Exclusive: Trading 212 UK sees revenue down 3%, profit down 26% in 2023

Exclusive FNG…FNG has learned that online brokerage firm Trading 212 UK Limited has seen a slight decline in activity and profitability in 2023, following a fairly strong 2022 for the company.

Trading 212 UK reported revenues of £95.3 million ($121 million) in 2023, down 3% from £98.7 million in 2022. Net profit for 2023 was 30.4 million GBP, a decline of 26% compared to 2022 profit of GBP41.1 million.

The above results apply only to the FCA regulated entity belonging to the Trading 212 group based in London/Sofia. The group also includes Trading 212 Limited (registered in Bulgaria and regulated by the Bulgarian Financial Supervisory Authority) and Trading 212 Markets Limited based in Cyprus/CySEC licensed. In 2022, Trading 212 UK accounted for around 86% of Trading 212’s total group revenue (£114.9m), so assuming group dynamics haven’t changed much in 2023, the UK’s performance probably gives a pretty good overall picture of this what is happening in the company. (Trading 212 Group Limited has not yet reported its 2023 results).

Trading 212 is controlled by Bulgarian entrepreneurs Borislav Nedialkov and Ivan Ashminov.

The company maintains separate bank accounts for customer money and customer transaction accounts. As at 31 December 2023, the total balance of these accounts was £391.2 million (2022: £286.5 million). As at 31 December 2023, total customer deposit assets held were £2.97 million (2022: £1.92 million).

Main activity

The activities of Trading 212 UK Limited (“T212” or the “company”) during the year included:

I. Providing a stackbroker platform.

II. Providing a web/app based Contracts for Difference (“CFD”) trading services platform where two parties agree to exchange the market performance of an underlying security, currency or other financial asset via a derivatives contract.

Both products are operated via the T212 trading platform for customers primarily based in the UK.

In the case of brokerage activities, the company applies a zero-commission model, under which clients do not pay commissions for transactions or incur fees for storing their assets. T212 charges fees to customers who trade in a currency other than the one in which their funds are deposited. T212 also retains a portion of the interest earned on the client’s money and, for part of 2023, earns fees from its fully secured share lending program

For CFD products, T212 manages its own risk in accordance with its trading risk management policy and limits based on defined and approved risk parameters for each product and asset class, in addition to hedging exposures to reputable third parties. For positions held overnight, T212 applies an overnight interest fee/credit based on the value of the position, prevailing market interest rates and margin.

Strategy

Operating on both a share trading and CFD platform, T212’s growth strategy remains focused on the stockbroking side of the business and increasing the value of client money and client asset balances.

While this growth continues to be driven in part by broader trends and market activity, it is primarily driven by the growing popularity of the T212 platform and our product offerings, which include, for example, T212’s zero-commission pricing structure, the ability to trade fractional shares, and the platform’s built-in functionality wallets. Additionally, the ability to trade via the T212 mobile app has proven to be extremely popular among tech-savvy individuals.

These features have helped open up stock trading to a much wider and diverse customer base who may not have had access to financial markets in the past or were not considered potential customers. Trading 212’s products, services and technologies have made it easier and possible for a wider audience to participate in managing their own financial affairs and investment decisions, something they were unable to do before.

During the year, the company launched two key initiatives designed to increase investment account returns for customers. First, in June 2023, T212 began sharing with customers the interest it earned on uninvested cash. Then in July, T212 enabled its customers to earn additional income through T212’s fully secured share lending program. Both of these initiatives have proven to be very popular with our customer base and have led to an increase in new customer registrations.

T212 continues to explore new product ideas to continue to contribute and support the investing community in gaining access to broader financial markets and enabling them to take control of their financial ventures, investment portfolios, and ultimately build wealth for the future.

Financial result

In 2023, T212 achieved revenues of £95.3 million (2022: £98.7 million) and pre-tax profits of £36.6 million (2022: £50.9 million). This year marks further stabilization of revenues following the exponential growth seen in 2019–2021.

Net assets increased from £120.1m to £128.1m year-on-year, reflecting continued profitability net of dividends worth £20.4m.

The company’s total administrative costs increased by 45% to £71.2 million (2022: £49.1 million), mainly as a result of increased marketing activities, which only effectively resumed in the last quarter of 2022.

Interest income increased to £14.8m in 2023 (2022: £0.5m) as a result of the higher interest rates currently being offered by banks.

Non-financial indicators

Historically, non-financial metrics have focused on customer acquisition and activity. Since there is no cost to open an account, the number of accounts containing cash or assets is a more useful measure of a company’s growth and potential.

In 2023, some of the key metrics analyzed by the company have changed as follows:

• the number of funded Invest/ISA accounts increased by 20%
• the number of monthly active users increased by 28%
• the number of monthly active transactions increased by 32%
• the total value of customer deposits increased by 22%
• Total customer money increased by 37%
• the total value of customer deposit assets increased by 55%

Other positive performance indicators during the year include significant improvements made across the business, including:

• improving operational resilience frameworks and enterprise operations;
• maturity of the risk management framework and risk reporting capabilities; AND
• continuing to implement changes from the new operating model throughout the company.

Future development

The company will continue its goal of increasing the value of customers’ secured assets by increasing the number of products and features offered to customers through the T212 app. This has been or will be achieved in 2024 through further enhancements to the high share program, the ability to make intra-species portfolio transfers, model portfolios and 24/5 trading.

Below is Trading 212 UK’s profit and loss statement and balance sheet for 2023.