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Zopa, the UK digital bank backed by SoftBank, has swung to profitability, taking the fintech group a step closer to an anticipated public listing.
The group posted pre-tax profits of £15.8mn for 2023, from a loss of £26mn the previous year. The bank has increased its deposit base by 15 per cent to £3.4bn in the period and has a total loan balance of £2.7bn.
Zopa was founded in 2005 as a peer-to-peer lender, matching customers seeking high returns with companies or individuals looking to borrow funds. In 2016, it began its pivot into banking to access more stable ways to fund its loans with savings accounts.
Its strategy has been different from other fintech banks including Monzo and Revolut, which have focused on growing rapidly by offering digital current accounts and not lending at scale. Both groups are still lossmaking.
By contrast, Zopa — which has 1mn customers — has focused on savings accounts and offering credit cards, car finance and personal loans. The bank plans to launch a current account for existing customers by the end of the year before broadening the offer to new customers next year.
Chief executive Jaidev Janardana, a former Capital One executive, said the company was ready to float and would preferably do so in London, but cautioned that UK markets were not ready for a highly anticipated wave of fintech listings.
Names that have been bandied around in the market for initial public offerings include Santander-backed currency group Ebury, Sweden’s Klarna, the buy now, pay later pioneer, and Starling.
“I’d be surprised if there are UK fintech IPOs this year,” he said.
Janardana blamed low investor sentiment around the banking sector, in part linked to concerns that lenders had made too much money from the high interest rate environment. There is a concern that their earnings would fall when central banks cut their benchmark rates.
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“Those concerns are overblown and those banks are a good buy but investors will take time to get comfortable with that,” Janardana said, adding that he expected sentiment would pick up after the central banks started to cut rates.
London is suffering a dearth of listings and has raised less IPO capital than European markets this year. Several big UK-listed groups are also moving their primary listings to New York, such as the gambling group Flutter and building materials group CRH.
Janardana welcomed the discussion about policies to make London more attractive by tapping into pension funds’ greater liquidity. A proposed overhaul of listing rules to attract more growth companies could however erode governance standards, he cautioned.
“Having a high bar on governance is important, some of those reforms will end up potentially hurting retail investors.”
