Monzo’s Annual Report Highlights Profitability, Marketing Focus, and Lending Growth
The first six months of 2023 have brought a welcome bout of profitability to the UK’s digital banks. Revolut, Starling and Tandem for example have said they are now operating at a profitable level. Monzo, which this week released its annual report, joined the club too. In this article, we take a look at five things we learned about the business from the report.
1. Profitability Achieved
Monzo officially reported a loss of £116.3m for the year up to March 2023, a fall of just 2 per cent, for the twelve months up to March 2022. However, the word ‘profit’ or ‘profitability’ popped up 20 times in the report, with CEO TS Anil and Chair Gary Hoffman highlighting the achievement. Monzo now says it is profitable on a monthly basis, signaling positive growth for the bank.
2. Marketing Investment
Monzo’s marketing spend has increased significantly in recent years. From £0.5m two years ago, the bank’s marketing spend for this year jumped to £21.7m. This includes a brand refresh and the use of digital platforms like TikTok. Monzo acknowledges the return on the higher costs and plans to continue investing in marketing to raise awareness among existing and potential customers.
3. Focus on Monzo Business
Monzo is shifting its focus towards Monzo Business rather than its consumer side. The bank now has 7.5 million customers, representing an increase of 1.7 million compared to the previous year. While the rate of customer growth has decreased slightly, Monzo’s customer deposits and card spending have increased significantly, indicating growing trust in the bank.
4. Steady Growth in Lending
Monzo has been cautious in launching lending products but has seen significant growth in this area. Total lending increased by 194 per cent to £759.7m, split across overdrafts, unsecured personal loans, and the Monzo Flex product. Borrowing available to customers on overdrafts and Monzo Flex also increased, reaching £921.9m.
5. Credit Risk Management
Monzo maintains a conservative approach to credit risk management. Credit loss expenses have increased to £101.2m, reflecting the growth in lending. Monzo has adjusted its models to account for higher expectations of loss, although it has not yet seen an increase in customers struggling to make repayments.