N26 reached its first full year of net profitability in 2025, with revenue climbing past €500 million as the German digital bank leaned on higher deposit income and a larger base of paying customers. The lender posted group net income of €1.6 million for the year, a swing from a €42 million loss in 2024, according to figures the company released today (Thursday).N26 Swings to €1.6 Million ProfitRevenue rose 13% to €501.6 million, while gross profit grew 33% to €350.5 million. N26 attributed the wider gap between the two to lower direct costs and what it called the operating leverage built into its platform, meaning revenue is growing faster than the cost of serving each customer.The result lands during a period of upheaval at the top of the company. Mike Dargan, a former UBS executive, took over as chief executive in April, inheriting a bank that had spent much of the prior year cycling through leadership changes and regulatory friction.Profit Milestone Rests on a Thin MarginThe headline profit is small set against the size of the business. Net income of €1.6 million on €501.6 million in revenue works out to a margin of roughly 0.3%, leaving little cushion. Most of the improvement came from shrinking losses rather than a jump in earnings, with the €43.6 million year-on-year swing driven by cost discipline and rising interest income.The turnaround follows a rough stretch for the company's valuation, which fell sharply from its 2021 peak as fintech funding cooled and regulatory problems mounted.Net interest income, which covers treasury and lending activity, rose 49% to €166.3 million and supplied 47% of gross profit. Much of that rests on deposits, and N26 has been courting balances with instant savings accounts paying up to 4% across European markets.Net fee and commission income increased 21% to €184.2 million, the remaining 53% of gross profit, helped by subscription growth and card spending. Revenue-relevant customers, the subset N26 counts as generating income, grew 16% to 5.6 million. Annual transaction volume rose 14% to €170.7 billion, and customer deposits topped €10.5 billion.Source: N26 management reporting frameworkTwo Accounting Frameworks, Two Sets of NumbersThursday's figures come from a press release, not a full audited report, which N26 has yet to publish. The numbers the company put front and center follow its own management reporting framework, which it says aligns with IFRS principles.Its audited statutory accounts, prepared under German banking rules known as RechKredV, tell a different story on the components. On that basis, N26 reported €191.3 million in net interest income and €176.9 million in net fee and commission income, both diverging from the management figures. Gross revenue under RechKredV came to €498.1 million, just shy of the €501.6 million the company led with.Group net income is identical under both frameworks, the company said. Asked when the complete accounts would appear, N26 told Finance Magnates it would publish the audited statements "in line with the applicable statutory filing deadlines" and make them available through official registers.Revolut and Bunq Set the Profitability BarN26's milestone arrives years after some European rivals crossed the same line, and on a far smaller scale. Revolut, the region's largest neobank, reported pretax profit of £1.7 billion for 2025 and net profit of £1.3 billion, its fifth straight profitable year, with a customer base above 68 million.The Dutch challenger bunq has been in the black since 2023 and reached 20 million users in 2025, reporting 65% profit growth in its most recent results. Both leaned on high interest rates to earn yield on customer deposits, the same lever that lifted N26's interest income.Where N26 stands apart is its starting point. The bank spent years under a BaFin-imposed cap that limited it to 50,000 new customers a month, a restriction tied to anti-money-laundering failures that also drew a €9.2 million fine. That ceiling held back the customer growth rivals used to scale, and lifted only shortly before fresh regulatory problems surfaced.Regulators Still Watching CloselyProfitability has not closed the book on N26's regulatory troubles. In 2025, BaFin imposed fresh restrictions after an audit flagged weaknesses in internal controls, ordering the bank to hold extra capital, installing a special monitor for the second time since 2021, and barring new mortgage lending in the Netherlands.The supervisory pressure came alongside a boardroom reshuffle. Co-founder Valentin Stalf stepped down as co-chief executive in 2025 after disputes between the founders and investors, clearing the path for Dargan's arrival.N26 has been widening its product range to lift income per customer, adding stock and ETF trading and rolling out savings products across Europe. The company said it plans to keep investing in banking, savings and investment offerings while expanding its use of artificial intelligence in customer service and internal operations.Momentum Carries Into 2026Early 2026 figures point to a stronger run. On a preliminary basis, N26 said it generated net income of €9.8 million in the first quarter, on revenue of €130 million and gross profit of €92 million, already well above the full-year 2025 profit.Dargan said the financial position gives the bank room "to reinvest heavily" in new products. Chief Financial Officer Arnd Schwierholz said N26 would keep "delivering sustainable growth while continuing to invest in products, technology" and resilience.N26 operates in 24 markets on a German banking license with a team of about 1,600. Whether it can turn a slim first profit into something more durable will hinge on keeping costs down while regulators keep watching. This article was written by Damian Chmiel at www.financemagnates.com.

Read full article on FINANCEMAGNETS