EXCLUSIVE Nubank sees Brazil’s slowdown as a chance to grow faster – CEO


A banner for Brazilian FinTech startup Nubank hangs on the facade of the New York Stock Exchange (NYSE) to celebrate the company’s IPO in New York, U.S., December 9, 2021. REUTERS/Brendan McDermid

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SAO PAULO, Feb 2 (Reuters) – Brazil’s economic slowdown could present an opportunity for Latin America’s new listed lender to aggressively gain market share despite the riskier environment, the founder and CEO said. CEO of digital bank Nubank (NU.N), David Velez. .

The fintech debuted on the New York Stock Exchange less than two months ago as Latin America’s most valuable financial institution, with a valuation of $52 billion. Although its shares have taken a hit since then, Velez said the company – whose 48 million customers make it one of the world’s largest digital banks and which recently expanded into Mexico – is well positioned to the growth.

Velez said he expects the non-performing loan (NPL) ratio to rise this year as Brazilian consumers grapple with high inflation, rising interest rates and a sluggish economy.

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But he sees Nubank keeping its NPL ratios below the market average due to its advanced use of data for underwriting policies. Nubank’s 90-day delinquency rate for credit cards is 3.3%, compared to an industry average of 4.8%.

The riskier outlook could even present a faster growth opportunity for Nubank, Velez added in a video interview with Reuters on Tuesday. Funded by retail deposits, Nubank is not dependent on credit markets and has had a large cash position since its $2.6 billion initial public offering (IPO) in December.

“We might have had the opportunity to accelerate and take even more [market] share and leave even lower interest rates to make our products much more competitive,” Velez said. The short duration of the bank’s credit portfolio – six weeks for credit card loans and four to six months for personal credit – also allows for better risk assessment, he said. noted.

Expanding Nubank’s credit portfolio is seen by analysts as key to achieving profitability. Morgan Stanley analysts estimate in a recent report that Nubank gets less than 200 reais ($37.67) in annual revenue from each active client, while its biggest rival, Itau Unibanco Holding, gets more than 1,200 reais. .

The most profitable credit products for retail banks are mortgages, followed by payday loans and personal loans, according to Morgan Stanley.

Nubank is looking at ways to start offering payday loans and also plans to expand the home equity and auto lines of credit offered by its partner Creditas to its customers.

START OF THE ROLLER MOUNTAINS

Velez said he was not surprised that U.S.-listed shares of Nubank have fallen more than 20% since their debut on Dec. 9, given the broader rout in tech stocks.

“We told investors to expect volatility. Brazil and Latin America are volatile,” he said.

The recent sell-off has dragged Nubank’s market capitalization below that of giant Brazilian banks Itau Unibanco Holding SA (ITUB4.SA) and Banco Bradesco SA (BBDC4.SA).

Velez said a rise in interest rates in the United States and Brazil will affect Nubank shares in the short term, but the longer-term growth trend will not be affected as customers seek less financial services. Dear.

Nubank has been through two recessions, a presidential impeachment and the COVID-19 pandemic in Brazil, Velez added.

Another channel to increase revenue is to sell more investment products to clients through its broker Nu Invest, a result of the acquisition of broker Easynvest in September 2020.

Nubank is also expanding services to its app customers, offering e-commerce, gaming and insurance primarily through partners in which the digital bank has a stake through its venture capital fund.

BRICKS AND MORTAR

A strong advocate of purely digital banking, Velez admits that Nubank will need to consider some sort of physical presence in the future to serve specific customers.

“At the end of the day, if we want to move into certain segments, we may have to look at having some kind of offline presence to be able to better serve our customers,” he said, quoting high net worth individuals and customers looking for mortgages.

The fintech could even consider partnering with a physical bank to offer mortgages, Velez added. “We would be very happy to partner with one of the big traditional banks.”

Closer on the horizon, Nubank is preparing to launch checking accounts in Mexico this year, after receiving regulatory approval for its acquisition of local lender Akala.

The growth of the Mexican operation was a pleasant surprise, Velez said, making Nubank the country’s largest credit card issuer for new cards issued monthly, with 760,000 customers.

Mexico has lower financial penetration rates and less competition than Brazil, he added.

The bank’s expansion into the CEO’s native Colombia will take longer, he said, as Nubank is still in the early stages of obtaining its operating licenses.

($1 = 5.3087 reais)

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Reporting by Tatiana Bautzer and Carolina Mandl in Sao Paulo Editing by Brad Haynes and Matthew Lewis

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