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Monzo's losses double as popular UK digital bank warns of pandemic uncertainty

Monzo's losses double as popular UK digital bank warns of pandemic uncertainty

7/31/2020 10:27:00 AM

Monzo's losses double as popular UK digital bank warns of pandemic uncertainty

Monzo said disruption resulting from Covid-19 has led to 'significant doubt' about its ability to continue 'as a going concern.'

3:27 AM EDT@Ryan_Browne_Key PointsMonzo reported an annual post-tax loss of £113.8 million in its 2020 accounts, up from the £47.1 million it lost last year.It said disruption resulting from Covid-19 has led to "significant doubt" about its ability to continue "as a going concern."

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The challenger bank recently relaunched a premium account called Monzo Plus in a bid to diversify its revenue streams.A Monzo debit card being used at a payment terminal.MonzoBritish digital bank Monzo said Thursday that its annual losses more than doubled and warned its ability to continue operating had become more uncertain due to the coronavirus pandemic.

The start-up reported an annual post-tax loss of £113.8 million ($149.5 million) in its 2020 accounts, up from the £47.1 million it lost last year, amid investment on hiring, marketing and aU.S. expansion. That was despite revenues more than tripling to £67.2 million from £19.7 million.

Monzo lent out a record £143.9 million, compared to £19.2 million in its 2019 results. But it expects credit losses to climb dramatically to £20.3 million from £3.9 million, with £4.1 million of that sum being set aside for a heightened default risk associated with the pandemic.

In a sign of the toll the crisis has taken on some start-ups, Monzo said the disruption resulting from Covid-19 has led to "significant doubt" about its ability to continue "as a going concern.""Our revenue streams have been significantly impacted by the COVID-19 pandemic and resulting macro-economic uncertainty," Monzo said in its report. "Regulatory reviews will also lead to stricter financial crime requirements."

"This may result in lower forecasted customer numbers and revenues, along with increased costs associated with correcting areas of concern. This increases the risk that the Group will not be able to execute its business plan, which could adversely impact its ability to generate a profit or raise sufficient capital to meet future regulatory capital requirements."

Matt Clifford, founder of London-based start-up investor Entrepreneur First, said such statements aren't typical of young tech companies with access to venture capital, or VC, funding."Those accountant statements aren't really built for start-ups," he told CNBC. "Almost all growth companies aren't really a going concern by conventional standards without access to more VC."

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