Nu Holdings (NU)

One of the largest digital banking platforms in the Latin American fintech space. Based in Brazil. Full-service financial powerhouse, with over 127M customers. Expanding to Mexico and Colombia. Venturing into travel. Received approval in January for US national bank charter. 

Key advantage is its cost structure, which traditional bricks-and-mortar incumbents struggle to match (monthly cost of service of 90 cents versus $10-20). Leveraging proprietary data and credit underwriting. Topline should grow at 20%, EPS ~25-30% range. No dividend.

Is risky, a Brazilian fintech. Up 70% this year. Has echoes of Robinhood. Has more room to run, to return to pre-Covid levels.

Dominates Brazilian fintech market. Winning large share of new loans made in that market. Estimated 25-30% growth for next few years. Operations also in Colombia and Mexico. Long-term growth involves expansion to more countries. 

Digital, no branches, very high consumer satisfaction. Started by helping those who couldn't get a traditional bank account, now gaining more affluent customers. No dividend.

Part of our caution is that it is a Brazil company and we do not follow it. Looking at a set of peers (via Bloomberg) it is not undervalued compared with peers, with a P/E ratio of 25X vs 16x to 20x for most peers. It is, however, growing fast, with EPS expected to double from 2024 to 2026 estimates. The last quarter was good. Nubank enters 2H with positive momentum, but macro headwinds in Brazil may test the sustainability of its recent acceleration. In 2Q, it reported a solid beat, with ROE of 28%, driven by net interest margin NIM recovery and a rebound in risk-adjusted NIM. This came alongside robust 40% forex-neutral loan growth and fee expansion. Asset quality held up well, with early delinquencies improving 30 bps and 90+ NPLs up just 10 bps, though Stage 3 formation ticked higher. Total loan growth was sequentially flat in FX-neutral terms, yet credit card loans and lending portfolios accelerated vs. 2Q24. Cost discipline is solid despite a slight deterioration in the efficiency ratio to 28.3% due to marketing and RSUs. Overall, 2Q marked a recovery in key profitability metrics, but questions remain about growth durability as economic conditions soften.  We think it is decent and the momentum has improved markedly, but we would not call it hugely compelling.
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He was wrong. He thought digital banking was the way to go.

This has run up too much so too risky in this uncertain market.