The Brazilian bank is taking market share and has a massive growth opportunity.
Shares of the Brazilian fintech Nu Holdings (NU 1.21%) exploded 54.7% higher in the first half of 2024, according to data provided by S&P Global Market Intelligence. The company continues to build on its dominant position in the Brazilian banking market and has its sights set on an even bigger market opportunity across Latin America.
Nu is a behomth in Brazil
Over the past few years, Brazilians without bank accounts have gone from 16.3 million to 4.6 million, and Nu has been a big reason for this. Since 2020, Nu’s customer count in Brazil has gone from 24 million to over 92 million, and the bank now serves over 54% of Brazil’s total adult population.
After a rough couple of years, Nu is on the right track and has posted five quarters of net income growth. The bank’s net income of $379 million in the first quarter was a record for the up-and-coming fintech and is one reason for the stock’s stellar performance in 2024.
NU Revenue (Quarterly) data by YCharts
Nu has done an excellent job of growing its customer count and getting more business from its existing customers. The bank has expanded by cross-selling and upselling to existing customers, and in the first quarter, the average revenue per active customer increased by 29% compared to last year.
However, with strong growth comes a lofty valuation. Today, Nu stock trades at a premium valuation, with a price-to-earnings ratio of 52 and a price-to-tangible-book value of 10.6. When compared with traditional banks, Nu is very expensive.
Here’s what’s next for Nu
Despite the lofty valuation, Nu’s growth opportunity is enormous. The bank has recently expanded into Mexico and Columbia, two of Latin America’s largest markets with significant unbanked or underbanked populations. According to recent data from Susquehanna, 66 million Mexicans, or 51% of the population, remain unbanked.
Because of its stellar growth, the bank is priced at a premium compared with traditional banks, and this high valuation could result in increased volatility. However, Nu has significant growth potential, and its strong first-half performance could be a precursor of more to come for patient investors.