Shares in UK payments group Wise surged more than 20 per cent on Tuesday after the fintech said rising interest rates would continue to push up profits this year, helping to offset a decline in the size of transfers by customers. The London-listed group is emerging as a winner from higher interest rates, which have lifted the amount Wise earns from the cash that customers keep with the company.
Interest income surged in the 12 months to the end of March, and Wise expects it to grow between 28 per cent and 33 per cent in its current financial year. Analysts at Peel Hunt said the group’s “guidance was better than expected”, helping to send its shares up 21 per cent in late-morning trading. Despite a slowing economy curbing volumes per customer in the first three of this year, Wise said it had been helped by “unusual trends”, including “strong interest income”. Customers’ cash balances climbed more than 50 per cent to £10.7bn in the year to the end of March, split almost evenly between personal and business accounts. Rising interest income has been a boon for Wise, whose initial public offering in 2021 was hailed as a rare triumph for the London market.
As global economic growth falters, Wise expects transfer volumes per customer to fall this year. Overall volumes per customer were flat in its last financial year, Wise said, pointing to a slowdown in international property sales in the second half of the year. Overall, the group’s pre-tax profits rose to £146.5mn in the 12 months to March, up from £43.9mn in the previous year. The group said revenues climbed 51 per cent to £846.1mn. The climb in Wise’s stock take its gain over the past 12 months to 66 per cent, but it remains below its IPO price. Analysts at Davy Research cautioned that “the longevity of the volume per customer slowdown remains unknown”.
Wise is seeking to move on from several scandals over the past year. In June, the UK’s Financial Conduct Authority launched an investigation into chief executive Kristo Käärmann over a deliberate default on tax payments. In August, its subsidiary was fined by the United Arab Emirates’ financial regulator over failures in its anti-money laundering controls. Chief financial officer Matt Briers insisted on Tuesday that the company was “very happy” with its London listing, saying that “we have access to the world’s financial markets through London and a lot of investors in the US”.
Wise has previously said that Briers, who has held the post since 2015, would depart by March 2024 to focus on recovering from an accident he suffered in 2022. In May, Käärmann announced he would be taking a three-month sabbatical starting in September to spend time with his family.