After first profit for 4 years, Klarna is studying a ‘potential IPO’

Klarna has reported its first profit quarter in four years, as it prepares to list on the stock exchange.

The fintech company in Sweden made a net income of 90mn (€8mn ) during the third quarter. This compares to a loss of just 2.1bn one year ago. Revenues increased by 30%, reaching 6bn. It nearly halved the credit losses, which dropped to 800mn. The drop was attributed to improved precision and accuracy in its underwriting models.

Klarna has taken what it describes as an “early stage on a journey to an eventual IPO”, by establishing a UK-based holding company in addition to its Swedish banking license. It hasn’t decided where or when it will list.

After reporting large losses due to rising interest rates, the once-high-flying payments group was forced last year to reduce its valuation by 85% to $6.7bn and to cut a 10th of its staff.

Sebastian Siemiatkowski is the co-founder, chief executive and co-founder of . He said in August that Klarna would be ready to go public when the market conditions improve after establishing themselves in the US, regaining profitability, and demonstrating their growth potential.

Siemiatkowski stated on Monday that Klarna “achieved what we set out for” by posting a profit quarterly and that they would “build upon this momentum” in order to “drive value to their consumers and merchants”.

London would benefit from a listing as many companies, including Cambridge-based Arm, prefer the higher liquidity and valuations of US public listings. In recent months, a number of UK flotations failed, including CAB Payments. Another fintech, its shares fell 72 percent last month when it lowered its revenue expectations.

The economic recession has also affected other payment companies. The shares of US rival Affirm have fallen by more than 85% since their peak reached in November 2021. Meanwhile, Dutch fintech Adyen’s market capitalization dropped by almost 40% in August due to missing analyst expectations.

The sector is also under increasing scrutiny from regulators, who are concerned about how BNPL firms are assessing whether loans are affordable. The UK Financial Conduct Authority released data in October that showed frequent users of BNPL are more likely to have financial difficulties .

Klarna partners with retailers such as H&M and Ikea, while Airbnb is also a partner. In the fall of this year, Klarna launched an AI feature that allows its users to locate products at good prices by taking pictures through its app.