Nu Holdings delivered exceptional Q2 2024 results, with strong customer growth, expanding revenues, and record profitability.
Top 5 Key Takeaways
- Customer base reached 104.5 million, up 25% year-over-year, with strong growth in Brazil, Mexico, and Colombia.
- Revenue surged 65% year-over-year to $2.8 billion, driven by successful cross-selling and new product introductions.
- Net income grew 134% year-over-year to $487 million, with adjusted net income up 131% to $563 million.
- Risk-adjusted net interest margin hit a record high of 11%, reflecting a 300 basis point expansion from a year ago.
- Deposits in Mexico exceeded $3.3 billion, positioning Nu as a leading digital financial platform in the country.
Summary
Nu Holdings delivered exceptional Q2 2024 results, with customer growth, revenue expansion, and profitability all exceeding expectations. CEO David Velez highlighted the company’s strong performance:
“During Q2 2024 our business model anchored in three fundamental principles, customer expansion, revenue per customer and efficient operating costs, demonstrated its formidable strength by accelerating earnings power.”
Main Themes
- Customer Growth: Total customers reached 104.5 million, up 25% year-over-year
- Revenue Expansion: Revenue grew 65% year-over-year to $2.8 billion
- Profitability: Net income increased 134% year-over-year to $487 million
- Credit Quality: NPLs increased as expected due to strategic credit expansion
- International Expansion: Strong growth in Mexico and Colombia deposits
- AI Integration: Acquisition of Hyperplane to enhance AI capabilities in financial services
Insights
Nu’s strategy of expanding credit to underserved segments while maintaining strong risk-adjusted returns is paying off. The company’s risk-adjusted net interest margin reached a record high of 11%, up 300 basis points year-over-year. This demonstrates Nu’s ability to profitably serve customers across the credit spectrum.
Market Opportunity
Nu is rapidly expanding its addressable market by targeting both unbanked and underbanked populations in Latin America. In Brazil, Nu now serves 56% of the adult population. In Mexico, where only 12% of the population has a credit card, Nu has grown to 7.8 million customers, presenting a significant growth opportunity.
Market Commentary
The Latin American financial services market is undergoing rapid transformation, with digital platforms like Nu challenging traditional banks. In Mexico, Nu’s high-yield deposit offering is changing consumer behavior and expectations around banking services. CEO David Velez commented:
“The moment that we went to market with a very competitive yield, it began changing behavior. And once you change that behavior and you change that idea in consumers’ behaviors, we think it’s very hard to go back.”
Customer Behaviors
Nu is seeing strong adoption of its credit products, particularly in Mexico. The introduction of the high-yield Cuenta product has led to a nearly doubling of credit card customer originations. These customers tend to have better credit quality, allowing Nu to expand credit offerings confidently.
Regulatory Policy
Nu is in the process of applying for a banking license in Mexico. Management reported positive progress in discussions with regulators and expects to receive the license in the coming months. This would further strengthen Nu’s position in the Mexican market.
Economy Insights
Despite macroeconomic challenges in Latin America, Nu is seeing robust demand for its services. CFO Guilherme Lago noted:
“We try to refrain from making any bets on what’s going to happen to macro on a going forward basis. In fact, if you look at our history, starting in Brazil, it is marked by big periods of instability, downturns, et cetera. And so, we feel like our philosophy continues to be one of demanding a lot of resilience from whatever growth we underwrite.”
Industry Insights
Nu’s success in attracting deposits and expanding credit in Mexico could pressure traditional banks to offer more competitive rates and improve their digital offerings. The company’s ability to profitably serve previously underbanked segments may also encourage other fintech players to target similar customer bases.
Key Metrics
Financial Metrics
- Revenue: $2.8 billion, up 65% YoY
- Net Income: $487 million, up 134% YoY
- Adjusted Net Income: $563 million, up 131% YoY
- Risk-adjusted Net Interest Margin: 11%, up 300 bps YoY
KPIs
- Total Customers: 104.5 million, up 25% YoY
- Monthly Activity Rate: 83.4%, up from 82.2% a year ago
- Products per Active Customer: 4.1
- Monthly ARPAC: $11.2 (6% growth on FX-neutral basis)
Competitive Differentiators
- Low cost-to-serve: $0.90 per active customer
- Strong brand recognition and trust in Latin America
- Advanced data analytics and AI capabilities
- Ability to profitably serve underbanked segments
- Rapidly growing deposit base in Mexico and Colombia
Key Risks
- Increasing NPLs due to strategic credit expansion
- Potential regulatory challenges in new markets
- Macroeconomic instability in Latin American countries
- Intensifying competition from traditional banks and fintech players
- Currency fluctuations impacting reported results
Analyst Q&A Focus Areas
Analysts focused on:
- Credit quality trends and NPL expectations
- Growth strategies in Mexico and Colombia
- Potential impact of open banking regulations in Brazil
- Sustainability of high deposit growth rates in new markets
- Plans for obtaining a banking license in Mexico
Nu Holdings Summary
Nu Holdings continues to demonstrate strong execution of its growth strategy across Latin America. The company’s ability to rapidly scale its customer base while maintaining profitability and healthy risk-adjusted returns is impressive. Looking ahead, investors should watch for continued expansion in Mexico and Colombia, progress on the Mexican banking license application, and the impact of AI integration on Nu’s credit underwriting and customer engagement capabilities. While macroeconomic challenges and increasing competition pose risks, Nu’s strong market position and innovative approach position it well for continued growth in the evolving Latin American financial services landscape.
