Funding Circle Approaches Profitability After 67% Increase in UK Revenue
Funding Circle’s UK business saw revenue increase by two-thirds in the four months to the end of October and the company expects second-half results to be “significantly better” than previous forecasts.
The publicly traded peer-to-peer lending platform – which also has operations in the United States, Germany and the Netherlands – recorded a total increase in revenue of 38% year-on-year thanks to the strong growth in its domestic market.
Funding Circle now expects to report a profit in terms of adjusted basic earnings in the second half of the year, significantly above previous forecasts by close to breakeven.
“Due to the strong performance to date, we expect second half 2020 total revenue to be higher than first half 2020 and approximately 20% higher for the full year compared to 2019 “the company said. “The 50/50 cost reductions are expected to be less than the 15% initially expected due to the additional profitable marketing expenses associated with higher volumes. ”
The strong performance of the UK commercial lender was boosted by its participation in the government-backed Coronavirus Business Interruption Loan (CBILS) program. It said it has approved around £ 1.85bn and issued around £ 1.35bn of CBILS loans as of November 15, 2020, which represents 24% of the overall CBILS market.
However, Funding Circle warned that “tThe economic environment remains uncertain “and said”we continue to expect a period of significant stress in the future ”.
In the United States, Funding Circle’s income grew 10% year-over-year, driven by investment income.
“With the timing of any future economic recovery uncertain, we continue to work with other lenders in the market on our US benchmark model and plan to relaunch our core lending product when conditions permit,” he said. -he declares.
John Cronin, analyst at Goodbody, said Funding Circle’s business statement indicates strong momentum for the company’s UK business.
“Funding Circle’s shift in focus to focus on government-backed loans is clearly starting to bear fruit, while the momentum in this regard is clearly also beneficial for Starling Bank, which has entered into an origination agreement. with Funding Circle to fund the government. secured loans on the P2P platform, ”Cronin said.
Funding Circle shares rose 3.79% early in the session, hitting a three-month high of 96.06 pence per share.