By Sam Boughedda
Nu Holdings (NYSE:NU) jumped Tuesday, currently up 16.9%, after the company reported its third quarter earnings on Thursday, with revenue topping analyst consensus estimates.
The digital financial services firm reported record revenue for the quarter, coming in at $1.3 billion versus the consensus estimate of $1.23B. Revenue grew 171% year-over-year.
The company's customer base grew to over 70 million after adding 5.1M customers in the quarter, with a record-high activity rate of 82%. Nu stated that the sustained increase in the number of active customers and higher consumer engagement bolstered its revenue growth.
In addition, its net profit was $7.8M.
"We continue to launch and cross sell best-in-class products, while keeping a low-cost tech platform with low cost of funding and a widening profit margin. While we saw increased delinquency in the quarter, consistent with the market trend, our risk-adjusted margins expanded by 100bps, showing we are being able to price increased risk appropriately. Nu is well capitalized and is positioned to deliver growth at scale in the long term," said David Vélez, founder and CEO of Nu Holdings.
Reacting to the release, Morgan Stanley analysts told investors in a note that they expected the shares to react positively after the company "reported strong results beating expectation on client net adds, revenues, gross profit, and adjusted net income, while ARPAC came in line with expectations."
"Loan-loss provisions and NPL ratios show no evidence that asset quality is deteriorating meaningfully, exactly in line with our long-held counter-consensus view," they added.
Elsewhere, BofA analysts stated that Nu Holdings reported positive trends on monetization, but there was asset quality deterioration and slower credit growth.
"On a positive note, i) revenue generation remained solid, reflecting increased client engagement and higher market rates, ii) funding costs started to reflect the benefits of recent changes in deposit remuneration, without having a material impact on balances, and iii) the efficiency ratio improved to an all-time low. On the other hand, personal loan origination decelerated in light of continued deterioration in asset quality while management noted that economic visibility remains low and that profitability could come under pressure in coming quarters in light of continued investments in developing and launching new products and expanding in the region," explained the analysts.