President of Nubank (NUBR33) says credit card can disappear

Youssef Lahrech, President and COO of Nubank (NUBR33), stated that he agrees with a recent statement by Roberto Campos Neto, president of the Central Bank (BC): with digitization, the credit card can disappear. The executive assumed the position of CEO of fintech this Monday (15).

“Movie streaming has had a similar effect on the entertainment sector that the digitalization of payments has had on banks. Everything changed. I agree that the credit card can disappearand that’s why we have diversified into other forms of payment, including Pix, BNPL”, he told Valor Econômico newspaper.

The executive argues that, with the increase in transactions via pix, this trend is amplified. “I think Pix affects the debit card first, then the credit card,” he says.

“It takes a few years to reach this picture: the credit card has other functions, such as international purchases, installment payments. But ultimately, Pix will increase market share. I’m more than happy with a possible credit card cannibalization,” he adds.

In addition, Nubank’s CEO predicts that banking can increase with BC’s payment system.

“The addressable market in Brazil is still quite large, we can double or more our base in Brazil,” he said.

Nubank jumps 19.5% with positive assessment over 2Q22

After the release of the balance sheet for the second quarter of 2022, the fintech shares on the New York Stock Exchange closed with a jump of 19.54%, at US$ 4.71, with results above market expectations. Some points of the fintech result draw the attention of investors — the case of the default rate.

According to UBS-BB, adjusted net income for the quarter was in line with expectations and the Nubank balance sheet brought positive surprises.

The major negative highlight was the 90-day delinquency ratio, which grew in the second quarter and was therefore considered weaker than expected by the market. The index could have been higher, had there not been Nubank’s strategy to reduce the supply of credit.

“We note that management stated that the company reduced its personal loan growth due to short-term macro uncertainties. Despite the very good growth in revenue, we see some investors expressing concern about the increase in loans overdue for 90 days”, says the UBS-BB report.

The main highlights in the analysts’ view were:

  • 10% growth in the customer base from 1Q22 to 2Q22, with an activity rate of 80%;
  • Significant increase in Nubank’s ARPAC (Average Monthly Revenue per Active Customer) from 16% to US$7.8;
  • Total loans grew 3% in the quarter, supported by credit card (5% increase in the quarter). while personal loans declined 3% in the quarter;
  • Interest income grew 38%, while service fees grew 18%; and
  • In the top line, the volume of purchases grew 18% in 2Q22, with a drop in the interchange fee of 10bps in the quarterly comparison, to 1.1%.

Regarding asset quality, the default rate increased by 60 bps in the quarter to 4.1%, “but it would have increased by 120 bps in the quarter if Nu had
maintained its old methodology of low”, emphasizes the report.

Analysts also point out that during the conference call with Nubank executives, most questions focused on personal lending and growth trends and asset quality.

“Management believes that the early default indicates that the 90-day default rate should be more stable going forward, while in personal loans, growth is slowing but will remain above the market,” says UBS-BB.

UBS-BB recommends buying Nubank shares at the target price of US$ 8 per share.

“The actions of Nubank have been devalued in recent months, a move largely caused by a combination of growing concerns about asset quality and the devaluation of technology companies,” the analysts say.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

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