When will Monzo break even?

Would be nice if Monzo could do the same as Starling and give an indication of when they expect to breakeven or make a profit - like Starling say - you can have millions and millions of customers but if they are not making you any money it just costs the bank money and drains their resources - eventually causing the business to fail as the running costs for all those accounts far exceed income.

I would rather Monzo had 1 million customers and be in profit than have 4 million customers and be losing £50 million a year.

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I believe Tom said something like the end of this year or early next year.

What did he say ?

Company wide i couldn’t believe so… American expansion and Business Accounts still need to become profitable first as well as Monzo Plus needing a big uptake.

Too many variables

No that’s not right. He said losses would widen this year, significantly.

In the Guardian he said profitability could take up to ten years to achieve consistantly.

I think somebody asked him this question in one of the Q&A portions of a recent event.

He said something along the lines that he had an aim for late 2020 profitability. You’d have to watch the event for his exact answer. I’ll look for the video on YouTube and post the link here.

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I think it may have been this one…

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Let me know if I am wrong I am walking down a street in the rain

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Thanks Cameron have not seen this one -watching it now and will let you know

I watched all the videos from that day, I don’t really recall any mention of profitability timelines. Do remember the comments about IPO though, pretty sure that was Toms keynote though not the Q&A

Are we talking profit per customer in the UK or profit for Monzo as a whole - these are very different things?

Unit economics for each customer in the UK has been a key focus for Monzo and they have gone from making a loss on each customer to making a small profit. This, at scale, should make a sustainable business and you can be sure that additional profit lines will be added over time. Head office costs etc are not factored into this I believe, hence the current losses.

Monzo as a business may choose to spend hundreds of millions on international expansion, developing other products etc and so may, at that level, make huge losses. That’s also entirely legitimate.

Revolut are taking huge investments and expanding hell for leather, Starling are taking a more conservative path. It’s always felt to me that Monzo sat in the middle of these two. Either way, showing a profit at this stage in the growth of a business may be missing the point. As long as the unit economics make sense then it is valid to rack up additional losses to get the distribution and expansion up.

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No mention of profit or break even unfortunately.

I think the saying goes…

“Turn over is vanity, profit is Sanity”

Challengers will only be the latest new investment craze for Private Equity for so long and then something else will come along and challenger banks will start getting bad press - the tide is already turning with SoftBanks investments .

Media loves to build things up so they can knock them down

WeWork Is a good example of this changing sentiment and even today another one of Softbanks investments has announced a scale back - Zume Pizza Inc.

https://www.bloomberg.com/news/articles/2020-01-08/softbank-backed-pizza-startup-cuts-half-of-staff-stops-making-pizza

Metro Bank was valued at 10billion last year and are now valued at £350 million and are having to borrow at higher rates than they are lending money out.

If Monzo’s customer base plus expansion plans ramp up too much it will eventually eat its self - let’s hope Tom comes out with some good news when they release results in July 2020. ( end of financial year is Feb 2020)

Spoiler alert.

They won’t. Losses will have increased threefold.

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:joy: I know but let’s hope they at least say we will break even by …

2022-23

When tranche two of the loan book launches.

That’s on the assumption private equity still wants to lend a 9 year old loss making bank money (if Monzo are still loss making in 2023)

Metro bank had to raise much needed funds at 9.5% that’s not a sustainable business model.

Hence why Metro will probably be swallowed by Lloyds - but the expensive branch network is not attractive - same as Monzo’s millions and millions of customers who are using Monzo for spending money rather than getting their salary paid in and taking out overdrafts and loans - this only costs Monzo money

That’s rubbish, where are you getting your research from? Metro made 40 million profit in 2018 and 19 million in 2017.

Metro had to refinance as they had classified loans incorrectly (essentially an accounting error) and it still made a profit of around 4.3 million.

It’s quite simply a lie to say Metro is in any form of trouble - it’s just not has gone from being a grossly overvalued to undervalued.

Edit: Further to this, bought up by Lloyds? They’ve just had a Colombian billionaire, with a history of turning around banks, buy around 7% of their shares and you’d suspect Lloyds buy before him?

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No bank would borrow funds at close to 10%. Maybe stop spreading false information around here?

Actually - that’s the only truth in the whole post. Metro suffered from horrendous media coverage over the fiasco and thus had to offer a high interest bond to be able to re-capitalise the bank (higher risk loans then they originally accounted for).

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