- Zopa raised $106 million in AT1 capital to bolster its balance sheet ahead of launching its flagship bank account.
- The UK digital bank has raised $1.2 billion, and has doubled its profits to $45 million in 2024.
- Zopa’s bank account is currently in a beta phase with a limited number of customers.
UK-based digital bank Zopa has raised $106 million (£80 million) in Additional Tier 1 (AT1) capital from existing and new investors. The new funds come five months after the company brought in $87 million in funding, boosting Zopa’s funding to $1.2 billion.
Zopa plans to use today’s funds to prepare for the launch of its flagship bank account. The AT1 capital will offer a regulatory buffer, helping Zopa meet regulatory capital requirements that ensure it has enough capital to absorb losses and continue operating during periods of financial stress. Because the funds come in the form of perpetual bonds or hybrid securities, they do not dilute existing shareholders’ equity stakes, and they can also be written down or converted to equity if the bank’s capital falls below a certain threshold.
Zopa has been working toward launching its full bank account since receiving its banking license from the Financial Conduct Authority in 2020. The company currently offers a range of lending, savings, and pension products, with $7.29 billion (£5.5 billion) in deposits and over $4 billion (£3 billion) in loans on its balance sheet. Zopa has yet to launch any payment tools, but it is currently in a beta phase with a limited number of customers.
With 850 employees, Zopa has doubled its profits, reaching $45 million (£34 million) last year. That same year, the company also partnered with Britain electricity supplier Octopus Energy and with retailer John Lewis to offer personal loans to its 23 million customers.
While Zopa hinted at plans for a public debut in 2021, the company announced last year that it has no current plans to pursue an IPO, saying it wants to wait for the markets “to revive and be more positive.” This is currently a common sentiment among fintechs, including Klarna, which delayed its IPO because of economic uncertainty. However, we may be seeing early signs of positivity, as investing platform eToro hit the public markets today, popping as high as 34% at the open before settling back to a 28% gain in recent trading. Additionally, US challenger bank Chime filed its S-1 yesterday afternoon in preparation for its own IPO.