Revolut boss confident of UK banking licence approval amid record profits

LONDON — The chief executive of British financial technology giant Revolut told CNBC he is optimistic the company will be able to get a banking license in the U.K. after the company reported its highest-ever full-year pre-tax profit thanks to surging user numbers.

In an exclusive interview with CNBC, Revolut CEO and co-founder Nikolai Storonsky said the company has overcome several significant hurdles on its more than three-year journey to gain regulatory approval and is confident of securing a U.K. banking license.

“Sooner or later, we’ll get to it,” Storonski told CNBC over a video call. Regulators are “still working on it,” he added, but so far no notable concerns have been raised about the fintech.

Storonski said Revolut’s size meant it was taking longer to get approved for a banking license than a smaller company would have, adding that some smaller lenders have been able to get approved for banking licenses despite having fewer customers.

“UK banking licences are approved for smaller businesses,” Storonski said. “They’re usually approved twice a year,” but those approved are usually smaller financial institutions. “Obviously, we’re a very large business, so it takes extra time.”

Revolut is a licensed electronic money institution (EMI) in the UK but cannot yet offer lending products such as credit cards, personal loans or mortgages. A banking licence would allow it to offer loans in the UK. The company applied for one in 2021 but has faced lengthy delays.

One of the key problems the company faced was that its share structure was not in line with the rules of the Prudential Regulation Authority, the Bank of England’s regulator for the financial services industry.

Revolut has multiple classes of shares, some of which previously had preferential rights, and one of the conditions set by the Bank of England for granting Revolut a UK banking license was that the six classes of shares be consolidated into ordinary shares.

Revolut then struck a deal with a Japanese technology investor to solve the problem. SoftBank The Financial Times reported that SoftBank plans to give up its preferred shares and transfer its stake in the company to a unified class, according to people familiar with the matter. News of the settlement with SoftBank was first reported by the Financial Times.

The fintech giant released its financial results on Tuesday, saying its full-year pre-tax profit for 2023 would rise to 438 million pounds ($545 million), turning into a profit from a pre-tax loss of 25.4 million pounds in 2022. Group revenue rose 95% to 1.8 billion pounds ($2.2 billion) from 920 million pounds ($1.1 billion) in 2022.

Revolut’s chief financial officer, Victor Stinga, said the company’s growth was driven by record user growth — Revolut is adding 12 million customers in 2023 — and strong performance across all of its major business lines, including card fees, foreign exchange and wealth services, and subscriptions.

“We see 2023 as a breakout year from a growth and profitability standpoint,” Stinga said in an interview this week.

Stinga attributed the revenue increase to three factors: an increase in the number of customers, strong performance in key revenue areas, and a strong increase in interest income, which now accounts for about 28% of Revolut’s revenue.

He added that Revolut will make strengthening financial discipline a top priority in 2023, keeping operating expenses in check and adopting a “zero-based budgeting” philosophy, with any new expenditure only being accepted after it has been justified and accountable.

Stinga said that as a result, management costs have grown much less than revenue growth, with management costs increasing 49% while revenue almost doubled year-on-year.

He added that Revolut is investing aggressively in advertising and marketing, spending $300 million on it last year. The company’s business banking solutions are also a top priority, with Revolut dedicating about 900 employees to business-to-business sales.