Buffett-backed Nubank triples profit on record revenue

SAO PAULO: Nu Holdings Ltd, the Brazilian digital lender that counts Warren Buffett’s Berkshire Hathaway Inc as a backer, has posted third-quarter profits that beat analysts’ estimates, as stronger-than-expected revenue helps the financial technology (fintech) company weather bad loans.

Adjusted net income more than tripled from a quarter earlier to Us$63.1mil (Rm290mil), topping the average estimate of Us$32.6mil (Rm149.8mil) in a survey of six analysts by Bloomberg.

Nubank’s revenue surged to a record Us$1.3bil (Rm5.9bil), above the expected Us$1.1bil (Rm5.06bil), with the number of clients climbing to 70.4 million.

“Souring loans have been rising given the current stage of the economic cycle, but we’ve been able to price in that surge really well,” chief executive officer David Velez said.

Efficiency gains and recent measures aimed at reining in funding costs also shored up results, Velez said.

The percentage of loans more than 90 days overdue rose to 4.7% from 4.1% three months earlier, better than the 5% estimate by Goldman Sachs Group Inc.

Banco Bradesco SA last week raised its guidance for bad-loan provisions, fuelling concerns that credit quality in Latin America is deteriorating.

“The pace of personal-loan origination has been slower than we expected as we’re carefully monitoring the macro backdrop, so origination was nearly flattish” compared to the second quarter, Velez said.

Fintech companies are expanding and boosting headcount across the region.

Nubank will finish this year with at least 1,000 more employees, co-founder Cristina Junqueira said in a separate interview.

The idea is to create “global platform teams” to replicate the success the Sao-paulobased firm has had in Brazil in Mexico and Colombia, where fintech only offers credit cards, she said. The hirings are mostly in areas such as fraud prevention, collections and information security.

In Brazil, Nubank’s main focus is to expand into areas including secure lending and payroll loans, as it seeks to diversify revenue, Velez said.