S&P upgrades Nubank rating to brAA+ and highlights improving trend in financial results

São Paulo, June 29, 2023 – S&P Global Ratings has upgraded Nubank’s rating from brAA to brAA+ with a stable outlook. The decision was based on the company’s consistent improvement of operational trends, as reinforced by our most recent  Q1’23 financial results. 

The main drivers were “an increase in financial margins, the strengthening of the company’s operational efficiency, and its ability to keep credit provision expenses manageable, despite increased risk in this sector since 2022,” states the report. 

“As a result of portfolio growth and its mix with a greater focus on higher profitability products, Nubank has been demonstrating an increase in its financial margin and revenues. This, coupled with better cost control, has allowed for an improvement in its operational efficiency”, indicate the analysts.

S&P also emphasizes Nubank’s strong capitalization and an efficiency ratio of 39%, which reflects operational leverage and positions the company as one of the most efficient and well-capitalized players in Latin America. A robust liquidity position, with a 33% loan-to-deposit ratio, adds to the solidity metrics. 

Nubank has been consistently able to grow its product portfolio, attracting a larger customer base and further engaging existing clients. Currently, the company serves over 80 million customers in Brazil, Mexico, and Colombia, with an 82% activity rate and a growing product portfolio, which includes the recent successful Cuenta Nu launch in Mexico. 

Net Income in Brazil reached a record of $171 million in Q1’23, with revenues doubling in one year, to $1.5 billion. The company’s earnings-generating power comes from its ability to grow its customer base and increase cross-sell to further monetize this pool while keeping low costs to operate. 

Future outlook

Nubank’s continued growth trajectory reflects in S&P’s decision to set a stable outlook for the company rating. “[Nubank] is expected to maintain its leadership in the digital banking segment and diversify its revenue sources, combined with the gradual monetization of its customer base. Furthermore, we anticipate that the entity will continue to show an improving trend in its financial results in 2023 and 2024”, states the report.

S&P also expects Nubank to keep NPL in check, continuing to outperform the industry.