Nubank Eyes Expansion in Mexico Amid Q1 Revenue Surge

Nubank reported record revenue of $2.7 billion in Q1 2024, with a net income of $378.8 million, surpassing the $357.3 million average estimate by analysts. Shares rose 8.2% in New York, marking the biggest intraday jump since September 2023, and extending the stock’s year-to-date rally to over 45%.
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Nubank Easynvest Investment Market

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Founded in 2013 in Brazil, Nubank has grown to serve 92 million clients, offering services beyond credit cards, including an investment platform, insurance policies, and more. The digital bank is now focusing on Mexico, aiming to replicate its success in Latin America’s second-largest economy, and in Colombia. As of Q1 2024, Nubank added 5.5 million customers, reaching a total of 100 million customers across Brazil, Mexico, and Colombia.

Nubank’s Mexico operations, which already have over $2 billion in deposits, are advancing rapidly. CEO David Velez emphasized the significant potential in Mexico, noting that the banking license application is progressing well with regulators. With a population of 130 million, many of whom lack access to traditional banking, Mexico represents a substantial opportunity for fintech expansion.

To attract Mexican customers, Nubank offers savings rates significantly higher than those provided by incumbent banks. This approach has proven effective, though yields are expected to adjust as the product matures. Velez pointed out the relatively low barriers to entry in the Mexican banking sector, emphasizing that physical branches are no longer necessary for digital banks to succeed.

Despite its growth, Nubank faces challenges with rising delinquency rates. In Q1 2024, non-performing loan rates increased to 5% from 4.4% for loans of 15 to 90 days and to 6.3% from 5.5% for loans over 90 days. COO Youssef Lahrech stated that the bank is comfortable with this risk, focusing on maximizing the net present value of credit grants rather than minimizing non-performing loans.

Nubank, described by CFO Guilherme Lago as “one of the most efficient financial services companies in the world,” holds a 15% market share in credit and debit cards in Brazil. The digital bank continues to expand its securitized lending portfolio, despite the maturing market in Brazil.

As Nubank continues its expansion in Mexico and Colombia, the digital bank aims to maintain its high return on equity, reported at 23% for Nu Holdings. This performance places Nubank among the best financial institutions in Latin America, despite being over-capitalized and having newer operations in Mexico and Colombia still working towards profitability.

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