Revolut books record profit on higher interest rates and surge in users
Revolut has swung to a record annual profit and nearly doubled its revenue for 2023 as the fintech filed its first timely set of results in years.
The London-based banking app posted a pretax profit of £438m for the year, swinging from a £25.4m loss in 2022. Its gross profit margin grew to 76 per cent from 70 per cent.
Revenue came in at £1.8bn last year, up from £920m in 2022 and exceeding Revolut’s own forecast. The firm said in December that it expected to hit $2bn (£1.7bn) in revenue for 2023.
The results are the first since 2020 that Revolut has not sought an extension to file beyond a statutory deadline in September. It received a three-month extension for its 2022 accounts last year, while Revolut’s 2021 results were not published until March 2023.
Resolving audit issues and showing its accounts are in order will be seen as a boost to Revolut’s struggle for a UK banking licence. After warning last March that it was unable to verify much of Revolut’s revenue, auditor BDO gave an unqualified opinion of Revolut’s 2023 accounts.
Like its large rivals, the start-up enjoyed the benefits of higher European interest rates on its margins last year. Revolut’s interest income surged to £500m from £83m between 2022 and 2023.
Its fee income also jumped to £1.2bn from £793m on the back of Revolut attracting almost 12m retail customers over the year to bring its total to 38m. Customer balances rose 38 per cent to £18.2bn.
The firm added that it hit 45m retail customers last month and remained “poised for exponential growth” as it aims for so-called super app status.
Revolut’s profit was tempered by a jump in credit losses on lending and non-lending products, totalling £47m – up from £14m in 2022 – as it rolled out personal loans in France, Germany and Spain and credit cards in Ireland and Spain. Its loan book swelled to £528m from £204m.
Revolut and other neobanks are posing a bigger challenge to major traditional lenders with their slick mobile-first offerings and swelling customer bases. They are also becoming increasingly profitable, with Monzo posting its first annual profit last month.
A major boost to Revolut would come from obtaining a UK banking licence, allowing it to offer lending products like credit cards and mortgages in its home market – where it recently hit 9m customers.
The regulatory process typically takes one year, but Revolut has been waiting since January 2021. “We remain committed to our ongoing UK banking licence application in addition to bringing the Revolut app to new markets and customers around the world,” Nik Storonsky, Revolut’s co-founder and chief executive, said on Tuesday.
Revolut obtained a European banking licence from the Bank of Lithuania in December 2021 and has been directly supervised by the European Central Bank since the start of this year.
The company’s bottom line was weighed down by a rise in administrative expenses last year to £933m from £667m as it expanded aggressively. Staff costs rose to £498m from £362m as the firm added 2,239 employees over the year.
Staff costs are set to balloon even further in 2024 as Revolut embarks on a hiring spree to grow its global headcount to 11,500 by the end of this year – up 40 per cent from 2023.
Revolut also invested heavily in advertising and marketing last year, with spending almost doubling to £241m from £129m.
The firm, founded in 2015, is understood to have recently hired bankers to help it sell around $500m of existing shares in a move that could value Revolut at more than $40bn – up from a $33bn valuation in a 2021 funding round that made it the UK’s biggest fintech firm.