European Robinhood rival Trade Republic reports first profit

A Sequoia-backed broker often labelled as Europe’s answer to Robinhood turned a profit for the first time in its eight-year history last year, even as the wider fintech sector struggled with higher interest rates.

Trade Republic, part of a new generation of brokers, reported a “solid double-digit million euro amount” of net profit in the year to September, co-founder Christian Hecker told the Financial Times. It made a net loss of €145mn the previous year, public filings show.

Hecker, who declined to provide more detailed financial information for the latest year, said the Berlin-based start-up was attracting up to 100,000 new clients per month by the end of last year, dodging some of the pitfalls that have held back growth at German fintechs such as N26 and Solaris.

However, the broker said it expected to return to a loss this year as the company increases marketing and other investments after geopolitical uncertainty in the wake of Russia’s 2022 invasion of Ukraine prompted a period of temporary restraint.

Trade Republic has resisted comparisons to Robinhood, the US broker that shot to prominence during the Covid-19 pandemic on the back of millions of day traders who fuelled a memestock phenomenon.

Instead, it has positioned itself as a platform for long-term investments such as passively managed exchange traded funds. Sixty per cent of customers had no prior trading experience, Hecker said.

He said the past year proved that Trade Republic’s underlying business model was “scalable and profitable”. Since last disclosing client numbers in 2021, the company has quadrupled its number of users to 4mn and increased clients’ assets more than fivefold to €35bn, Hecker said.

Trade Republic, which secured a €5bn valuation in 2022 and has raised a total of $1.3bn from investors including Peter Thiel’s Founders Fund, Sequoia Capital and Ontario Teachers’ Pension Plan Board, last year received a full-scale European banking licence. Rival fintechs N26 and Solaris have meanwhile had to contend with special regulatory monitors and growth restrictions.

The company is planning to expand with the launch of debit cards and current accounts. But Hecker said Trade Republic would keep its focus on investing. “We don’t want to turn into an ordinary neo bank,” he said, adding that the new products were meant as ancillary services to keep its brokerage clients on side.

However, its expansion efforts come as Robinhood has launched a renewed assault on the European market after a two-year delay, opening up access to its app to UK investors last November.

The US company has also pledged to target long-term investors rather than day traders, aiming to shake up “a market dominated by traditional brokers still charging high fees”.

Trade Republic faces further challenges to its business from a potential ban on a controversial trading practice known as “payment for order flow”, whereby retail brokers receive payments from trading platforms.

Payment-for-order-flow agreements only accounted for about a third of Trade Republic’s overall income, Hecker said. “As we are diversifying our products, its share will fall further over the coming years,” he added.