Revolut boss expects digital banking to return to profit

The chief executive of Revolut said digital banking is expected to return to profit despite declining enthusiasm for cryptocurrencies after dynamic markets helped offset the negative impact of the pandemic.

“I don’t think the interest [in crypto trading] will increase. I think it’s going to come off a bit, but Covid has shown that we are very shock resistant, ”Nikolay Storonsky told the Financial Times ahead of the release of the company’s latest annual report.

“Crypto could potentially come out and most likely, but we have other bets.”

Revolut launched six years ago and offers a travel-focused prepaid debit card, but has expanded into areas ranging from corporate payments to stock and cryptocurrency trading.

Growing interest in digital currencies helped Revolut achieve profitability at the end of last year for the first time since 2017, when it benefited from a previous bitcoin boom before falling back into a loss after the falling prices.

However, Storonsky and Mikko Salovaara, recently appointed chief financial officer of Revolut, said the latest developments would be more sustainable.

“We continue to expect to be profitable, [but] rates in terms of growth and profitability are difficult to predict, ”said Salovaara.

Overall revenue rose 34% to reach £ 222million in 2020, despite the blow to its traditional travel-related revenue. However, the company’s net loss fell from £ 107million to £ 168million as it increased spending on new employees and investing in areas such as compliance.

Reports earlier this year said Revolut was lining up investment bankers for an investment round that could take place after the summer, but Storonsky said Revolut did not immediately need to raise funds after a round. fund of $ 500 million last year that valued the company at $ 5.5 billion.

“We are still making fundraising plans, but at the moment we are not fundraising,” he added. “We could in the future, but we’re very profitable now and just don’t need the money.”

Unlike UK fintech rivals such as Monzo and Starling, Revolut has prioritized international expansion rather than creating a full-service bank in one country first, but is now applying for UK banking licenses. United and United States.

He started offering loans last year in Lithuania and Poland, where he already has a banking license, but had only loaned £ 1.4million by the end of 2020.

“We are very risk averse with our credit portfolios,” Storonsky said. “We decided to grow up [the loan book] much slower because there was no need to rush the products, and we preferred not to waste any money.

Storonsky admitted that initial growth in the United States had been slower than he had hoped, but said performance was improving.

He added that he was not concerned about growing competition in his home market from established companies such as JPMorgan, which plans to open a digital bank in the UK this year.

Storonsky, who became the UK’s youngest self-made billionaire last year, compared JPMorgan’s efforts to those of NatWest, which spent around £ 100million trying to create a new digital bank that has shut down its doors after just a few months.

“I’ve had this conversation so many times,” Storonsky said. “First, it was [NatWest] start a digital bank ”, then that’s another bank. The end is always the same. I don’t think traditional banks can create great products. . . they are just bankers.

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