Nubank results point to Latin America’s fintech strength

Ten-year-old Brazilian fintech Nubank reported strong revenue, user, and profit growth even in a difficult period, as Latin Americans expand their use of the company’s products.

Why it matters

Strong growth and a compelling product have contributed to company profitability, and it appears to be enjoyed by its users – now the question turns to where its next phase of growth will come from.

It’s important to note that the company remained in a strong position as a provider of credit (moving into payments later), therefore targeting a more profitable market dominated by major incumbents amid a boom in the fintech sector, and one that can ultimately be disrupted. 

What’s going on

Following a tumultuous 2022, in which the perception of fintech’s stability was in question, Nubank has been able to answer its critics despite difficult macro headwinds.

• User growth: 4.2 million added in Q4 (+38% year-on-year) to reach a 2022 total addition of 20.7m. Nubank now serves 74.6m around the world.
• Q4 revenue grew 112% year-over-year to $1.5 billion.
• Gross profit grew 137% year-on-year to $578.3m, with gross profit margins at 40%.
•  Nubank’s customer base now represents 44% of the Brazilian population.

An inflection point

CEO and founder David Vélez noted the company’s currently low customer acquisition cost, explaining to investors that 70 to 80% of clients come through word of mouth. As the company grows, it’s likely that its marketing costs are going to have to increase.

Digging into the financials, marketing costs are in fact rising with Q4 2023, up 43.6% YOY, or 48% YOY based on FX neutral figures.

It remains in a strong position, however, in that it appears to have a lot of headroom to rebundle services that it had previously unbundled as it built its business, having grown deposits 55% year-on-year and its monthly average revenue per active customer by 37% compared to 2022.

“We are very proud that as of the end of 2022, 58% of our active customers have chosen Nu as their primary banking account,” explained CFO Guilherme Lago on a call with analysts.

Key quote

"Despite the macroeconomic challenges of 2022, Nu was able to beat every key metric: maintained accelerated growth, gained share in products and markets," said CEO David Vélez, in a statement to Reuters.

Sourced from Nubank, Seeking Alpha, Reuters, FT