News

November 19, 2024

N26 reports first profitable quarter after customer limit lifted

The digital bank forecasts a 40% increase in gross revenue in 2024 — but didn’t disclose expected losses

German neobank N26 reported its first ever profitable quarter in Q3 after regulators lifted a limit on customer numbers imposed on the company in 2021 for failing to apply effective money-laundering controls.

In preliminary financial results published today, the Berlin-based startup also forecast a 40% rise in gross revenue across 2024 to €440m as a result of increased customer activity. 

Approximately 50% of the bank’s revenue comes from interest-related income — up from 40% in 2023 — with the rest generated from fees and premium subscriptions. That’s a higher percentage than competitors in the market such as Monzo, which reported in 2023 that its loan book generated around a quarter of its total revenue.

Advertisement

“It is quite a change in the company that after two and a half years of being restricted on growth, we are going back to growth,” CEO Valentin Stalf said at a press conference, admitting that the company had “always hoped to get out of the growth cap much earlier than (it) did in the end.”

N26, which was last valued at $9bn in 2021, also announced its intention to offer accounts to businesses in the coming year — as well as plans to expand its mortgage business, which it launched in the Netherlands in 2023, to other European markets. 

Stalf said N26 is expecting to expand in “some countries” in eastern Europe next year, but declined to name which ones. 

The company confirmed that it halved its losses in 2023 to €102m, but did not disclose figures for expected losses in 2024.

Markets

N26 did not share its active customer numbers — a metric used by competitors — in its results. It said it expects to reach 4.8m “revenue-relevant” customers — classed as those who have gone through the fintech’s know your customer (KYC) process and have an open account with N26 — up from 4.2m at the end of 2023.

Each revenue relevant customer is projected to spend €29k in transactions on average in 2024, with annual transaction volume for all customers expected to increase by 23% on 2023’s number. 

N26 has been refocusing on its continental European markets since it announced it would be exiting Brazil in November 2023, following its departure from the US in 2021 and the UK in 2020.

The company is active in 24 European countries; its main markets are Germany, followed by France and Spain, though the company declined to give a detailed breakdown of the share of its customer base in each geography. 

In Italy, N26 was banned from onboarding new clients in March 2022. However, as of June 2024, the Bank of Italy has allowed the fintech to partially resume customer onboarding following the complete lifting of restrictions in Germany. 

N26 said it is in “close exchange” with the Bank of Italy but cannot predict when restrictions will be lifted completely. 

Advertisement

The roadmap

After years of being closely supervised by German financial watchdog BaFin, N26 is eager to cement its position as a market leader in compliance and fraud prevention. 

N26 cofounder Max Tayenthal said that “criminals are constantly improving their methods and becoming more sophisticated” meaning banks have to “be better and better” at fighting financial crime.

N26 says it has invested €100m since 2022 in infrastructure and teams focused on this. The bank uses AI and machine learning in its screening processes for new clients, risk-scoring to reduce risks in lending, and detection of suspicious card transactions. 

It’s also ramping up the use of AI in customer service, which CEO Stalf said will halve the company’s costs in this area in the next five years.

N26 was coy about whether it can achieve annual profitability in 2025, as many of its competitors, such as Revolut, Starling and Monzo, have already done.

The company’s CFO Arnd Schwierholz said N26 aims to continue the profitability it saw in Q3 and into Q4 of this year, while balancing that with growth. 

Miriam Partington

Miriam Partington is a senior reporter at Sifted. She covers the DACH region and the future of work, and coauthors Startup Life , a weekly newsletter on what it takes to build a startup. Follow her on X and LinkedIn