Nubank is considered the undisputed disruptor in the Latin American banking sector. The company has a major cost advantage over all established banks in the region and also has one of the lowest customer acquisition costs in the world. In addition, it has a track record of over 10 years in disciplined credit underwriting.
With over 118 million customers (including approximately 99 million active customers), Nubank offers significant scope for further customer maturation and cross-selling opportunities. Although management is focused on expansion in Mexico and Colombia, expansion into other geographic areas outside Latin America is not ruled out in the medium term.
Despite a profit of over USD 2bn in Brazil in FY 2024, the share of the gross profit pool in the country is only 5%, indicating strong future growth. In particular, expansion into other lending products, such as payroll lending, offers significant growth potential in the medium term. Jefferies is more optimistic about the opportunity in Mexico than the market as Nubank could play a significant role in retail in a country with low banking penetration and low risk appetite from established banks.
Nubank is expected to generate returns on equity (ROEs) of over 40% by fiscal 2026. Mexico and Colombia are expected to contribute to earnings from 2025 as the bank gains scale there. The recent share price weakness is macro-driven, but the medium-term growth story remains intact
