Shares of online money transfer firm Wise experienced a significant surge of 16% on Tuesday, following the company’s report of a substantial increase in profits. Wise announced that its profit before tax had tripled to £146.5 million ($186.5 million), and earnings per share had more than tripled to 11.53 pence. This surge in profits was largely attributed to rising interest income. The company also witnessed a growth in customer base, with a 34% increase and a total of 10 million users by March 31, 2023. Additionally, Wise reported a 37% increase in volumes, amounting to £104.5 billion.
Benefiting from Rising Interest Rates and Fintech Trends
Wise’s positive financial results were bolstered by the recent surge in interest rates implemented by the Bank of England. With rates raised to 5%, Wise, along with other fintech companies, was able to generate income through interest on funds held in customer accounts. This income from lending has also been a contributing factor to the profitability milestones reported by other fintech firms such as Monzo and Starling Bank.
Impressive Revenue Growth and Increased Deposits
In addition to the surge in profits, Wise experienced substantial revenue growth, with a 51% increase from £559.9 million to £846.1 million. The overall income reported by the company rose by 73% year-on-year to £964.2 million. This growth was largely driven by a significant increase in the amount of funds deposited by customers.
Challenges Faced by Wise
While Wise celebrated its financial success, the company also faced several challenges. CEO Kristo Kaarmann became the subject of an investigation by Her Majesty’s Revenue and Customs due to a £365,651 tax bill that was not paid on time. This investigation could potentially have serious consequences for Kaarmann’s position if he is found to have violated UK tax laws. Kaarmann acknowledged this investigation in an interview with BBC Radio, expressing his hope for a timely resolution. He emphasized that the issue was a personal mistake and unrelated to the company’s operations.
Wise also encountered regulatory issues, as it was fined $360,000 by Abu Dhabi regulators for deficiencies in its anti-money laundering controls. Kaarmann assured that this matter has been resolved. Furthermore, he revealed his intention to take a three-month sabbatical from September to December to spend time with his baby. During his absence, Harsh Sinha, the company’s chief technology officer, will assume the role of CEO on an interim basis. While speculation arises regarding Sinha potentially becoming the permanent CEO, Wise has not made any official statements regarding this matter.
In summary, Wise has reported impressive growth and profitability, driven by rising interest income, customer base expansion, and increased deposits. Despite these positive developments, the company faces challenges relating to the CEO’s tax investigation and regulatory fines. The temporary leadership change during the CEO’s sabbatical also raises questions about the company’s future direction.
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