Moody’s assigns NuFinanceira Ba2 rate on a global scale and Nu Holding receives the Ba3

São Paulo, October 23, 2023 – Moody’s Investors Services, one of the leading global credit rating agencies and risk analysis firms, has assigned Nu Financeira the prestigious investment-grade rating of AAA.br and Ba2 on a global scale, highlighting the performance of the company and the successful consolidation of its operations in Brazil. This decision was based on Nubank’s position in the consumer finance segment, with a customer base of 80 million in the country (as of June 2023) and a strong presence in the credit card industry.

Nubank’s strong financial results were a key factor in the rating decision, with a net profit of $224.9 million in the first half of 2023. Additionally, the profitability of Nu Financeira, measured by the annualized net profit index on tangible assets, reached 2.4%, surpassing the average of banks in Brazil’s National Financial System, which currently stands at 1.5%, according to Moody’s calculations.

Moreover, the company’s solid risk management practices were highlighted as essential in its positive rating. The company maintains comfortable levels of regulatory capital and controlled delinquency rates. Furthermore, Nu Financeira has high liquidity, with a loan portfolio predominantly consisting of short-term credits from its broad customer base.

Nubank’s strategy of diversifying its portfolio to cater to its wide customer base was also highlighted. The company has successfully launched complementary products and services, including a marketplace, insurance, investment brokerage, and payroll loans. The broad acceptance and performance of these new offerings reflect Nubank’s customer-centric approach, placing customer needs at the center of its operations.

Global Rating Ba2

On a global scale, Nubank in Brazil has received a Ba2 rating from Moody’s, which puts the company on the same level as Brazil’s sovereign rating and the country’s largest incumbent banks. Consistent with Moody’s methodology, Nu Holdings has been assigned a Ba3 rating, also on a global scale. Nu Holdings includes all Nubank companies, including its operations in Mexico and Colombia.

In its analysis of Nu Financeira’s business in Brazil, Moody’s report as highlights the company’s solid capitalization and wide customer base as significant strengths. Additionally, liquidity is emphasized, as of June 2023, Nubank’s liquid assets accounted for 50.5% of its tangible assets, well above the average of 35.5% for leading retail banks in Brazil, according to Moody’s. “While it is likely that this proportion will gradually decrease over the next 12 to 18 months, the overall volume of Nubank’s liquid assets will remain at solid levels and be sufficiently large to cover short-term obligations,” stated a Moody’s spokesperson.

What to Expect for the Future

Moody’s expects continued growth for Nu Financeira, resulting in strong profitability for the company. This forecast is supported by the expected increase in revenue per customer and the maintenance of a low-cost operational structure, which are essential factors contributing to ongoing improvements in operational efficiency. “The stable outlook reflects our expectation that Nu Financeira will continue to gradually expand its operations, maintaining solid capital and profitability ratios over the next 12 to 18 months,” the report emphasized.

“The Moody’s rating attests to the quality of the work we have done over the past 10 years and reinforces that our business model is solid. This is just the beginning of our story. We are very confident in our expansion strategy in Latin America, where there is a huge market that still has much to benefit from the modernization of the financial system. Additionally, diversifying our portfolio has yielded excellent results, and we still have much room to grow in this area,” said David Vélez, CEO and founder of Nubank.

As Nubank continues to expand and strengthen its operations, it remains committed to offering exceptional financial services to its customers while maintaining its strong capital position and profitability metrics.

The statements made by Moody’s are available on its global website for the Ba2 rating of Nu Financeira and Nu Holdings’ Ba3, as well as on the local website for the AAA.br rating of Nu Financeira.

Update on November 6, 2023, after the complete reports were published. They can be accessed on the local and global Moody’s website.

The reports released with the analyses made by Moody’s detail the factors that led to the ratings received by Nubank. Among them:

• Nubank’s credit portfolio is characterized by a conservative risk management culture, resulting in comfortable levels of regulatory capital, low credit card delinquency, and ample reserves for doubtful debtors. The quality of the portfolio is sustained by prudent subscription policies and an experienced credit department team that uses technology and adopts the “low-and-grow” model. In June 2023, Nubank’s credit card portfolio closed the same period with R$58 billion, making Nubank the third-largest credit card issuer in the National Financial System. 
• The 90-day delinquency reported by Nubank of 5.9% in June 2023 remains below the market average (8.5% in June 2023).
• Nubank’s funding structure is mainly composed of deposits, which represent almost 90% of the total funding until the end of the first half of 2023. The amount of resources raised by Nubank increased by 25% compared to the previous year. Deposits are mostly composed of Bank Deposit Receipts (RDBs), which represent a resilient, stable, and low-cost source. 
• Nubank maintains high capital ratios, comfortably above the regulatory requirements established in Brazil. In June 2023, Nubank reported a regulatory capital excess for Brazil operations, already considering this regulatory change (Resolution 200), of US$ 700 million and a cash position in the holding of US$ 2.4 billion.