Bunq becomes first EU neobank to report annual profit after surge in users and interest rate boost

Dutch mobile banking firm Bunq has become the first EU neobank to report an annual profit on the back of a surge in users as it gears up to re-enter the UK market and mulls an IPO.

Bunq posted a net profit of €53.2m (£45.6m) in 2023, swinging from a €10.5m (£9m) loss in 2022. It launched in 2012 and is now the EU’s second-largest neobank with more than 11m users.

Many recently launched neobanks, operating exclusively online, have struggled to turn a profit as they focus on drawing in customers with competitive interest rates and typically rely on revenue from interchange fees, premium subscriptions and other customer fees.

Bunq pinned its strong performance largely on growth in its customer base. Its user deposits soared 287 per cent to €6.92bn (£5.93bn) at the end of last year from €1.78bn (£1.53bn) in 2022, while user fee income jumped 30 per cent to €59.5m (£50.1m).

Meanwhile, the firm’s monthly and total transactions both grew 79 per cent last year to 44.1m and 528.4m respectively.

Bunq’s earnings have also been helped by 22-year high interest rates from the European Central Bank. The ECB hiked its key rate from minus 0.5 per cent to four per cent between July 2022 and September 2023.

The firm’s net interest income more than tripled to €127.1m (£108.9m) in 2023, with Bunq saying it “continued to give its users competitive savings rates in line with the European Central Bank”.

Its balance sheet swelled to €7.42bn (£6.36bn) from €2.06bn (£1.77bn) over the year, which it said was largely due to the introduction of its new “highly competitive” savings product.

News of Bunq’s first annual profit comes as the company plans to expand outside of the EU and become “the first global neobank”.

It reapplied for a UK e-money institution licence in December, three years after it stopped offering new accounts in the country due to regulatory requirements under Brexit.

Bunq said that if the Financial Conduct Authority approves its application, the firm could tap into a market of some 2.8m British “digital nomads”.

The firm made a bid for a US banking licence last April but withdrew its initial application at the end of January 2024. Bunq said it intended to re-file the application and was considering alternative legal forms, including a branch.

It has also mulled a stock market listing. Founder and chief executive Ali Niknam told City A.M. in January that Bunq, most recently valued at €1.65bn last July, had always “dreamed” of an IPO, although it was not immediately planning one. He added that a London listing “could be a consideration”.

“I’m incredibly grateful to work with so many amazing people each and every day and proud of what we’ve accomplished together in 2023: a record 79 per cent growth,” Niknam said on Thursday.

“Not because growth has ever been our main goal, but because it validates one of my core beliefs, that if you build a product that people love, your business will thrive.”