ClearBank CEO Charles McManus speaks at the Innovative Finance Global Summit in April 2023.
Chris Ratcliffe | Bloomberg | Getty Images
ClearBank, a British fintech company that provides payment services to companies such as Coinbase, posted its first full-year profit after rising interest rates drove revenue up 91%.
The company’s pre-tax profit for the year ended December 31, 2023 was 18.4 million pounds ($23.3 million), according to financial statements released on Thursday. This is an increase from the £7.1m loss in 2022.
The bank posted its first monthly profit in November 2022. This is the first time the bank has reported annual profits.
ClearBank’s first profit came as its total revenue nearly doubled. ClearBank’s overall revenue in 2023 increased by 91% year-on-year to 111.3 million pounds.
The company has benefited greatly from high interest rates, which have fueled a surge in deposits as consumers and businesses look to earn more by depositing cash into interest-bearing accounts.
Tide, one of ClearBank’s major customers in the UK, has been offering its business customers an interest rate of 4.33%, advertising the preferential policy on buses and the London Underground.
ClearBank CEO Charles McManus told CNBC that the company is clearly a beneficiary of rising interest rates, but he was quick to emphasize that ClearBank is not dependent on interest income and that trading revenue has been growing healthily.
McManus said there was “no single driver” of ClearBank’s positive results in 2023, adding that ClearBank benefited from a number of factors such as clearing operations for authorized e-money companies and growth in the use of interbank payment services. Credit card fees are higher.
“We’ve been building the bank and the business model for years,” McManus told CNBC. “You see the flavor of it in the breadth of our business.”
higher deposit
Inevitably, however, rising deposits were a key driver of ClearBank’s results this year. The company said net interest income rose 142% to 81.9 million pounds, with deposits reaching 6.1 billion pounds.
A key driver of ClearBank’s deposit growth last year was the collapse of Silicon Valley Bank, a major bank used by fintech startups and venture capitalists.HSBC UK, the UK arm of Silicon Valley Bank It was acquired by British banking giant HSBC for £1 and renamed HSBC Innovation Bank.
This has driven an increase in ClearBank deposits as SVB’s customers seek alternatives.
“The market (has) been under stress on the credit side, banks are failing, whether it’s concerns in Europe, the US or the UK, and it’s a safe haven because of the cash-related business model,” McManus said.
“Cash is not just a safe haven, it’s collateral for pain schemes,” McManus added. “The more payments we make, the more cash we actually need to hold as customers to make quick payments. Collateral,” the UK’s plan to send electronic pound payments instantly.
“During these stressful times, our customers have actually left us with more cash rather than taking on some of the banking risk associated with Barclays,” McManus noted.
Founded in 2015, ClearBank is a regulated clearing bank and payments institution in the United Kingdom that provides banking services to companies such as Coinbase and other fintech companies such as savings apps Chip and Raisin and business banking startup Tide.
All funds held in ClearBank accounts are held with the Bank of England, meaning customers who hold their funds through companies powered by ClearBank technology can benefit from high yields on their cash.
ClearBank’s total fee income for the year was £31.4 million, with recurring platforms being the main driver. Embedded banking end customers (customers of ClearBank customers) grew 93% year over year to 1.2 million.
No rush for IPO
ClearBank is in no rush for an IPO, McManus said, adding that it already has plenty of cash on its balance sheet. In 2022, ClearBank raised £175 million in a funding round led by private equity firm Apax Digital.
ClearBank chiefs said it was important for the company to complete its expansion into the U.S. market before deciding to go public. He added that a collapse in the share price of UK-listed payments company Cab Payments made it unattractive for a company like his to decide to go public in the short term.
ClearBank is currently applying for an EU banking license through the Dutch Central Bank. The company had hoped to complete its license application by 2023, but now says it expects to receive a full EU banking license later this year.
McManus said Brexit played a role in the company’s bid for an EU banking license, as ClearBank “is being closely watched in relation to all of this”.
The UK’s decision to leave the EU has made it more difficult for British fintech companies seeking to expand their operations in the EU, because the UK is no longer part of the EU single market and financial companies can no longer provide “passport” rights that allow companies to operate. A single UK license for all EU member states.
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