Brazil’s Nubank posted a record profit of US$783 million in the third quarter, an increase of 39% from a year earlier and ahead of the US$723 million estimate from analysts surveyed by Valor. The total loan portfolio reached $30.4 billion in the third quarter, up 42% year-on-year.
Nubank revenues reached $4.2 billion in the July to September period, exceeding market estimates of US$3.8 billion, with net interest income rising 32% annually.
Jefferies’ analysts cited by Reuters said Nubank “posted a solid beat with no red flags in credit quality and with management reiterating that delinquencies remain in line with expectations.”
Many digital banks talk a good game about their customer numbers, but Nubank is one that walks the walk. Established in 2013, Sao Paolo-based Nubank is the largest independent digital bank in the world. It currently has 127 million customers, up from 15 million six years ago. The bank now has 110.1 million users in Brazil, 13.1 million in Mexico, and 3.8 million in Colombia.
Nubank stands out for securing investors’ confidence since its Dec. 2021 IPO. The company is currently worth US$76 billion, up 33% since the market debut. Other fintech giants that went public around the same time, including India’s Paytm and Korea’s Kakao Bank, have seen their share prices fall by double digits.
In March, The Economist declared that this bank has conquered Brazil. Granted, it did not happen overnight. It started off with a fee-free credit card, then moved into bank accounts and lending for small businesses. Later it introduced lending products, directly competing with entrenched Brazilian incumbent banks by offering consumers interest rates 30-40% below the market norm. Brazilian banks are notorious for charging some of the world’s highest interest rates and fees. Five banks control about 80% of banking assets and loans.
This bank’s portfolio today includes SME solutions, investments, crypto, insurance, and mobile plans. The company says that its combination of products and services differentiates it from most digital banks “by driving principality.” That is, it is the primary bank for most of its active customers, a feat that many digital lenders struggle to achieve.
Guilherme Lago, the chief financial officer, suggested during an earnings call that the Brazilian business will eventually mature and grow at a slower pace, making it important for the company to look elsewhere for brisk expansion opportunities. “We always want to keep stacking S-curves. In other words, when one business begins to mature, we have another with a steeper expansion curve,” he said. In Mexico, the bank has achieved good results, he said, adding that the second largest Latin American country “will be a relevant part of our growth story over the next two, three, or four years.”
One market that this bank is eyeing for future expansion is the United States. While the U.S. is a mature and ultra-competitive banking market, it believes there are opportunities in certain regions and states such as Florida, Texas, and California. Compared to Colombia, where operations have been ongoing for several years, the U.S. is a more promising market, Lago said.
“Today, our core focus remains on delivering growth in our existing markets, where we continue to see substantial opportunities for expansion. At the same time, applying for a U.S. national charter helps us better serve our existing customers based in the country and, in the future, connect with those who share similar financial needs and could benefit from our products and services,” David Vélez, founder and CEO of Nu Holdings, said in a Sept. 30 statement the company published to announce its application for a national bank charter in the U.S.