Nu Holdings (NYSE: NU), the parent of Brazilian fintech Nubank, reported a fourth-quarter revenue of $2.99 billion, beating analyst expectations of $2.74 billion. However, its stock cratered over 17% as investors zeroed in on shrinking net interest margins.
Nu’s net interest margin (NIM) fell to 17.7%, a sequential drop of 70 basis points. The company attributed the contraction to foreign exchange volatility and its deposit strategy in Mexico and Colombia. The margin squeeze cast a shadow over an impressive 85% year-over-year increase in net income, which reached $552.6 million on an FX-neutral basis, alongside a robust annualized return on equity of 29%.
The fintech giant added 4.5 million customers during the quarter, growing its total customer base to 114.2 million—a 22% rise from the previous year.
David Vélez, founder and CEO of Nubank, said,
“2024 was a transformational year for Nu as we advanced our mission to empower millions across Latin America with accessible, transparent, and low-cost financial services.”
However, the company’s monthly activity rate dipped to 83.1%, reflecting faster customer growth in Mexico and Colombia compared to its established Brazilian market.
Nu Holdings’ (NYSE: NU) lending portfolio more than doubled year-over-year to $6.1 billion, driven by strong demand. Its credit card portfolio also grew, climbing 28% to $14.6 billion. Total deposits jumped 55% to $28.9 billion, signaling confidence in the company’s offerings. On the efficiency front, Nu improved its efficiency ratio by 150 basis points sequentially, bringing it to 29.9%.
BofA Global Research analyst Mario Perry commented, “In 4Q24, net income of U$553mn remained flat with 3Q24 and was in line with BofAe, while ROE contracted 150bp QoQ to 28.9%. Results were negatively impacted by a 13% devaluation of the BRL in the quarter, which distorted growth figures. Nonetheless, the quarter reflected muted revenue generation (+2% QoQ) on further NIM contraction (-70bp QoQ to 17.7%, and -210bp in the past two quarters) mainly due to a lower yield on the loan book given a continued shift in loan mix to lower-risk products. In fact, total revenues rose 24% YoY, or at its slowest pace in several years, causing monthly ARPAC to decline for a third consecutive quarter to $10.7 from $11.4 in 1Q24. On a positive note, asset quality improved (also a function of loan mix), which led to a modest reduction in the CoR, although it was not enough to compensate for slower revenue growth, with risk-adjusted NIM down 60bp QoQ, to 9.5% (and down 150bp in the last 2 quarters).”
Perry maintained a Neutral rating on Nu Holdings (NYSE: NU) stock with a $14.00 price target.
