Revolut Scraps US Merger Plans in Favour of Standalone Licence

Revolut has announced that it will no longer pursue a merger with a US lender, instead opting to apply for a standalone banking licence in the United States. This decision is expected to preserve cash for organic growth, with a neutral-to-slightly-positive market reaction.

Market Reaction

The private-market share estimate for Revolut remained essentially flat after the announcement, with no disclosed secondary-sale price change. The implied market cap stayed at approximately $85 billion, based on the $1,388 per share estimate and the latest disclosed share count of around 61 million shares.

Revenue Projections

Revolut’s US revenue projections have been adjusted downward by 20% to $1.2 billion by 2027. The company’s projected US revenue represents approximately 0.006% of US nominal GDP, with a negligible impact on the overall economy.

Challenges and Requirements

To obtain a standalone banking licence in the US, Revolut must meet various regulatory requirements, including a minimum capital requirement of $10 million, liquidity and reserve ratios, and consumer-protection compliance. The company must also demonstrate a strong financial plan and risk management framework to satisfy the Office of the Comptroller of the Currency (OCC) and the Federal Reserve.

Global Expansion Strategy

Revolut’s decision to pursue a standalone licence in the US is expected to influence its global expansion strategy. The company may face similar regulatory challenges in other markets, and its ability to navigate these requirements will be crucial to its success.

Sources