Brazil’s Nubank Maintains Solid Profitability in Q2-2023

Nu Holdings, one of the world’s largest digital financial services platforms based in Brazil, has reported stupendous growth maintaining solid profitability, the company’s Q2-2023 financial results showed.

Nu continued to drive increased profitability and posted a net income of $224.9 million, compared with a $29.9 million Loss in the same quarter last year. Adjusted net Income reached $262.7 million with an adjusted ROE of 19%, compared to an adjusted net income of $17 million for the same period last year.

The company posted $1.9 billion in revenues, a new all-time record high, which represents a 60% increase from Q2 of 2022 on a FX-neutral basis and a 5x increase in only two years FXN. This comes as a result of the compounding effect of customer growth and higher levels of customer monetization in Brazil.

The gross profits for the second quarter of this year expanded to $782 million, with a 113% increase YoY FX neutral. Gross profit margin expanded to 42% from 31% in Q2’22.

Nu strengthened its position as one of the best-capitalised players in the region with a Basel Index in Brazil of 20.2%, almost doubling the minimum required of 10.5%. In addition, Nu Holdings has $2.4 billion in excess cash.

As on 30 June 2023, Nu had an interest-earning portfolio (IEP) of $6.3 billion, while total deposits were three times this amount of nearly $19 billion. Nu continued to optimise the use of deposits quarter after quarter, as reflected in its 35% loan-to-deposit ratio.

David Velez, founder, and CEO of Nubank said that this quarter, Nu continued to expand its customer base, engagement, and monetisation, increasing the monthly Average Revenue per Active Customer (ARPAC) stood at $9.3 for the first time, while keeping cost to serve stable below the dollar level.

This combination led to revenue growing 5x in the last two years to a record of $1.9 billion, and net income reaching $225 million, over 50% higher than the last quarter, which reinforces Nu’s strong operational leverage and earning-generating power.

“We continue to showcase leading indicators in the region for operating efficiency, and solidity. In Brazil, our growth trajectory continues, as one in every two adults is a Nu customer, and we have become the fourth largest financial institution in the country in number of customers, Velez said.

Operating Highlights

Nu added 4.6 million customers in Q2 of 2023 and 18.4 million year-over-year (YoY), reaching a total of 83.7 million customers globally by 30 June 2023. This represented a 28% growth YoY, which underscores Nu’s position as one of the largest and fastest-growing digital financial services platforms worldwide and the fifth-largest financial institution in Latin America by number of customers.

In Brazil, Nu’s customer base reached 79.4 million, accounting for 49% of the country’s adult population and becoming the fourth-largest financial institution by number of customers, according to Brazilian Central Bank data. In July 2023 Nu surpassed the mark of 85 million customers globally and 80 million in Brazil.

Regarding asset quality, Nu’s 15-90 NPL ratio hit 4.3%, decreasing 10 basis points from Q1 of 2023, in line with expectations and partly related to the improvement of personal loan portfolio cohorts. The 90+ NPL ratio increased to 5.9% given the expected stacking behaviour of the early delinquency buckets from previous periods.

Much like in other quarters, Nu continued to outperform the industry on a like-for-like basis, across different income bands, and with an even more pronounced comparative advantage for the lower income bands. 

Business Highlights

Nu’s growth trajectory continues with around 1.5 million new customers per month. Nu has already become best-in-class in terms of efficiency ratio in the country, as revenues continue to grow while costs remain under control, demonstrating massive operating leverage and likely securing the position of the lowest-cost manufacturer in Brazil.

Recent launches on Secured Loans, such as Payroll Loans for Federal Public Servants or FGTS-backed loans which the company began testing a few weeks ago, will enable Nu to become the primary banking relationship of an even larger base of customers, fuelling engagement and monetization even further. 

In Mexico, Nu’s customer base grew 33% YoY to 3.6 million, and in Colombia to around 700,000 customers, which represents a 133% increase YoY. The growth trajectory in both countries will likely accelerate with the launch of the digital savings account product in the local markets. In Mexico, just one month after its public launch, Cuenta Nu crossed the 1 million customers milestone.