Nubank's profit crosses $1 billion, beating estimates; shares jump

Brazilian digital lender Nubank reported a quarterly net profit exceeding $1 billion in the April-June period, surpassing analysts' estimates. This marked a 49% increase year-on-year on a foreign-exchange-neutral basis, surpassing the $967.2 million prediction by Visible Alpha. The lender, which serves over 139 million clients across Brazil, Mexico, and Colombia, is also set to launch operations in the U.S. Nubank's shares saw a significant jump of 9.5% in extended trading after the market closed on Thursday, reaching approximately $15.25 per share.

The company's revenue climbed by 39% to $5.88 billion, outpacing the $5.60 billion forecast by Visible Alpha. Additionally, Nubank's risk-adjusted net interest margin rose to 12.4% from 9.9% the previous year. Chief Financial Officer Rob Livingston attributed the profit surge to higher revenue and an improvement in risk-adjusted net interest margin during an analyst call.

Livingston expressed confidence that the current level of risk-adjusted net interest margin is sustainable in the foreseeable future. JPMorgan analysts also noted that the result was a substantial beat even for investors who were previously positive before the announcement.

Nubank experienced a decline in the cost of credit, which had previously raised concerns, as it decreased to $1.69 billion. However, this reduction remained 60% higher than a year earlier. The company benefited from Brazil's Desenrola debt-refinancing program, which aimed to assist individuals in renegotiating debt. Livingston explained that while the program contributed to cost reduction, it would have resulted in similar improvements due to seasonal factors, accounting for approximately 5% of the bank's total cost of credit.

The credit portfolio grew by 37% year-on-year and 5% quarter-over-quarter, reaching $39.4 billion. Early delinquency rates were reported at 4.8%, a slight increase of 0.3 percentage points year-on-year but down from 5% in the first quarter.