Nubank’s shares jump as neobank pivots to monetization in Brazil

Nubank‘s shares rose higher on Feb. 15 in US markets, opening at a 4% increase as investors responded to the fintech’s fourth-quarter results.

The largest neobank in Latin America saw a boost in today’s trading session following strong profit growth and solid customer demand for its products. The Brazilian digital bank’s stock had been gaining momentum in the past few weeks, trading at $5.20 apiece today compared to a low of $3.70 just about a month before.

The digital lender’s adjusted net income surged to $113.8 million in the fourth quarter from $3.4 million in the year-ago period, and 79.2% compared to $63.5 million in the linked quarter.

Pivot to monetization

The fintech had already reached breakeven in the previous quarters and is now undertaking the challenging task of increasing profits while upholding its Latin American growth expansion.

David Velez headshot
David Vélez, CEO of Nubank.

“Fourth quarter results are further evidence of the success of our growth strategy,” David Velez, co-founder and CEO, said in the filing. “Today, 44% of the adult population in Brazil is a customer, and importantly, 58% of our active consumers have chosen Nu as their primary banking relationship.”

During the quarter, Nubank increased crossover sales among its clients, who gravitated toward the fintech’s core products. Although the Brazilian company has had tremendous success in signing clients, how much revenue it produces from each of them has a long way to go if compared to traditional, well-established banking peers.

However, its average cost is also significantly lower than more prominent traditional players.

At any rate, monthly average revenue per active customer ticked upwards to $8.2, up 37% year over year on a neutral FX basis. The CEO said the main driver was Nubank earning its place among its customers as the leading bank.

Users in Brazil, as in many other markets, tend to have multiple bank accounts.

Nubank’s customer acquisition is slowing down

The pace of customer acquisition remained robust as the company grew its footprint in Colombia and Mexico. Nubank added 4.2 million new clients in the three months, and almost 21 million if considering the entire 2022.

The quarterly rate, however, fell to 38% compared to 62% in the year-ago quarter, with most of its clients based in Brazil. Its expansion rate in Brazil is slowing down after a swift growth in previous years, growing at a 35% rate compared to 129% in Mexico.

“It is inevitable that our customer growth in Brazil over the coming years will be lower than what we experienced over the last years,” Velez said in a call to discuss results. “Our growth in Brazil will progressively pivot from customer acquisition to monetization.”

As of now, the bank reports 74.6 million clients in the three markets it operates in. According to central bank data, these numbers consolidate Nubank as the fifth financial company in Brazil by the number of clients.

Room to grow in Mexico and Colombia

The executive underscored that the situation is different in Mexico and Colombia, where from a customer acquisition perspective, Nubank is “still at early stages.” Although he acknowledged that Nubank’s penetration was “still low,” he said, “early signs of performance are extremely encouraging.”

“The stages of development of our three geographies are complementary and expected to provide Nu with powerful growth engines for years to come.”

Shares still down from IPO pricing

Although shares have rebounded strongly in the past month, Nubank’s stock – listed on New York Stock Exchange with a blockbuster IPO in late 2021 – is still around half its value at the peak last year. The sharp reversal in market conditions led to a substantial repricing of tech-oriented companies, with growth firms such as Nubank bearing the brunt of the correction.

Market capitalization for the Brazilian-based fintech stands at around $25 billion.

  • David Feliba

    David is a Latin American journalist. He reports regularly on the region for global news organizations such as The Washington Post, The New York Times, The Financial Times, and Americas Quarterly.

    He has worked for S&P Global Market Intelligence as a LatAm financial reporter and has built expertise on fintech and market trends in the region.

    He lives in Buenos Aires.