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Revolut valuation almost halved by Schroders

Revolut valuation almost halved by Schroders

Investment bank Schroders has slashed the valuation of its shareholding in Revolut by almost half after the firm was criticised for downplaying red flags from auditors BDO over its revenue statement.

In a regulatory filing, the Schroders Capital Global Innovation Trust devalued its investment in the bank by around 46%. Schroders invested at market peak in Revolut’s $800m Series E round in 2021.

The Trust said the value of its stake at 31 December 2022 was £5.4m, compared with £10.1m at 31 December 2021.

This implies a similar reduction in the bank's valuation from $33 billion to $17.7 billion.

Schroder said it was acting "with caution given the challenging market backdrop".

Schroders actions come just six weeks after Revolut filed itts much-delayed financial accounts, turned in its first annual profit after growing its revenues nearly threefold in 2021.

The accounts were signed off by the company's auditor BDO, but with a number of caveats. BDO flagged concerns that it could not verify £477m of revenue, nor vouch for their “completeness or occurrence”, due to the configuration of Revolut's internal IT systems. The risk of material misstatements was most acute for the company's foteign exchange, wealth and crypto business.

Revolut was subsequentlyy criticised by shareholders and board members for glossing over the BDO statement in its published accounts.

A spokesman for Revolut says that the inadequacies referred to by BDO were remedied in 2021 and that there were no longer any question marks hovering over the revenue statement.

Revolut is not the only fintech firm in Schroders' portfolio facing a downgrade, with the Innovation Trust also marking down its holding in Atom Bank by 31%.

 

Comments: (2)

A Finextra member
A Finextra member 25 April, 2023, 09:18Be the first to give this comment the thumbs up 0 likes

I'm not surprised, they appear to be on shaky ground especially with those caveats on the audit.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 25 April, 2023, 11:031 like 1 like

The thing about banking industry is that burying your head in the sand like an ostrich and kicking the can down the road DOES work!

Assuming, for a moment, that Revolut took its auditor's objections at face value and reduced its revenues by the questioned figure of £477M, it's not like its shareholders are going to say, "Kudos, good job done, we're happy with our investment" - they're anyway going to downgrade the value of their investments, probably by even more than half as it has happened now.

After reading an interesting piece by Matt Levine about when SVB recognized MTM loss in its HTM portfolio and what it did about it, I've inclined to believe that banking is one industry where, if you're unlucky / incompetent / fraudulent enough to enter the damnation zone, you're damned if you do, and damned if you don't.

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