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From start-up to Latin America's largest digital bank: how David Vélez challenged the traditional banking system with Nubank, won millions of customers and is now expanding further. From the new Smart Investor.
More than ten years ago, David Vélez may have been ridiculed for the idea of founding a digital bank in his native Brazil. But that is a thing of the past - today, every second adult has an account with Nubank. The bank is now also the clear number one in Brazil in the lending business with private customers.
Vélez consistently focused on a user-friendly banking app as well as attractive offers such as a credit card and a digital account without fees. In doing so, he shook up the previously strictly regulated banking market. In addition, many banks categorically rejected lower-income customers. Today, Nubank and its listed parent company Nu Holdings are among the fastest growing fintechs in the world.
The Group has transferred the success of its scalable, digital platform to new countries in Central and South America. It entered the Mexican market back in 2019, followed by Colombia a year later. Most recently, Nubank had more than 110 million active customers.
Nu Holdings shareholders have experienced a rollercoaster of emotions since the IPO. After a disastrous 2022, the NYSE-listed stock set off on an impressive rally. The recent fall in the share price is likely to be a healthy correction. It was triggered by figures and an outlook, both of which were largely in line with expectations.
In addition, there was news of a share sale by Warren Buffett's Berkshire Hathaway. In this situation, it is worth taking a sober look at the fundamentals. With sales growth of over 50 percent, a quarterly profit of 553 million US dollars, more than five million new customers per quarter and a return on equity of 30 percent, nothing has changed in the success story of Nu Holdings. The lower valuation (P/E ratio of 18) now invites investors to buy in.
Guest author: Marcus Wessel, Smart Investor
