Revolut boss expects digital bank to remain profitable

Revolut’s chief executive said the digital bank expected to remain profitable despite falling enthusiasm for cryptocurrencies after buoyant markets helped offset the negative impact of the pandemic. 

“I don’t think interest [in crypto trading] will increase. I think it will come off a bit, but Covid showed we’re very resilient to shock,” Nikolay Storonsky told the Financial Times ahead of the publication of the company’s latest annual report.

“Crypto might potentially come off and most likely it will, but we have other bets.”

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

Rising interest in digital currencies helped Revolut hit profitability late last year for the first time since 2017, when it benefited from an earlier bitcoin boom before falling back into a loss after prices crashed. 

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

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

Overall revenues increased 34 per cent to £222m in 2020, despite the hit to its traditional travel-related income. However, the company’s net loss rose from £107m to £168m, as it ramped up spending on new staff and invested 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 had no immediate need to raise funds after a $500m fundraising last year that valued the company at $5.5bn.

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

Unlike British fintech rivals such as Monzo and Starling, Revolut prioritised international expansion rather than building a full-service bank in a single country first, but it is now applying for banking licences in the UK and USA.

It started offering loans last year in Lithuania and Poland, where it already has a bank licence, but had lent just £1.4m by the end of 2020.

“We’re very risk-averse with our credit portfolios,” Storonsky said. “We decided to grow [the loan book] much more slowly because there was no need to rush the products, and we’d prefer not to lose money.”

Storonsky admitted that early growth in the US had been slower than he had hoped for, but said performance was picking up. 

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

Storonsky, who last year became the UK’s youngest self-made billionaire, compared JPMorgan’s efforts to NatWest, which spent about £100m attempting to build a new digital bank that closed after just a few months.

“I’ve had this conversation so many times,” Storonsky said. “First it was ‘what about [NatWest] launching a digital bank’, then it’s some other bank. The end is always the same. I don’t think legacy banks can build great products . . . they’re just bankers.”

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