Nubank Shares Slide After First Quarter Earnings

(Bloomberg) -- Shares of Nu Holdings Ltd., one of the world’s biggest digital banks, fell after reporting first quarter results.

Nubank, as the firm is widely known, posted revenue of $3.2 billion in the quarter ending March 31 compared with the median estimate of $3.1 billion, according to data compiled by Bloomberg. Net income of $557.2 million, up 74% year-over-year, also topped expectations with its deposits and loan book growing more than estimated.

Still, gross profit came in below estimates, which the company said was due to higher credit loss allowances and increased interest expenses.

Nu shares, which had gained 27% year-to-date, dropped more than 6% in after-market trading.

The bank added 4.3 million customers in the quarter for a total of 118.6 million across its three geographies of Brazil, Mexico and Colombia, according to a release. 

“Over the past four quarters, we have acquired more customers than all of the five incumbent banks in Brazil together,” Chief Financial Officer Guilherme Lago said in an interview before the release. “So the customer growth machine continues to churn at a healthy pace.”

Nubank, which competes with Itau Unibanco Holding SA for the title of most-valuable publicly traded financial firm in Latin America, highlighted a significant ramping up of unsecured loans in Brazil while maintaining delinquency rates stable and under control.

The overall loan book grew to $24.1 billion while deposits reached $31.6 billion. Of those deposits, $5.4 billion are from Mexico where its client count reached 11 million people in the quarter. Nubank often pays interest rates higher than incumbent banks for deposits to lure and maintain customers. 

Lago said the opportunity to grow personal loans in Brazil is a bigger one at the moment as Nubank already has a large market share in credit cards as a percentage of the market. 

He said that “only fishing within our fishing bowl” will allow Nu to grow its personal loan holdings ten-fold. 

“It’s growing faster not only because I think our models are working well,” he said, “but also because it’s the segment in which we have lower penetration than credit cards.”

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