Exclusive FNG… FNG has learned that online brokerage 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 revenue of £95.3 million (USD 121 million) in 2023, down 3% from £98.7 million in 2022. Net profit for 2023 was £30.4 million, down 26% from the 2022 earnings of £41m.
The aforementioned results refer only to the FCA regulated entity of the London/Sofia-based Trading 212 group. The group also includes Trading 212 Limited (registered in Bulgaria and regulated by the Bulgarian Financial Supervisory Commission) and Trading 212 Markets Limited based in Cyprus / licensed by CySEC. In 2022 Trading 212 UK accounted for around 86% of Trading 212 Group’s total revenue (£114.9m), so assuming the group’s dynamics haven’t changed much in 2023, the UK results probably give a pretty good overall insight into what is happening in the company. (Trading 212 Group Limited has yet to file its 2023 results).
Trading 212 is controlled by Bulgarian businessmen Borislav Nedialkov and Ivan Ashminov.
The company operates separate bank accounts with customer money and customer transaction accounts. As at 31 December 2023, the aggregate balance of these accounts was £391.2m (2022: £286.5m). At 31 December 2023, the total value of client custody assets was £2.97 million (2022: £1.92 million).
Main activity
The activities of Trading 212 UK Limited (“T212” or “the company”) during the year consisted of:
I. The stackbroking platform provision.
ii. Providing an Internet/app-based Contract for Difference (“CFD”) trading service platform where two parties agree to exchange the market performance of an underlying security, currency or other financial asset through a derivative contract.
Both products operate through T212’s trading platform to customers primarily resident in the UK.
For the brokerage business, the company applies a zero-fee model where clients do not pay a commission for transactions and there are no custodian fees for the assets held. T212 earns commissions from customers when they transact in a currency other than the one in which their cash was deposited. T212 also retains a portion of the interest earned on customer money and for part of 2023, earns commissions through a fully secured equity lending program
For CFD products, T212 manages its own risk in accordance with its commercial risk management policy and limits based on defined and approved risk parameters for each product and asset class, hedging exposures outside of them with trusted third parties. For positions held overnight, T212 applies a one-day rate charge/credit based on the value of the positions, prevailing market rates and a mark-up.
Strategy
While operating a stockbraking and CFD platform, T212’s growth strategy remains focused on the stock market side of the business and increasing the value of clients’ money and other client assets.
While this growth continues to be driven in part by broader market trends and activity, it is primarily driven by the growing popularity of the T212 platform and our product offering, which includes, for example, the T212 zero commission pricing structure; the ability to trade in fractional amounts of shares and the functionality within the platform to create portfolios. Additionally, the ability to trade through T212’s mobile app has proven extremely popular with the tech-savvy demographic.
These features have helped open up equity trading to a significantly wider and diverse customer base that may not have historically had access to the financial markets or been considered potential customers. Trading 212’s products, services and technology have facilitated and enabled a wider audience to participate in managing their own financial affairs and investment decisions that they were previously unable to do.
During the year, the company launched two key initiatives to increase the return to its clients in their investment accounts. First, in June 2023, T212 began sharing the interest it earned with its customers on uninvested cash. And then in July T212 gave its customers the option to earn additional income through its fully secured 1212 equity lending program. Both of these initiatives have proven very popular with our customer base and have encouraged an increase in new customer sign-ups.
T212 continues to review new product ideas so that it can further contribute and support the investing public in gaining access to the wider financial markets and enabling them to take control of their financial businesses, investment portfolios and ultimately create wealth for his future.
Financial performance
In 2023, the T212 made revenues of £95.3m (2022: £98.7m) and pre-tax profits of £36.6m (2022: £50.9m). This year marks a continued stabilization of revenue following the exponential growth seen between 2019 and 2021.
Net assets have increased from £120.1m to £128.1m year-on-year, a result of continued profitability minus £20.4m in dividends.
The company’s total administrative expenses increased by 45% to £71.2m (2022: £49.1m) mainly due to increased marketing activities which only started properly again in the last quarter of 2022.
Interest income increased in 2023 to £14.8m (2022: £0.5m) as a result of the higher interest rates now offered by banks.
Non-financial indicators
Non-financial indicators have historically focused on customer acquisition and customer activity. As there is no cost for a customer to open an account, the number of accounts holding either cash or assets is the most useful instrument for business growth and potential.
During 2023 some of the key metrics analyzed by the company have moved as follows:
- 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%
- Total value of customer deposits increased by 22%
- The total value of the customer’s money increased by 37%
- Total value of customer custody assets increased by 55%
Other positive performance indicators during the year include the significant improvements made across the business, including:
- improvements made to the company’s business resilience framework and functions;
- the maturity of the risk management framework and risk reporting capabilities; and
- further integrating the changes from the new operating model across the business.
Future developments
The company will continue its goal of increasing the value of customers’ assets under protection by expanding the number of products and features offered to its customers through the T212 application. This was done or will be done in 2024 through the further enhancement of the high interest sharing program, the ability to undertake in-kind portfolio transfers, model portfolios and 24/5 trading.
Following are Trading 212 UK’s income statement and balance sheet for 2023.