In a surprising turn of events, British fintech giant Wise unveiled impressive half-year results on Tuesday, revealing a nearly fourfold increase in pre-tax profits, driven by a substantial boost from higher interest rates. The financial report for the half-year ending on September 30, 2023, showcased a robust performance, with Wise reporting revenue of £498.2 million, marking a substantial 25% year-on-year growth. Including interest income, the company’s total income for the period reached £656 million, reflecting an impressive 58% increase compared to the previous year.
The standout figure was Wise’s pre-tax profit, soaring to £194.3 million, an extraordinary 280% year-on-year surge. The company attributed this remarkable growth to higher interest rates, continuing a trend observed earlier in the year, where Wise capitalized on increased interest income. Despite the stellar profit performance, analysts from Jefferies expressed caution regarding Wise’s total processed volume (TPV) momentum. They highlighted potential pressure on volume per customer (VPC) and characterized the boost from higher interest income as a “welcome temporary compensation” for slowing core total processed volume, suggesting it might be unsustainable in the long run.
Wise, known for its cost-effective international money transfer services, operates in a space closely tied to consumer activity. The report noted that U.K. retail spending experienced a modest 1.2% year-on-year growth in October, the lowest since December 2022. Wise went public on the London Stock Exchange in 2021 and currently boasts a market capitalization of £7 billion ($8.7 billion). While the company’s share price has risen by 25% since the beginning of the year, it has weathered the recent technology stock volatility storm.
Harsh Sinha, Wise’s technology chief, has temporarily taken over as CEO during co-founder Kristo Kaarmann’s three-month sabbatical, which began in September and is set to conclude in December. Despite concerns over a recent downturn in payments stocks, Wise’s robust financial results challenge the notion of a fintech demise, as highlighted by Simon Taylor, Head of Strategy at regulatory technology firm Sardine.ai.
“Wise has benefitted much more from higher rates than the banks have because it continues to grow revenue and market share,” Taylor commented, emphasizing the resilience of fintech in the face of market fluctuations. Wise shares remained essentially unchanged following the release of the financial results.
