NuBank (NU) earnings writeup
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NuBank (NU)
Overview
Nu is one of the largest digital banks in the world and the largest in Latin America, where it operates, with 105 million registered customers (87.2 million monthly active customers), 60% of which are using Nu as their primary bank.
Nu has a significant presence in Brazil, now serving 56% of the adult population. Over the past two years, it has also been growing rapidly in Mexico and Colombia, repeating the same growth playbook used in Brazil.
What's so unique about NU is its best-in-class cost structure. It remains one of the most cost-effective fintechs in the world, with the low cost-to-serve (just $0.90 per month per customer), which is approximately 85% lower than those of incumbent banks), providing a significant competitive advantage.
Nu’s $7 cost to acquire new customers ($2 of which is paid marketing) is also one of the lowest among global banks and fintechs. For comparison, similar digital banks in the US spend $200-300 on average to acquire new customers.
Nu also has one of the lowest delinquency rates at just 7% which consistently outperforms competitors, some of which are above 10%. In Q2 they reported the delinquency rate on 15-90d NPLs actually dropped to 4.5%
In Brazil, its main market, the company has recently begun shifting from acquiring customers to monetizing them. Once Nu adds new customers, engaging and retaining them with an expanding portfolio of products across five categories (banking, investing, lending, insurance, and savings) becomes its primary focus.
This is reflected in its growing ARPAC (revenue per active customer), which is a critical indicator of the growth of the business. Nu's ARPAC reached $11.20 this quarter, with more mature cohorts already generating a monthly ARPAC of $25 or more. ARPAC has been steadily growing at 6-8% QoQ since 2023 Q2.
The company's key products remain traditional banking and lending. In Q2, bank deposits were up 64% YoY (fx neutral) and the lending portfolio, which reached $18.9 billion this quarter, was up +81% YoY and +8% QoQ (fx neutral basis). The extraordinary growth in both key products is a testament to Nu’s superior ecosystem.
All of the above contributes to Nu's ability to be a highly profitable business on a scale with plenty of operating leverage; it’s always a good sign when gross profit is growing faster than revenues because it means margins are expanding. Nu certainly looks like it’s on the way to becoming a $100+ billion financial powerhouse in Latin America.