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Nu Holdings stock rises as Brazilian fintech reports rapid Latin America client growth

15:02, 16 August 2022

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Promotional image of two consumers holding a Nu Holdings card
Latin American fintech Nu Holdings (NU) stock rose on record revenues and client growth – Photo: Nu Holdings

Nu Holdings, Latin America’s largest fintech bank, saw its stock rise on Tuesday as it grew its customer base across three countries and reported record second-quarter revenue.

Nu Holdings (NU) stock was up as much as 13% in pre-market US trading. NU stock held an 18% gain over the previous day by noon on Tuesday. Over the past month the stock is up 36%.

Nu Holdings (NU) stock price

Founded in 2013, Nu Holdings is a digital financial services platform and technology company operating in Brazil, Mexico, and Colombia. It offers Nu and Ultraviolet credit and debit cards and mobile payment solutions.

Fintech involves the use of technology to improve activities in finance. The use of smartphones for mobile banking, investing and borrowing services are examples of technologies aiming to make financial services more accessible.

The company’s investors include legendary value investor Warren Buffett’s Berkshire Hathaway (BRKb) and Japan’s Softbank (9984).

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Berkshire Hathaway (BRKb) stock price

Nu Holdings Q2 earnings

Slide showing Nu Holdings key Q2 metricsNu Holdings

For the second quarter ended 30 June, Nu reported net income of $17m and revenue of $1.2bn, beating consensus estimates of $1.01bn.

“We registered record revenues and are making huge strides towards becoming a multi-product and multi-country platform,” Nu’s founder and CEO David Vélez said in a press release.

Nu’s Vélez studied business at Stanford University before working in investment banking and venture capital.

“Our largest operation – Brazil – is now profitable, having registered a net profit of $13m in the first half of 2022, driven by customer growth to 65 million and ability to offer and cross-sell new products.”

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São Paulo, Brazil-headquartered Nu said deposits rose 87% on the prior year to $13.3bn and it reached a total of 65.3 million customers, a 57% increase on last year’s second quarter.

In Mexico, Nu’s second largest market, its customer base increased over six times to 2.7 million while in in Colombia, it reached 314,000 customers.

A pair of Nu Holdings customer cardsNu Holdings

“We are now the number one issuer of new credit cards in both Mexico and Colombia –where we have just received a license approval to continue our expansion,” Vélez added.

Disruption

Nu has disrupted Latin America’s banking markets by offering sleek digital experiences and lower fees for products and services.

The company raised $2.6bn last December in its initial public offering (IPO) on the New York Stock Exchange.

“I favour the firm’s digital-first approach and its revenue growth figures are extraordinary, indicating that it is doing something very right. Additionally, while it has continuing operating losses, those losses are starting to narrow somewhat so far in 2021,” analyst Donovan Jones told Seeking Alpha ahead of Nu’s IPO.

“While the IPO isn’t cheap, given the firm's growth trajectory, reduced operating losses and apparent Berkshire backing, it is worth a close look.”

 

Further reading...

What You Need to Know

The week ahead update on major market events in your inbox every week. Subscribe
The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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