eToro UK's Massive Cost Reductions Lead to 13% Net Profit Increase in 2022

<p>Thanks to
significant cost-cutting measures, eToro's UK division managed to achieve a
higher net profit in 2022, amounting to $3.43 million. This was accomplished
despite nearly halving its net income and seeing almost a threefold reduction
in trading commissions compared to the previous year. At the same time, the
company successfully acquired 100,000 new funded UK accounts.</p><p>Lower Revenue but Higher
Net Profit for eToro</p><p>In recent
weeks, many British financial firms have reported their 2022 results, and the
pattern is usually the same: <a href="https://www.financemagnates.com/institutional-forex/tavira-financials-revenues-rise-but-bottom-line-suffers-in-fy23/" target="_blank" rel="follow">higher revenues but lower profits</a> due to rising
costs of operations. eToro (UK) Limited managed to reverse this trend. The
company maintained profitability and improved its performance despite lower
<a href="https://www.financemagnates.com/terms/r/retail-trading/">retail trading</a> activity, which negatively impacted revenue from trading
commissions. </p><p>How did eToro achieve this? </p><p>An analysis
of the 2022 report shows that trading commissions fell by nearly 60%, from
$307.87 million reported in 2021 to $131.32 million last year. "The fall
in revenue can be attributed to a significant reduction in trading activity
across the year, particularly in crypto," the company commented. To fight
the crypto slump, eToro has expanded its presence in the EU <a href="https://www.financemagnates.com/cryptocurrency/etoro-expands-eu-presence-gains-cysec-crypto-license/" target="_blank" rel="follow">and gained CySEC digital
assets license</a>.</p><p>The firm
drastically reduced trading costs from $61.1 million to just $2.32 million.
Administrative and operational costs also decreased 45%, falling from
$257.97 million to $139.92 million. "The UK business was required to
streamline certain activities and cut costs in 2022, and as a result, operating
expenses fell 46%," eToro UK added. </p><p>Despite
this, operating profit remained well below the 2021 result, amounting to $3.84
million compared to $6.22 million. However, eToro UK significantly increased
its interest income from $112,969 to over $3.56 million, a jump of 3000%. As a
result, the net profit for 2022 was $3.43 million, a boost of 13% compared to
the $3.03 million reported in 2021.</p><blockquote><p lang="en" dir="ltr"><a href="https://twitter.com/eToro?ref_src=twsrc%5Etfw">@eToro</a> UK' net income fell 46% in 2022. But due to huge cost cuts, the company achieved profitability and boosted net income by 13%. <a href="https://t.co/A0o6Xwhyw0">pic.twitter.com/A0o6Xwhyw0</a></p>— Damian Chmiel (@ChmielDk) <a href="https://twitter.com/ChmielDk/status/1711997867668259174?ref_src=twsrc%5Etfw">October 11, 2023</a></blockquote><p>New Customers and a
Positive Outlook for the Future</p><p>The company
also reported that despite a significant decline in retail investment activity,
it managed to acquire nearly 100,000 new funded UK accounts. It also retained
previous customers, although a large portion remained inactive throughout 2022.
This inactivity negatively affected the company's valuation, <a href="https://www.financemagnates.com/forex/valuation-of-etoro-drops-again-touches-17-billion-from-25-billion/" target="_blank" rel="follow">which dropped to $1.7
billion</a>.</p><p>Despite
negative market sentiment, the entire eToro Group also attracted new customers,
ending the year with nearly 31 million globally registered investors and 2.8
million funded accounts. This number increased by 16% compared to 2021. </p><p>What are
the forecasts for the slowly ending 2023? </p><p>eToro admits that it has survived
several different market cycles over the past 16 years and, thanks to the
diversification of its products, can weather most market storms relatively
unscathed. </p><p>eToro "is
emerging from 2022 in a very healthy position with a strong balance sheet. This
has enabled the business to continue investing in its product offering,
improving the user experience," the company added.</p><p>Moreover,
<a href="https://www.financemagnates.com/forex/analysis-why-recession-fears-arent-spooking-retail-investors/" target="_blank" rel="follow">the attitude of eToro's customers remains positive</a>. At the moment, they
consider a recession to be a more pressing issue than high inflation; however,
78% feel optimistic about the future of the markets and their investments.</p>

This article was written by Damian Chmiel at www.financemagnates.com.