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 fallen since then, Mr Velez said the company – whose 48 million customers make it one of the world’s largest digital banks and which has recently expanded into Mexico – is doing well. positioned for growth.
Velez said he expects the non-performing loan (NPL) ratio to rise this year as Brazilian consumers face high inflation, rising interest rates and a sluggish economy.
But he believes that Nubank will keep its NPL ratios below the market average thanks to its advanced use of data for underwriting policies. Nubank’s 90-day delinquency ratio for credit cards is 3.3%, compared to the industry average of 4.8%.
The riskier outlook may even represent 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 the credit markets and has had a large cash position since its $2.6 billion initial public offering (IPO) in December.
“We may have the opportunity to accelerate and take even more shares [de march] and keep interest rates even lower 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 loans – also allows for better risk assessment, he added.
The expansion of 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 payroll loans and personal loans, according to Morgan Stanley.
Nubank is exploring ways to begin offering payday loans, and also plans to extend its home equity and car equity lines of credit to its customers, offered by its partner Creditas.
SAW-TOOTH BEGINNINGS
Mr Velez said he was not surprised that US-listed Nubank shares had fallen more than 20% since going public on December 9, given the general rout in technology stocks.
“We told investors to expect volatility. Brazil and Latin America are volatile,” he said.
The recent downturn has caused Nubank’s market capitalization to fall below that of major Brazilian banks Itau Unibanco Holding SA and Banco Bradesco SA.
According to Mr. Velez, a rise in interest rates in the United States and Brazil will affect Nubank’s stock in the short term, but the longer-term growth trend will not be affected, as customers seek cheaper financial services. .
Nubank has grown despite two recessions, presidential impeachment and the COVID-19 pandemic in Brazil, Velez added.
Another way 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 also develops services for customers in its app, 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 fierce advocate of purely digital banking, Velez concedes that Nubank will need to consider some form of physical presence in the future to serve specific customers.
“Eventually, if we want to go all the way in certain segments, we may need 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 seeking mortgages.
The fintech could even consider partnering with a brick-and-mortar bank to offer mortgages, Velez added. “We would be very happy to partner with one of the big traditional banks.”
Closer to home, Nubank is preparing to launch checking accounts in Mexico this year, after receiving regulatory approval for its acquisition of local creditor Akala.
The growth of the Mexican operation was a pleasant surprise, Velez said, making Nubank the country’s largest credit card issuer, with 760,000 customers.
Mexico has lower financial penetration rates and less competition than Brazil, he added.
The bank’s expansion into Colombia, the CEO’s home country, will take longer as Nubank is still in the early stages of obtaining its operating licenses.
($1 = 5.3087 reais)