(Bloomberg) — Nu Holdings Ltd., the Brazilian digital lender that counts Warren Buffett’s Berkshire Hathaway Inc. as a backer, posted third-quarter profits that beat analysts’ estimates, as stronger-than-expected revenue helped the fintech weather a surge in bad loans.
(Bloomberg) — Nu Holdings Ltd., the Brazilian digital lender that counts Warren Buffett’s Berkshire Hathaway Inc. as a backer, posted third-quarter profits that beat analysts’ estimates, as stronger-than-expected revenue helped the fintech weather a surge in bad loans.
Adjusted net income more than tripled from a quarter earlier to $63.1 million, topping the average estimate of $32.6 million in a survey of six analysts by Bloomberg. Nubank’s revenue surged to a record $1.3 billion, above the expected $1.1 billion, with clients climbing to 70.4 million.
“Souring loans have been rising given the current stage of the economic cycle, but we’ve being able to price in that surge really well,” Chief Executive Officer David Velez said in an interview Monday. Efficiency gains and recent measures aimed at reining in funding costs also shored up results, Velez said.
The percentage of loans more than 90 days overdue rose to 4.7% from 4.1% three months earlier, better than the 5% estimate by Goldman Sachs Group Inc. Banco Bradesco SA last week raised its guidance for bad-loan provisions, fueling concerns that credit quality in Latin America is deteriorating.
“The pace of personal-loan origination has been slower than we expected as we’re carefully monitoring the macro backdrop, so origination was nearly flattish” compared to the second quarter, Velez said.
Fintech companies are expanding and boosting headcount across the region. Nubank will finish this year with at least 1,000 more employees, co-founder Cristina Junqueira said in a separate interview. The idea is to create “global platform teams” to replicate the success the Sao-Paulo-based firm has had in Brazil in Mexico and Colombia, where the fintech only offers credit cards, she said. The hirings are mostly in areas such as fraud prevention, collections and information security.
In Brazil, where Nubank offers services such as credit, debit cards and investments, the main focus is to expand into areas including secure lending and payroll loans, as it seeks to diversify revenue, Velez said. The firm should launch a “beta test” for its payroll-loan product in the fourth quarter and make it available to all clients in early 2023, he said, adding that more products for the “upmarket customer” are also planned.
Acquisition Opportunities
After raising $2.8 billion in its initial equity offering in December, Nubank is “in a very, very strong position to look at acquisitions more actively,” Velez said, adding that “it would likely be verticals in financial services or even beyond in sectors where we haven’t built in-house.”
But he added that it’s unlikely the firm would pursue a big acquisition, given the opportunities it has to grow organically.
“It’s so important not to get too distracted with a shiny object that might be on sale somewhere else,” Junqueira said.
Velez said he’s unfazed about recent elections that changed the leadership in some Latin America nations, since “both the right and the left kind of agree that more competition in financial services is a good thing, that more financial inclusion is a good thing.”
Other key points:
- The average revenue per active client, or ARPAC, rose to $7.90 in the third quarter from about $7.80 a quarter earlier
- Early delinquency indicators, from 15 to 90 days, rose to 4.2% in September from 3.7% in June
–With assistance from Felipe Marques.
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