Things look to be going from bad to worse for UK challenger bank Monzo. After suffering a 40% down round in June, the bank has now revealed its annual losses have doubled due to the pandemic.
Worryingly, the bank has said the Covid-19 pandemic has placed “significant doubt” over its ability to continue as a going concern, according to a report from CNBC.
Monzo has revealed its annual post-tax loss for 2020 is £113.8m, which is a huge jump from the £47.1m recorded last year. Reasons for this increased lost are placed on the bank’s expansion efforts, which saw it enter the US, hire more staff and increase marketing, the article said.
The loss comes despite the bank tripling its revenues, rising from £19.7m to £67.2m.
Other notable stats in its financials are that it issued £143.9m in loans, a new high for the challenger bank, and increasing from £19.2m in 2019. With more money lent out, Monzo is anticipating its credit losses to rise to £20.3m from £3.9m the previous year, the article said. Of the money expected for credit losses, £4.1m has been set aside due to an increased risk of defaults caused by the pandemic.
The pandemic has hit a lot of FinTechs and Monzo has been one of those to suffer. In June, the company reportedly raised a £60m top-up round, which was valued the company at $1.24bn. This represents a 40% drop on its previous valuation of $2bn that it achieved in 2019 after a £113m round.
With the coronavirus situation not looking to change any time soon, fears over its impact are still huge.
Monzo told CNBC, “Our revenue streams have been significantly impacted by the COVID-19 pandemic and resulting macro-economic uncertainty. Regulatory reviews will also lead to stricter financial crime requirements.”
“This may result in lower forecasted customer numbers and revenues, along with increased costs associated with correcting areas of concern. This increases the risk that the Group will not be able to execute its business plan, which could adversely impact its ability to generate a profit or raise sufficient capital to meet future regulatory capital requirements.”
There have been several indicators of Monzo’s struggle during the pandemic. The challenger bank had to fire 120 members of its staff, close its Las Vegas office and lose the 165-strong team, it also reportedly furloughed 165 members of its UK team. The problems the bank has suffered even brought rumours it was going to go bust; however, the bank denied these speculations.
The problems for the bank have come quite suddenly, with it announcing in February that it would hire 500 new staff and launch a new premium service. Last year, Monzo also entered the US market with the hopes of capitalising on its strong growth.
To support the struggling business, the company’s former CEO and co-founder Tom Blomfield announced at the end of the March that he wouldn’t take out a salary for a year and that several of his board members would take a 25% pay cut. Blomfield has since stepped down from his position as CEO and recently transitioned to a president role in the business. The bank’s current CEO is TS Anil.
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