Background on Nubank and Nu Holdings
Nubank, a Brazilian fintech company, is a digital bank that offers credit cards and other financial services without physical branches. Founded in 2013 by David Vélez, Cristina Junqueira, and Edward Wible, Nubank has rapidly grown to become one of the largest financial institutions in Latin America. Nu Holdings, based in New York, is the parent company managing Nubank.
Financial Performance and Share Increase
Nu Holdings reported a 42% increase in net income compared to the same period last year, on a constant currency basis. This positive news led to an 8.3% rise in Nubank’s shares during after-hours trading in New York, reaching $13.10 per share on Friday.
Nubank’s impressive performance is reflected in its financial results for the second quarter. The company reported a net income of $637 million, with total revenue amounting to $3.7 billion—a 40% increase from the same period last year.
Growth Drivers and Future Outlook
Guilherme Lago, Nubank’s CFO, explained to Reuters that the surge in profits was driven by operational leverage and revenue growth. However, he noted that the factors fueling this growth are beginning to shift.
“While in the past three to five years, a significant portion of our growth came from acquiring new customers, in the next three to five years, a substantial part of our revenue growth in Brazil will come from deepening relationships with existing customers,” Lago stated.
Analysts’ Perspective
According to Citi analysts, Nubank experienced a “solid quarter,” with net income exceeding expectations and the net interest margin showing improvement. The annualized return on equity (ROE) for Nubank was 28%, consistent with the figure reported last year.
Credit Portfolio and Delinquency
Nubank’s credit portfolio grew 8% from the first quarter to $27.3 billion, primarily due to an expansion in personal loans within the portfolio, which consists mainly of outstanding credit cards.
The delinquency rate decreased to 4.4%, a 0.3 percentage point drop from the first quarter. Meanwhile, the delinquency rate for over-90-day past due loans increased to 6.6%, a 0.1 percentage point rise compared to the same period last year.
Key Questions and Answers
- Who is Nubank and what does it do? Nubank is a Brazilian digital bank founded in 2013 that offers credit cards and other financial services without physical branches. It has grown to become one of the largest financial institutions in Latin America.
- What is Nu Holdings? Nu Holdings is the parent company based in New York that manages Nubank.
- Why did Nubank’s shares rise? Nu Holdings reported a 42% increase in net income, leading to an 8.3% rise in Nubank’s shares during after-hours trading in New York.
- What factors drove Nubank’s profit growth? The growth was driven by operational leverage and revenue expansion, though Nubank’s CFO noted that the factors behind this growth are changing, with future growth expected from deepening relationships with existing customers.
- What were Nubank’s financial results for Q2? Nubank reported a net income of $637 million and total revenue of $3.7 billion, a 40% increase from the same period last year.
- How has Nubank’s credit portfolio performed? The credit portfolio grew 8% to $27.3 billion, primarily due to personal loans within the portfolio, which consists mainly of outstanding credit cards. The delinquency rate decreased to 4.4%, but the over-90-day delinquency rate increased to 6.6%.
