Nigerian neobank Kuda Bank has reported a revenue of $21 million in 2023, falling short of its projected target of $40 million. Despite this shortfall, the bank achieved a 138% increase from the $9 million in revenue reported in 2022. This growth was achieved despite the naira's 40% devaluation against the dollar in 2023.

Kuda's app user base also expanded to 7.2 million in 2023, a 47% rise from 4.9 million in 2022. However, total losses grew to $40 million in 2023, up from $18.5 million in 2022. These losses were primarily due to increased staffing and operational costs, including $8 million in salaries for 456 employees.

It's not uncommon for neobanks to incur losses during their initial growth phases as they acquire customers and invest in product development while operating with limited revenue. Kuda is no exception, following in the footsteps of other neobanks like Monzo, which lost $143 million in 2020, and Revolut, which lost $135 million in 2019.

By the end of 2023, Kuda held $5 million in cash against annual operating costs of approximately $55 million. The bank's liquid assets sufficiently cover customer deposits, providing a buffer exceeding $20 million. Auditors determined that the business is not exposed to short-term going concern risks; however, additional capital may be needed to cover operating expenses.

In 2023, Kuda began talks to raise a $20 million bridge round at its 2021 Series B valuation of $500 million but did not close the round. Since its 2019 inception, Kuda has raised over $81 million in funding. CEO Babs Ogundeyi told shareholders that additional capital will be required to pursue its strategy, and efforts are underway with potential investors to secure further funding.

Kuda did not immediately respond to a request for comments. Given its last publicly disclosed valuation of $500 million, Kuda's revenue multiple is 23x—significantly higher than that of publicly traded neo banks like Nubank (10x), Monzo (5.4x), and Revolut (20.5x).

Kuda primarily makes money through interest on customer loans, returns from treasury investments and fixed deposits, fees from banking services, and commissions from partners. The bank's lending model remains conservative, with $12.6 million in overdrafts issued in 2023 and a reduced credit loss allowance from $12.4 million to $10.4 million.

The bank currently has $96 million in customer deposits and total assets worth $125 million, a slight uptick in customer deposits from 2022's $94 million but a decline in assets from $140 million. However, its customer deposits pale in comparison to some of Nigeria's tier-2 commercial banks like Unity Bank, with $1.35 billion, and Wema Bank with $1.9 billion.

As Kuda continues to navigate its growth phase, it will be interesting to see how the bank addresses its revenue shortfall and increased losses. With plans to raise additional capital, Kuda will need to convince investors of its potential for long-term growth and profitability.