Wise H1'23 profits surge by 280% amid high interest rates

Wise, a UK-based money transfer company, has reported impressive results for the first half of its 2023 financial year amid high interest rates. The results released on Tuesday showed a surge in its pre-tax profits by 280% year-on-year. At the same time, the fintech firm has paused on accepting new business clients in Europe.

Wise’s update

In 2022, Wise recorded a significant decline in its share price amid a wave that saw the value of numerous fintech companies decline. The impacted firms are those that had secured grand valuations in the wake of low interest rates.

Besides, regulatory issues also affected the stock. For instance, in August last year, it was fined $360,000 in Abu Dhabi for violating anti-money laundering regulations.

Fast forward to 2023 and Wise’s shares have risen significantly on the back of higher interest rates. More specifically, the stock has been up by about 26% year to date as it benefits more from the money its customers keep with the company.

The results released on Tuesday showed that its pre-tax profits were up by 280% year-on-year in H1’23. Furthermore, its revenue was up 25% YoY to£498.2 million. This is as its active customers increased by over 30%. Interest income on its customers’ balances, as well as revenues, also lead to an increase in its income by 58%.

For the 2024 financial year, Wise forecasts income growth of 33 - 38%. Besides, amid the high interest rates and subsequent expectations of higher interest income, it expects its adjusted EBITDA margin for the 2024 financial year to be significantly higher than its medium term target of 20%.

The upbeat results come at a time when the UK-based fintech firm has paused on accepting new business clients in Europe. The company is keen on improving its compliance teams amid the surging geopolitical tensions and sanctions. Earlier in the year, UK’s Office of Financial Sanctions Implementation indicated that Wise had allowed the account of a company owned by an individual on the country’s Russia sanctions list to transfer £250. To prevent a similar incidence, it is investing heavily on its compliance.

The company temporarily stopped taking on new business clients in the UK and Europe on 27thOctober. While it resumed accepting UK customers in the past week, it still hasn’t done the same for European clients.