to the chief executive, Allica’s Q1 2023 profitability was due to “very prudent capital and liquidity positions”.

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