Brazil’s economic downturn may represent an opportunity for Latin America’s newest listed lender to gain market share aggressively despite the riskier environment. The fintech debuted on the New York Stock Exchange less than two months ago as Latin America’s most valuable financial institution, worth $52 billion. Although its shares have taken a hit since then, Velez said the company – whose 48 million clients make it one of the world’s largest digital banks and which recently expanded in Mexico – is well-positioned for growth. The ratio of nonperforming loans (NPL) to rise this year as Brazilian consumers struggle with high inflation, rising interest rates and a sluggish economy. Nubank keeping its NPL ratios below the market average due to its advanced use of data for underwriting policies. Nubank’s 90-day default ratio for credit cards is 3.3%, compared with the industry average of 4.8%.
Funded with retail deposits, Nubank does not depend on credit markets and has a large cash position since its $2.6 billion initial public offering. The short duration of the bank’s credit portfolio – six weeks for credit card loans and four to six months for personal credit – also allows better risk assessment. Expanding Nubank’s credit portfolio is seen by analysts as the key to reaching profitability. Nubank obtains less than 200 reais ($37.67) in annual revenue from each active client, whereas its largest rival, Itau Unibanco Holding, gets more than 1,200 reais.