Nubank Stock Surges As Second Quarter Earnings Exceed Expectations

On Thursday night, Latin American digital bank Nubank announced revenue and profits that beat analysts’ expectations. Its share price jumped 10% on Friday to above $13.00, pushing its market value to nearly $64 billion.

Nubank reported second quarter revenue of $3.7 billion, up 40% from a year ago, which was in line with analysts’ expectations. Net profit rose 42% since last year to $637 million.

Monthly average revenue per customer climbed to $12.20, exceeding the $12.00 analysts had forecasted. This suggests Nubank is making more money off of existing customers, a part of Nubank’s business that is its most important vector for growth, says James Friedman, a senior fintech analyst at Susquehanna International Group.

Short-term loan delinquencies, or the number of Nubank customers who are late on their loan payments, decreased by 0.3%, while long-term delinquencies of 90 days or more rose by 0.1% to 6.6%. Nubank attributed the increase to seasonality and a spike in short-term delinquencies in the first quarter.

Declining credit quality is a pervasive problem in Brazil, especially with regard to personal loans and credit cards, Nubank’s core lines of business. “This is a concern that has lingered not only with us, but also with many investors and other stakeholders since late last year or early this year,” said chief financial officer Guilherme Lago on Thursday’s earnings call. In spite of this, he insisted that Nubank’s loans are performing “largely as expected.” Friedman says Nubank’s delinquency results were better than what central bank data had suggested and help to explain the stock’s 10% surge on Friday.

Nubank has its primary operations in Brazil and smaller business units in Mexico and Columbia. Its $63 billion market value makes it the second largest public company in Latin America after Brazilian banking giant Itau Unibanco. The digital bank attracted 4.1 million new customers in the second quarter, bringing its total user base to 122.7 million, just slightly short of analysts’ expectations. Growth was fastest in Mexico, where the number of credit card customers rose 52% since last year to 6.6 million.

The stock’s performance on Friday morning is likely also driven by the company’s planned foray into international markets, says Friedman. In recent weeks, Nubank has announced several new hires, including a new chief technology officer, global head of public policy and chief design officer to better prepare for global expansion, CEO David Vélez explained in response to an analyst question on Thursday evening. Vélez indicated that they’re also extending their recruitment efforts beyond just Latin America to find the best global talent.

“The international narrative is rapidly evolving,” Friedman wrote in an email to Forbes. “I think that’s the big surprise.”