To The Moon

Before diving straight into NU Holdings' Q3 2022 (US tickeron : NU), would like to share findings about this US listed Fintech bank. 

If you are already familiar with NU's background, feel free to skip to Q3 2022 earnings. Of course you are welcome to continue. Hee hee.

The Company

Nu Holdings is the parent company of Nubank, a Brazilian online banking company that is disrupting the financial sector in Brazil and has expanded into Colombia and Mexico. 

Operational history.

Nubank started its "disruptive" journey since 2013. In Dec 2021, it IPO-ed in US market with an IPO price of US$9.

Latin American NU Banking's history.

Historically large, traditional banks in Brazil have a stranglehold on the way businesses are conducted  - in cartel & monopolistic manner - highly arcade.

What is "worse" is the High & Varied fees imposed, not to mention limited products offerings.

Casting these 2 limitations aside, presence of these monolithic banks are also far, few and in between - with branches found at most in 60% of Brazil cities.

Case of "Underpriviledged"

As a result of traditionalists limited outreach presence, willing or unwillingly - there are vast millions of people unserved / under-served / unbanked.

Potentials and opportunities.

NU Banks being a Digital Bank is able to reach out to these Millions of underserved and has been converting them into customers successfully; evident by the growth rate achieved.

Lets talk strategy : 

Its online solutions are designed to help customers in the followings :

a. Spending - faciliates customers payment for gds & svcs.

b. Saving - help customers with deposits, manage & save their monies in interest-earning accounts via debit cards.

c. Investing - provide solutions to help customers invest their money in curated investment pdts & svcs .

d. Borrowing - extend loans when needed in easy to receive, manage and pay back manner.

e. Protecting - affordable insurance designed to help customers secure insurance in life; with funeral benefits.

Potential Pitfalls :

1. Even though NU's customer acquisition costs (CAC) is low, NU is currently losing money as they fund their rapid growth.

Employees :

Approximately 6,068 staff overseeing all 5 areas of businesses and its expansive IT infrastructure; ensuring all systems go on a daily basis.

With the basics out of the way, lets jump in.

NU's presence in Colombia, Mexico and Brazil

In a short span of 8 years, NU has managed to penetrate 3 countries with a total combination population of 400 Million.

Vast opportunities are abound in helping out the unbanked.

Haven't even considered other surrounding countries where NU have yet to make their entrance.

Bank to the unbanked / underserved

Above slide is a testimony of NU's mission "to fight complexity to empower people in their daily lives by reinventing financial services."

Current "Average Revenue Per Active Customer (ARPAC)" is US$7.90 vs other sample banks that range from US$33.40 to US$54.20.

Looking at NU's customer profile - 49% Low income, 43% Middle income and 8% High income.

What does the means ?

Being an optimist, it simply means there is still so much opportunities to help customers' move from Low to Middle percentile and from Middle to High percentile, no ?

Qtrly ARPAC & Qtrly Revenue growth

Year-on-Year NU managed to increase its active customer revenue by +61% from US$4.90 to US$7.90. Similarly, its quarterly revenue has exploded +171% YoY.

Again, the future is "bright" if NU keeps to the pace of customers'engagement.

Net Interest Income & Net Interest Margin

Net income and Adjusted net income

For last quarter, NU's Net Income and Adj Net Income have come in at 7.8 Million and 63.1 Million respectively.

Bird's eye view of NU Q3 2022 earnings - bird's eye view.

NU's entry into both Mexico & Colombia in 2020 is bearing fruits now.

All pertinent Q3 earnings are found on the "Right" hand side.

Starting with "growth of customer base" to 70.4 Million ; an increased of +46% YoY; with 82% monthly activity rate.

Deposits have swelled to US$1.4 Billions; thats a whooping +73% YoY.

Overall, NU has put in a stellar performance that no one could really asks for more; given worldwide inflationary pressures. 

Some may cast doubt on NU's future earnings potential viability given that its customer's avg revenue is only US$7.90.

While its true, what NU's customers lack is average revenue per customer; nonetheless its customer volume mitigated the situation, enabling NU to report profits this Quarter as well.

NU - historical & current Qtrly earnings EPS

Just for the record, NU has been consistently beat or meet Wall Street expectations; that everyone knows sometimes border on being "ridiculous".

I am sold on NU. Are you ?  Do leave your thots & views in the Comments section below ok.  Thanks.

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Matching song ? Goin' To The Bank by The Commodores. Nostalgic track. Dunno ? YouTube it.

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