Dive Brief:

• Varo has raised $123.9 million in what the digital bank termed a “growth investment,” according to a press release Monday.
• Varo also added two directors to its board: former Morgan Stanley Chief Marketing Officer Alice Milligan and Kevin Watters, an 18-year veteran of JPMorgan Chase who last served as CEO of card services at the bank, according to his LinkedIn profile.
• The capital raise comes as Varo indicated an adjusted operating income of $38.6 million for the fourth quarter, according to call report details published by American Banker.

Dive Insight:

Private-equity firm Warburg Pincus and new investor Coliseum Capital Management led Varo’s Series G round, the digital bank said.

In a statement Monday, Varo CEO Gavin Michael said the “combination of new capital, Coliseum’s partnership, and experienced banking leaders joining our board, is propelling Varo into its next phase of growth.” 

“We remain focused on operating with discipline and delivering meaningful impact for our customers,” Michael said.

Varo’s adjusted operating income represents a 7.7% jump from a year earlier. The bank continues to operate at a loss, however. Varo’s $20.8 million loss for 2025’s fourth quarter expands on $17.9 million in losses the bank saw a year ago.

A spokesperson for the company said the widening loss “has been driven by an increase in growth marketing replacing the reduction in operating costs.”

Varo also saw a drop in net deposits to $211.4 million. That category comprises customer funds the bank keeps on its own balance sheet – and the figure indicates a 37.2% fall-off from a year earlier.

However, a Varo spokesperson noted that the bank counted $361.4 million in gross deposits at the end of the fourth quarter, including $150 million in swept deposits that were not part of the call report.

In a joint statement, Milligan and Watters said Varo “has built something rare: a technology-first customer experience paired with the governance and risk discipline required of a nationally chartered bank.” 

“With this new capital and a strong foundation for disciplined growth, we’re excited to support the next phase of scaling Varo’s lending and banking platform for everyday consumers,” they said.

Although Monday’s press release introduces Milligan as a new director, her LinkedIn profile indicates she’s served on Varo’s board since October.

Chris Shackelton, co-founder of Coliseum Capital Management, said his company’s investment in Varo “reflects our confidence in [the bank’s] leadership team and uniquely compelling growth potential.” 

“We are thrilled to join Warburg Pincus as long-term, collaborative partners, and support Varo’s work to expand its customer value proposition and to further differentiate from traditional banks,” Shackelton said in a statement Monday. “We believe Varo is building a resilient and scalable platform from which to capitalize on a significant market share opportunity.”