Finance

Buy now, pay later firm Klarna swings to first-half profit ahead of IPO

Published

9 months ago

August 27, 2024

Business Finance News

“Buy-now, pay-later” firm Klarna aims to return to profit by summer 2023.

Jakub Porzycki | NurPhoto | Getty Images

Klarna said it posted a profit in the first half of the year, swinging into the black from a loss last year as the buy now, pay later pioneer edges closer toward its hotly anticipated stock market debut.

In results published Tuesday, Klarna said that it made an adjusted operating profit of 673 million Swedish krona ($66.1 million) in the six months through June 2024, up from a loss of 456 million krona in the same period a year ago. Revenue, meanwhile, grew 27% year-on-year to 13.3 billion krona.

On a net income basis, Klarna reported a 333 million Swedish krona loss. However, Klarna cites adjusted operating income as its primary metric for profitability as it better reflects “underlying business activity.”

Klarna is one of the biggest players in the so-called buy now, pay later sector. Alongside peers PayPal, Block‘s Afterpay, and Affirm, these companies give consumers the option to pay for purchases via interest-free monthly installments, with merchants covering the cost of service via transaction fees.

Sebastian Siemiatkowski, Klarna’s CEO and co-founder, said the company saw strong revenue growth in the U.S. in particular, where sales jumped 38% thanks to a ramp-up in merchant onboarding.

“Klarna’s massive global network continues to expand rapidly, with millions of new consumers joining and 68k new merchant partners,” Siemiatkowski said in a statement Tuesday.

Using AI to cut costs

The company achieved its adjusted operating profit “by focusing on sustainable, profitable growth and leveraging AI to lower costs,” he added.

Klarna has been one of the forerunners in the corporate world when it comes to touting the benefits of using AI to increase productivity and cut operating costs.

On Tuesday, the company said that its average revenue per employee over the previous twelve months increased 73% year-over-year, to 7 million Swedish krona.

It comes as Klarna tries to pitch itself as a primary banking provider for clients as it approaches a much-anticipated initial public offering.

The firm earlier this month launched its own checking account-like product, called Klarna balance, in a bid to persuade consumers to move more of their financial lives onto its app.

The move highlighted how Klarna is looking to diversify beyond its core buy now, pay later product, for which it is primarily known.

Klarna has yet to set a fixed timeline for the stock market listing, which is widely expected to be held in the U.S.

However, in an interview with CNBC’s “Closing Bell” in February, Siemiatkowski said an IPO this year was “not impossible.”

“We still have a few steps and work ahead of ourselves,” he said. “But we’re keen on becoming a public company.”

Separately, Klarna earlier this year offloaded its proprietary checkout technology business, which allows merchants to offer online payments, to a consortium of investors led by Kamjar Hajabdolahi, CEO and founding partner of Swedish venture capital firm BLQ Invest.

The move, which Klarna called a “strategic” step, effectively removed competition for rival online checkout services including Stripe, Adyen, Block, and Checkout.com.

Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

1 day ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

1 day ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”