Varo Bank raises $123.9M despite widening losses as it pushes toward profitability
What’s the deal? Varo Bank has raised $123.9 million in new capital in a Series G growth round, even as the US neobank reported widening net losses. The round was led by Warburg Pincus, with new investor Coliseum Capital ManagementDealroom has a profile for this one. Try Dealroom → joining, and comes days after Varo published its fourth-quarter 2025 financial results.
The San Francisco–based bank said the funding will support its next phase of growth as it scales lending and banking operations. Varo was the first consumer fintech to secure a national bank charter in the US, which it received in 2020.
Why now? The capital raise follows the release of Varo’s latest call report, which showed record operating income alongside continued losses.
In the fourth quarter, Varo posted a net loss of $20.8 million, up 16.2% from a year earlier, even as adjusted operating income rose to a record $38.6 million. The timing suggests the bank is shoring up capital as it balances regulatory costs with the push toward profitability.
What could go wrong? Losses are still mounting, and Varo’s balance sheet has come under pressure.
Total on-balance-sheet deposits fell 37.2% year on year to $211.4 million, while capital has declined in most quarters since 2021, despite periodic infusions. Scaling lending in a tougher consumer environment could increase credit risk, while regulatory scrutiny remains high for nationally chartered digital banks.
The signal: The round shows that private investors are still willing to back regulated fintechs with improving revenues, even if profitability remains elusive.
Rather than chasing growth alone, capital is flowing to digital banks that can demonstrate operating leverage and governance discipline, signalling a more selective phase for fintech funding.
Sources:
Business Wire
American Banker
FinSMEs
PYMNTS
Finovate
FintechLaunches
Image source:
FinTech Global
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