Monzo reports first profit since 2015 in 'landmark year of record growth'
The digital bank, which burst onto the banking scene in 2015, said it was benefiting from having more customers depositing more cash in their accounts.
Monzo has proudly declared its first annual profit in its nine-year history, as the digital bank gears up for a bold expansion into the US and across Europe.
Chief executive TS Anil hailed this period as a "landmark year of record growth" for Monzo, which is now serving close to 10 million customers.
The fintech firm reported a pre-tax profit of £15.4 million for the year ending March, a significant turnaround from a pre-tax loss of £116.3 million the previous year.
Monzo, which made a splash in the banking sector in 2015, attributes its success to an increase in customer deposits and the introduction of new features such as cash and stocks and shares ISAs.
Customer deposits have surged by 88 percent to £11.2 billion, with Monzo enhancing its offerings with more features including cash and stocks and shares ISAs.
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Benefiting from the trend like other UK banks, Monzo has seen a boost in income due to higher interest rates, set against the backdrop of efforts to tackle the surging cost of living.
With profitability now on its side, Monzo has disclosed early plans to establish an office in Dublin, Ireland, which it views as a "gateway" for European expansion.
While the opening date for the Dublin office remains unspecified, Monzo indicates that it will be operational in the "coming months".
As the UK's seventh-largest bank, Monzo is also laying the groundwork for its US debut, having recently appointed a fresh leadership team in the region.
Following a decision to withdraw an application for a banking licence in the country in 2021 due to likely disapproval, Mr Anil revealed that the bank saw record numbers of savings pots created over the past year. These are places where customers can set money aside for a specific goal or round up everyday spending and put the cash in a "piggy bank".
Card spending saw a significant increase of 42 percent this year compared to the previous one. Monzo, which provides overdrafts, credit cards and loans, disclosed that its expected credit losses (ECLs) soared by 75 percent year on year to £176.9 million.
The ECL is the sum it reserves to cover losses it anticipates when customers fail to repay borrowed money.
The surge was driven by a growing lending book and an increase in some customers falling into arrears on their payments amid the broader cost-of-living crisis, according to the bank. Losses, as a percentage of average lending balances, rose to 9.75 percent from 7.58 percent year on year.
Mr Anil emphasised that Monzo is committed to "making sure we lend to customers who we believe can pay us back". He expressed his pride in being compared to banks that have been around for much longer, centuries in most cases, because it establishes that Monzo is a player at scale and is building a company for the ages.
However, he also acknowledged that they are still in the infancy of their journey with a huge runway ahead of them.
He stated that an increasing number of customers will want to use technology to manage their finances.
