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Zopa, the UK digital bank backed by SoftBank, has turned profitable, bringing the fintech group a step closer to an expected public listing.
The group made pre-tax profits of £15.8m for 2023, from a loss of £26m the previous year. The bank increased its deposit base by 15 percent to £3.4 billion in this period and its total loan balance stands at £2.7 billion.
Zopa was founded in 2005 as a peer-to-peer lender, matching customers looking for high returns with businesses or individuals looking to borrow money. In 2016, he began his shift to banking in order to access more stable ways to finance his loans through savings accounts.
Its strategy was different from other fintech banks including Monzo and Revolut, which focused on rapid growth by offering digital current accounts and not lending at scale. Both groups are still suffering losses.
By contrast, Zopa, which has 1 million customers, has focused on savings accounts and offering credit cards, auto financing, and personal loans. The bank plans to launch a current account for existing customers by the end of the year before expanding the offer to new customers next year.
Chief Executive Officer Jaydev Janardhana, a former Capital One executive, said the company was ready to go public and preferably do so in London, but warned that UK markets were not prepared for a highly anticipated wave of fintech listings.
Among the names being traded in the IPO market are Santander-backed Currency Group, Ebori, Sweden's Klarna, Buy Now, Pay Later and Starling.
“I would be surprised if there are any fintech IPOs in the UK this year,” he said.
Janardhana blamed low investor sentiment around the banking sector, partly related to fears that they had made too much money from the high interest rate environment. There are fears that their profits will fall when central banks cut benchmark interest rates.
“These fears are overblown and these banks are good buys, but investors will take time to get comfortable with that,” Janardhana said, adding that he expected sentiment to improve after central banks started cutting interest rates.
London suffers from a dearth of listings and has raised less capital from an IPO than European markets this year. Several major UK-listed groups are also moving their primary listings to New York, such as gambling group Flutter and building materials group CRH.
Janardhana welcomed the discussion on policies to make London more attractive by tapping into the greater liquidity of pension funds. He warned that a proposed overhaul of listing rules to attract more growth companies could erode governance standards.
“High standards of governance are important, and some of these reforms may end up hurting retail investors.”
