Trading 212 profit halves amid revenue slump
Per its filing with the UK companies house, Trading 212 UK said revenue from online trading dropped to £115 million in the fiscal year ending December 31, 2022, down 17 percent compared to £139 million a year earlier.
The lower revenue came despite a surge in operational costs which rose by more than 31 percent during the period. Amid increased staff costs and other expenses involved in upscaling the business, the operational expenses were reported at £75.5 million in FY 2022 compared to £57 million the previous year.
As a result, Trading 212 earned £34 million in net profit, down by 52 percent from the £11 million it booked in 2021.
The UK business of Trading 212 has seen incredible levels of growth over recent years. Revenue has grown from £2 m in 2019 to £54.3 million in 2020, and then peaked in 2021 as a boom in retail trading helped the broker earn handsome fees from its clients’ trades.
Net assets have also increased during this time due both to the retained profit in the business as well as a £20 million share capital injection. Net assets now stand at £150 million, up from £116 million at the end of 2021.
Trading 212 was the first retail UK broker to offer commission-free trading and its core product portfolio consists of stocks, ETFs, FX, and derivatives products.
In terms of CFD products, the company operated from January 2021 to May 2021 on a spread revenue model, profiting from the difference between the prices offered to clients and those on which hedging trades were conducted via a back-to-back hedging agreement with a group affiliate. From May 2021 onwards, T212 opted to end this arrangement to manage its own risk based on defined parameters for each product and asset class, hedging exposures outside of these with third parties.
For the stock trading business, the company operates a zero-commission model where clients do not pay commission for trading nor custody fees for the assets held. Instead, T212 earns fees from clients when they trade in a currency different to that in which their cash was deposited, and through a collateralised stock lending program.
While operating both a CFD and a stockbroking platform, T212 continues to shift focus towards stockbroking with the growth strategy delivering increases in client money and asset balances from £2.1 billion to £2.9 billion.