Nubank (NUBR33) reports a loss of US$ 29.9 million in the 2nd quarter of 2022, but profits in adjusted terms

Nubank (NYSE:NU; B3:NUBR33) posted a net loss of $29.9 million in the second quarter of the year, up 96.7% from the negative balance recorded a year earlier (from $15.2 millions).

The adjusted net result, however, resulted in a profit of US$ 17 million. The figure represents an increase of 3.03% in relation to the R$ 16.5 million obtained in the same period last year. The number is adjusted for share-based compensation expenses and tax effects.

On the earnings call, Nubank founder David Vélez said the bank has “maintained the ability to reinvest profit in expanding and improving operations, including those in Mexico and Colombia.”

The company’s revenue was US$ 1.157 billion in the period, an increase of 244% compared to the second quarter of 2021. Expenses with provisions for credit losses remained stable at 3%.

The digital bank ended the second quarter with 65.3 million customers, up 56.6% compared to a year earlier. The active customer portfolio stood at 52.3 million compared to 29.9 million a year earlier. The activity rate was 80% from 72% in Q2 2021. Average monthly revenue per active customer more than doubled to $7.8.

Nubank’s total credit portfolio reached US$9.2 billion in the period. Of the total, US$ 7.1 billion corresponds to credit cards and US$ 2.1 billion to personal credit.

“We have a lot of liquidity on our balance sheet. Our only limitation is our credit underwriting appetite, which is 100% under our control. We chose to be a little more selective in the second quarter, but we also chose to re-price our products more aggressively,” said Guilherme Lago, Nubank’s CFO in a conference call about the company’s results.

Deposits totaled US$ 13.3 billion, an increase of 77% in the comparison between the periods. The company highlighted that the funding was made at a cost below the CDI, Brazil’s risk-free rate, resulting in “a significant excess liquidity”.

The CFO says that Nubank should continue to grow at higher levels than the market average, but will continue to be “selective and conservative”. Of the total customer base, around 4 million have a personal loan and more than 11 million are eligible to purchase financing.

The default on loans from 15 to 90 days was stable compared to the first quarter at 3.7%, “suggesting that the normalization cycle after the Covid pandemic may be coming to an end”, says the text accompanying the result. Delinquency over 90 days, in turn, increased from 3.5% to 4.1%, in line with the bank’s expectations.

“Our baseline expectation for the rest of 2022 is that our 15- to 90-day early delinquency ratio will remain stable if there are no material changes to our underwriting strategy or business environment,” said Lago.

In the second quarter, Nubank implemented a new methodology that anticipated the decline in personal loans in arrears from 360 to 120 days, while that of cards remained at 360 days. “Such changes have no impact on the result, as these write-offs had already been fully provisioned”, says the text accompanying the bank result. Executives say the practice is more common among banks around the world.

The balance of provisions ended the second quarter at $968 million, up more than 15% from the previous quarter. “The growth of the loan portfolio was responsible for around 85% of the increase in provisions,” said Nubank.

The volume of card purchases was US$ 20 billion, an increase of 94%. “This increase was due both to the growth of the customer base and the maturation of the current customers’ harvests and the greater use of Nu’s product portfolio, made up of credit cards, prepaid cards, Ultravioleta cards and cards with guarantee”, explained the company, in the text accompanying the results.

Lago explains that the delinquency rate of more than 90 days is a metric of overdue stock, rather than flow, so it should take longer to stabilize, and should continue to rise in the coming quarters.

Financial and transactional services costs jumped from $177.2 million in the second quarter of 2021 to $794 million.

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