The Wise logo displayed on a smartphone screen.
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British fintech company Wise nearly quadrupled its pretax profit in its half-year results released on Tuesday, citing a boost from rising interest rates.
Wise reported revenue of £498.2 million, up 25% on the previous year, for the six months ended 30 September 2023. Including interest income, the company’s total revenue was £656 million for the period, up 58% on the previous year.
Before tax, the company’s profit was £194.3 million, up 280% on the previous year.
Wise said it benefited from higher interest rates, continuing a trend earlier this year where the company generated additional revenue from interest rate increases.
The company has more customer balances than a year ago, meaning it has more yield-generating cash at a time of central bank interest rate hikes.
Jefferies analysts said in a note that despite Wise’s exceptional earnings performance, they remain “cautious on TPV (total volume processed) dynamics, despite an expected stabilisation, as VPC (volume per customer) likely remains under pressure.”
Analysts added that Wise’s earnings boost from higher interest income is a “welcome temporary offset” to the slowdown in total volumes processed, but noted that it is “likely unsustainable.”
Wise, which allows consumers to transfer money across borders at significantly lower fees than traditional banks, has a business largely tied to consumer health. Retail spending in the UK rose 1.2% in October compared with a year ago, the slowest year-on-year growth since December 2022.
Wise, which went public in London in 2021, has a market capitalization of £7 billion ($8.7 billion). The company’s share price has risen 25% since the start of the year, recovering from a tough year for tech stocks.
Harsh Sinha, Wise’s CTO, recently took over from Wise CEO Kristo Kaarmann as the company’s new CEO. Kaarmann, who co-founded Wise in 2011 with fellow Estonian entrepreneur Taavet Hinrikus, began a three-month sabbatical in September and is expected to return in December.
Wise shares were largely unchanged on Tuesday.
No “disappearance” of fintech yet
The results come after a bloodbath for payments stocks, which have fallen sharply in recent weeks on results suggesting a slowdown in momentum and a return to reality after the heady days of the Covid-19-driven online payments boom.
“The rumors about the demise of fintech were overblown,” Simon Taylor, chief strategy officer at regulatory technology firm Sardine.ai, told CNBC via email Tuesday.
“The consensus was that ‘risk assets’, like fintech, should be hit hardest by rising rates. The opposite is true. ‘Rate normalisation’ was supposed to help banks, but it helped fintech companies more.
“Wise has benefited much more from higher rates than the banks as it continues to grow its revenue and market share,” Taylor added.
Last week, Wise announced that it was pausing new business account signups due to high demand. During its earnings call, company management said that the company was restarting online business account signups in the UK, but was still working to restore business account signups for the rest of Europe.