Fintech darling reports first annual profit as loan book swells to £2bn

Allica Bank has reported its first annual profit since it launched in 2020, with its revenue more than doubling on the back of bumper lending growth, a surge in deposits and a boost from higher interest rates.

The fintech firm, which specialises in lending to small and medium-sized enterprises (SMEs), posted a pretax profit of £16.1m for 2023, from a £1.6m loss in 2022.

The digital bank hit monthly profitability for the first time in June 2022 after acquiring a roughly £600m SME lending portfolio from AIB, which swelled its customer base by around 2,000.

Allica saw its revenue surge 141 per cent to £191m last year. It posted a 47 per cent increase in lending to SMEs to £2bn, while customer deposits jumped 75 per cent to £2.6bn as it tempted firms with some of the market’s leading business savings rates.

Although Allica’s profitability has been helped by higher interest rates from the Bank of England, the fintech has been a vocal critic of big banks for “shortchanging” small businesses that are less likely to shop around for the best savings deals.

The bank’s net interest margin – the gap between interest received on loans and rates paid for deposits – increased to five per cent in 2023, from 3.6 per cent in 2022.

Allica has raised its provision for bad loans to £14.3m from £5.8m, which it said reflected the growth in its loan book rather than borrowers that are struggling to repay.

The lender is aiming for more than 10 per cent market penetration in the coming years after having already hit 0.5 per cent of its target segment of established SMEs (more than 2,000 customers) with the launch of its business current account last year.

Chief executive Richard Davies said: “Recording our first full year profit just three years after opening our doors for lending on the eve of the Covid lockdown was a true milestone in challenging market conditions, and one we’re very proud to have achieved.”

He added: “Allica remains the UK’s only full-service digital bank dedicated to serving established SMEs, and we are laser focused on transforming banking for this critical segment of our economy.”

Allica was named by Deloitte as the UK’s fastest-growing fintech last year, with revenue growth of 85,438 per cent over the previous three years.