Monzo, a prominent digital bank in the UK, is currently in negotiations for a potential £300 million stake sale. If successful, this deal could escalate its valuation to over £3.5 billion, potentially making it the most valuable virtual bank in the country. The bank is discussing this share sale with several blue-chip investment funds, although the identities of these new backers have yet to be disclosed. Full disclosure of details is expected by the end of 2023.
This stake sale is anticipated to be the final one before Monzo's planned stock market flotation. The digital bank has been steadily growing since its inception in 2015 and has managed to serve an 8.5 million-strong customer base. Despite facing fierce competition in the digital banking sector from rivals such as Starling Bank and Revolut, Monzo has remained resilient.
The company expanded into buy-now-pay-later schemes and consumer lending in 2022, which led to bad debt provisions rising from £14 million to £101 million. Despite losing about 9,080 customers between April and June 2023, Monzo managed to double its revenue to approximately £356 million due to increased interest rates and customer deposits. The bank added 1.6 million new customers during the year ending February, bringing its total customer base to around 8 million in the UK.
Monzo offers a variety of services including business banking, savings accounts with competitive rates, and an investment service that saw 200,000 sign-ups within two days of its launch. It provides different account types including free accounts, Monzo Plus (£5/month), and Monzo Premium (£15/month) which includes phone and travel insurance.
Despite reporting a loss of £116 million for the year ending February, Monzo is forecasted to turn profitable by next year. This optimistic projection is backed by the fact that the potential capital raise may surpass the £3.5 billion funding Monzo received from the Abu Dhabi Growth Fund in 2021.
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