Shares of Wise Spike 16% As Higher Interest Rates Boost Fintech Profits

Wise, the online money transfer firm, experienced a significant surge of 16% in its shares on Tuesday, propelled by a notable increase in profits attributed to rising interest income.

‍

In a statement to the stock market, the company reported a tripling of its profit before tax to £146.5 million ($186.5 million). Earnings per share also more than tripled, reaching 11.53 pence. This robust performance was accompanied by a customer growth rate of 34%, resulting in a total user base of 10 million by March 31, 2023. Additionally, transaction volumes increased by 37% to £104.5 billion.

‍

Wise shares closed at approximately £6.11 on Tuesday, marking a remarkable gain of over 16% for the day.

‍

The company has capitalized on the upward trajectory of interest rates, which were raised to 5% by the Bank of England last week in response to persistent inflationary pressures. Like other fintech firms, Wise has benefited from generating income through interest on funds held in customer accounts. Notably, Monzo and Starling Bank have also reported their own milestones of profitability, citing increased income from lending activities.

‍

Wise further disclosed that its revenues surged by 51% to £846.1 million, compared to £559.9 million in the previous year. The firm's overall income reached £964.2 million, representing a substantial year-on-year growth of 73%. This impressive performance was bolstered by a surge in customer deposits.

‍

However, alongside these positive developments, Wise has encountered several challenges. CEO Kristo Kaarmann faced an investigation by Her Majesty's Revenue and Customs last year concerning a tax bill of £365,651 that he failed to pay on time. The outcome of the investigation could have serious implications for Kaarmann's position if he is found to have violated UK tax laws. In an interview with BBC Radio, Kaarmann acknowledged the ongoing investigation by the Financial Conduct Authority and expressed his regret for the personal oversight, emphasizing that it is unrelated to the company's operations.

‍

Wise also faced a fine of $360,000 from regulators in Abu Dhabi due to deficiencies in its anti-money laundering controls. Kaarmann assured the BBC that the issue has been resolved.

‍

Earlier this year, Kaarmann announced his intention to take a three-month sabbatical from September to December to spend time with his newborn child. During this period, Harsh Sinha, the company's chief technology officer, will assume the role of CEO on an interim basis. This has sparked speculation among some investors regarding Sinha's potential permanent appointment as CEO. However, Wise has not made any official indications regarding this matter.

‍