Digital-only bank Monzo set to sell a stake for £300m valuing it at £3.5bn… despite never turning a profit

Monzo is in talks to sell a stake in the company for £300 million, which would make it the most valued digital bank in Britain despite never making a profit.

The bank is reportedly in discussions with a group of leading investment funds over a share sale expected to be worth more than £3.5 billion. Sky News.

However, talks have yet to be finalized and concrete details on the sale are expected by the end of the year.

Insiders told Sky News that ‘the fundraising would take place at a premium to the £3.5 billion for which capital was secured from the Abu Dhabi Growth Fund at the end of 2021.’

One person close to the fundraising said the increase was opportunistic because the new capital would be used to accelerate growth.

“The company just needs the money to build the business faster,” they said

In May, the group increased its provisions for debts that turned sour from £14m to £101m.

The online bank, which expanded into the buy-now-pay-later and consumer lending domains in 2022, said the amount was “in line with our growth in consumer lending.”

It added: ‘We will continue to see this trend as more customers join Monzo and borrow next year.’

The bank was founded in 2015 and has around 8 million UK customers.

According to the latest current account switching figures, the company lost a net 9,080 customers between April and June 2023.

However, unlike many of the banks on the list, it does not offer switching incentives.

Rival Starling Bank was founded in 2014. Starling has made a profit for two years in a row, while Monzo has yet to do so, reporting a £116 million loss in the year to February.

But despite this, amid higher interest rates and a rebound in customer deposits, Monzo saw its turnover double last year to around £356 million and said it expects an annual profit next year.

The company also said it added 1.6 million new customers in the year to February.

A potential fundraising round could be the last before a rumored initial public offering, which would allow ordinary investors to buy shares.

Last month Monzo revealed it would be offering an investment service – and it claimed 200,000 people had signed up within two days.

Monzo also offers business banking and savings accounts, including an easy-access rate of 4.1 per cent, and other savings deals linked to banks such as OakNorth and Shawbrook.

It offers a free account, alongside Monzo Plus which costs £5 per month and Monzo Premium for £15 per month, the latter of which offers phone and travel insurance.