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U.K. digital bank Tandem Bank reports profitability

Illustration: Aïda Amer/Axios

U.K.-based digital bank Tandem Bank reported it reached full-year profitability in its most recent fiscal year, bolstered by growth in its green lending business.

Why it matters: Challenger banks — at least those based in the U.K. — seem to have cracked the code for operating profitably by boosting their lending books.

Driving the news: In its annual report, Tandem reported an underlying operating profit of £4.5 million for the year, an improvement over the previous year’s underlying operating loss of £18.2 million.

Between the lines: The challenger bank attributed its shift into profitability to last year’s acquisition of online lender Oplo, which helped grow its green-lending business.

  • Tandem funded £238 million in green lending — up from £136 million in the prior year — through its home improvement business, which financed solar, battery, air/heat pumps, energy-efficient windows and boiler installations.
  • Its lending business also offers green discounts on second-charge mortgages depending on the EPC ratings of their homes.
  • The firm says 68% of all its loans now support green lending.

Of note: CEO Alex Mollart joined Tandem as part of the Oplo acquisition and took over for then-chief executive Susie Aliker at the end of 2022.

State of play: Tandem is just the latest U.K. challenger bank to announce it has reached profitability, following in the footsteps of larger competitors Starling Bank and Monzo.

  • Last week, Starling announced its pre-tax profits had reached £195 million, a jump from £32 million in the year prior.
  • Yesterday, Monzo reported it reached profitability in the first two months of its fiscal year and expects to reach full-year profitability by the end of 2024.
  • As with Tandem, their growth was attributed to an increase in lending. Starling’s lending business grew to £4.9 billion from £3.3 billion, and Monzo’s lending volume nearly tripled to £759.7 million in the same period.
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