German fintech N26 says no new funding 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 until it breaks even, the company said on Tuesday as it reported a 14 per cent increase in net losses for 2021.

The Berlin-based online bank, which counts Peter Thiel’s Valar Ventures and Hong Kong tycoon Li Ka-shing among its backers, last year raised €780mn in a funding round where it was valued 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 reach break-even without having to turn to investors again. He said the firm was “agnostic” over how long this will take, adding that it depended on factors beyond its control. “We are not committing ourselves if this will take 12 months, 24 months or 36 months.”

Fintech valuations have crumbled this year as investors grapple with rising interest rates, high inflation and increasing economic uncertainty. Swedish payments provider Klarna in July raised €800mn at a valuation of €6.7bn, a drop of more than 80 per cent compared to its previous funding round.

Net losses at N26 widened to €172.4mn last year, compared to €150.7mn in 2020. While revenue grew by 50 per cent to €182.4mn in 2021, administrative costs increased by 31 per cent to €269.8mn.

Rising interest rates will buoy the bank’s revenue this year but N26 still warned that overall growth will slow down to about 30 per cent due to a draconian client growth cap imposed by German financial watchdog BaFin.

The regulator decreed 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 fixes other flaws. N26 co-founder and chief executive Valentin Stalf said on Tuesday that the bank has made “good progress overall”.

“As of today, we are compliant with the bulk of the regulatory requirements,” he said, adding that he is confident that “most” of the restrictions will be lifted within six to 12 months and “potentially significantly earlier”.

The company wants to become a “poster child” for good regulatory compliance, he said, and suggested that without the growth cap N26 could probably grow faster than before as online banking becomes more popular in Europe.

Plans for an initial public offering have been put on the backburner. “If you look at the current market out there, this is no point in time to talk about IPOs”, said Kemper, but he added that the bank continued to work on its “readiness” for a potential listing at some point in the future.