Kuda Group, the parent company of Nigeria’s popular neobank Kuda Bank, saw its revenue jump to $32.1 million in 2023, a significant 49% increase from the $21.5 million it made in 2022. However, the company fell short of its ambitious $40 million revenue target and reported a $40 million loss, more than double the $18.5 million loss recorded the previous year.
The growth came despite tough economic conditions, including a 40% devaluation of the naira against the dollar. Kuda’s user base grew by an impressive 47%, reaching 7.2 million users by the end of 2023, up from 4.9 million in 2022.
Like many neobanks around the world, Kuda is still in its growth phase and is spending heavily to acquire customers and develop its products. The company’s losses were largely driven by rising operational costs, including $8 million spent on salaries for its 456 employees.
This isn’t unusual for digital banks. For context, UK-based Monzo lost $143 million in 2020, while Revolut posted a $135 million loss in 2019 during their early growth stages.
By the end of 2023, Kuda had $5 million in cash reserves, compared to annual operating costs of approximately $55 million. While auditors have confirmed that the bank has enough liquid assets to cover customer deposits (with a buffer of over $20 million), Kuda will need to raise additional capital to sustain its operations in the long term.
The bank makes money through several streams:
Interest on customer loans: $9 million,
Returns from treasury investments and fixed deposits: $8 million,
Fees from banking services: $4.5 million,
Commissions from partners: $8.3 million.
Kuda has taken a cautious approach to lending, issuing only $12.6 million in overdrafts in 2023 and reducing its credit loss allowance (funds set aside for potential loan defaults) from $12.4 million to $10.4 million.
In 2023, Kuda began discussions to raise a $20 million bridge round at its 2021 Series B valuation of $500 million, but it hasn’t closed the deal yet. Since its launch in 2019, Kuda has raised over $81 million in funding. CEO Babs Ogundeyi has assured shareholders that efforts are underway to secure additional investment.
Despite its challenges, Kuda’s valuation remains strong at $500 million, giving it a revenue multiple of 15x, which is higher than profitable neobanks like Nubank (8.4x) and Monzo (5.4x). However, when it comes to customer deposits, currently at $96 million, Kuda still lags far behind Nigeria’s traditional banks like Unity Bank ($1.35 billion) and Wema Bank ($1.9 billion).
Kuda’s rapid growth shows that it remains a key player in Nigeria’s fintech space, but its mounting losses highlight the challenges of scaling a neobank in a tough economic environment. As it works to secure more funding and expand its services, all eyes will be on whether Kuda can balance growth with profitability in the years ahead
