Brazil's FinTech giant Nubank just crushed its 2Q 2023 earnings. We have never seen growth like NU's in any challenger bank. In fact, some would claim – including me – that this ten-year-old company is not only the strongest neobank in the world, but one of the best-run digital banks ever, maintaining solid profitability. Here are the key takeaways.
Customer Growth:
83.7 million customers (+28% Year-over-Year)
NU added 4.6 million customers in Q2'23 and 18.4 million YoY, totalling 83.7 million customers globally by June 30, 2023.
This is a 28% growth YoY, emphasizing NU's position as one of the world's fastest-growing digital financial platforms and the fifth-largest financial institution in Latin America.
In Brazil, NU’s customer base reached 79.4 million, accounting for 49% of the country's adult population, making NU the 4th largest financial institution behind Itaú, Bradesco and Caixa.
Customer Engagement:
Their average customer uses nearly 4 products. NU is cross-selling multiple products like a champ. It's what every consumer FinTech and bank exec only dreams of. This means that, in addition to 37 million credit cards and ~60 million bank accounts, NU now has:
- 6.7 million personal loans
- 1.1 million insurance policies
- 10.4 million investment customers
- 1.3 million NuCripto customers
Maybe this is why the Monthly Average Revenue per Active Customer (ARPAC) was $9.3, an 18% increase YoY on an FX-neutral basis, with mature cohorts above $24.
NU is the primary banking relationship for over 58% of the monthly active customers that have been with the company for over a year.
Activity rate rose to 82.2%, from 80.2% a year ago.
Operational Efficiency:
Monthly Average Cost to Serve Per Active Customer remained stable and under $1, at $0.8.
NU’s efficiency ratio stood at 35.4%, highlighting its strong operating leverage.
Asset Quality:
NU’s 15-90 NPL (non-performing loans) ratio was 4.3%, a 10 basis points decrease from Q1’23. The 90+ NPL ratio increased to 5.9%.
Results:
$1.9 billion in revenues (+60% YoY)
$224.9 million in profit (they lost $29.9M in Q2 2022)
Adjusted Net Income reached $262.7 million with an adjusted ROE of 19%.
Gross Profit of $782 million, a 113% increase YoY FX neutral, with a margin of 42%.
Capital and Liquidity:
Basel Index in Brazil of 20.2%, well above the required 10.5%.
NU Holdings holds $2.4 billion in excess cash.
Interest-Earning Portfolio of $6.3 billion, with total deposits of $18.0 billion, resulting in a 35% loan-to-deposit ratio.
Business Plan:
Continued growth in Brazil with approximately 1.5 million new customers per month.
International expansion is evident, with Mexico's customer base at 3.6 million (33% YoY growth) and
Colombia’s at approximately 700,000 (133% YoY growth).
Launched digital savings account product in Mexico and Colombia.
A Multi-Product Platform:
Portfolio includes credit cards (37 million active customers), NuAccounts (60 million), and personal loans (7 million).
Insurance has over 1 million active policies and NuInvest over 10 million active customers.
NuCripto recorded 1.3 million active customers, and the SMEs customer base expanded 55% YoY to 3.1 million.
New Products:
Nubank also announced two major product updates:
First, they launched Nubank Lar Seguro, a home insurance offering, in partnership with Chubb, the world’s largest publicly traded property and casualty insurer.
Nubank Lar Seguro will become available to eligible customers in Brazil over the next few months.
Nubank Lar Seguro offers coverage that can be personalized according to the customer’s individual needs.
Options include partial or full reimbursement for damage to homes and/or personal property in case of covered events, such as fire, loss of rent, theft, electrical damage, storms, and personal liability.
The insurance also offers a broad network of 24-hour emergency service professionals to help with property maintenance, such as leaks, repairs to electrical systems, and locksmiths, among others, in addition to allowing for scheduling general repairs and installations.
Users can obtain a quote and purchase the policy in a simple and convenient way with visibility to the coverage details, in a 100% digital experience through the Nubank app.
“With Nubank Lar Seguro, our customers can choose the coverage that they really need at a monthly cost that fits their budget. Therefore, we believe we will help increase awareness about the relevance of home insurance, which is still limited to a small portion of the Brazilian population,” says Livia Chanes, Country Manager of Nubank in Brazil.
“With a hassle-free experience in our app and transparent information, we offer customized coverages that materialize the true value proposition of home insurance, from protecting assets to 24-hour maintenance services to cover day-to-day unforeseen events.”
Source: https://lnkd.in/ebQ9rmyK
The second one is a temporary virtual credit card that expires in 24 hours. The idea is to bring even more peace of mind and protect users from potential fraud.
This new feature will be offered gradually and available to the entire customer base in the coming months.
Purchases made with the temporary card will be included in the regular monthly bill, along with purchases made with the physical card and other virtual cards.
After creating it, the customer can check the remaining time to use it on the card management screen.
Just like with other physical and virtual cards, the customer can always access the transaction history of the temporary cards created.
After it expires, the temporary card is automatically deleted, and a notification is sent to the user to inform them of the deletion.
Source: https://lnkd.in/e5Bi6eWn
Interestingly, even with all of this good news, NuBank’s shares fell as much as 8.6% in New York trading after releasing these results. That’s the most on an intra-day basis since April although, to put this in perspective, the bank is still up 73% on the year. Why did the shares fall? Because co-founder and CEO of NuBank, David Velez, sold 3% of his holdings to raise cash.
Thanks to the updates from Marcel van Oost and Linas Beliúnas on LinkedIn for their insights to this article:
https://www.linkedin.com/feed/update/urn:li:activity:7097894905728901120/
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...
