German fintech N26 says no new funding is needed before it breaks even
Germany’s highest-valued fintech N26 does not need new funding in the foreseeable future as it has enough cash to break even, the company said on Tuesday as it reported a 14 percent increase in net loss for 2021.
The Berlin-based online bank, which counts Peter Thiel’s Valar Ventures and Hong Kong tycoon Li Ka-shing among its backers, raised €780mn in a funding round that valued it at €7.8bn.
“We’ve bought a lot of freedom with this funding round,” said chief financial officer Jan Kemper, adding that the group wants to break even without having to turn to investors again. He said the firm was “agnostic” about how long this would take, adding that it was dependent on factors beyond its control. “We are not committing to whether this will take 12 months, 24 months or 36 months.”
Fintech values have fallen this year as investors grapple with rising interest rates, high inflation and growing economic uncertainty. The Swedish payment provider Klarna raised 800 million euros in July at a value of 6.7 billion euros, a drop of more than 80 percent compared to the previous funding round.
Net loss of N26 increased to €172.4 million last year, compared to €150.7 million in 2020. While revenue grew by 50 percent to €182.4 million in 2021, administrative expenses increased by 31 percent to €269.8 millions.
Rising interest rates will boost the bank’s earnings this year, but N26 still warned that overall growth will slow to around 30 percent due to a draconian customer growth cap imposed by Germany’s financial watchdog BaFin.
The regulator decided a year ago that the bank can only have 50,000 to 70,000 new customers a month until it has improved anti-money laundering controls and fixed other flaws. N26 co-founder and chief executive Valentin Stalf said on Tuesday that the bank had made “good progress overall”.
“As of today, we are in compliance with the bulk of regulatory requirements,” he said, adding that he was confident “most” of the restrictions would be lifted within six to 12 months and “potentially significantly sooner”.
The company wants to become a “poster child” for good compliance, he said, suggesting that without growth caps, N26 is likely to grow faster than before as online banking becomes more popular in Europe.
Plans for an initial public offering have been put on the back burner. “If you look at the current market out there, this is no time to talk about IPOs,” Kemper said, but he added that the bank continued to work on its “readiness” for a potential IPO at some point in the future.
