A Balance Sheet Heavy Bank

Recently I keep reading stories in the media inciting Monzo to, essentially, extend many more loans to customers. They suggest doing this to move towards a more “traditional” model of banking, making money on a large loan book.

Let’s put aside for a minute that this ignores completely the fact that Monzo did this intentionally in order to pursue a service-based model (to better serve the customer).

Do these hacks think that Monzo’s management are imbeciles? We’re staring down the worst recession since the Great Depression and all those massive loan books at the legacy banks are going to get utterly rinsed out. How do you think this goes when they pull the furlough schemes and millions are out of work? Those loans go bad and they go bad fast. Monzo is in an absolutely fantastic position in this regard. They’ve got minimal lending and therefore minimal credit risk.

Should Monzo get deeper into the lending game? IMHO definitely not until the legacy banks have taken every last bullet in the oncoming gouging recession.

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in fairness I think Monzo massively increased their loan book in the last years accounts, which was the right thing to do , but in hindsight was perhaps the wrong time to do it, time will tell.

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