Warren Buffett and Berkshire Hathaway (WKN:854075)(WKN:A0YJQ2)-backed Nu Holdings, the parent company of Nubank, is planning an initial public offering on the New York Stock Exchange before the end of the year that is expected to raise more than $3 billion. That makes the Brazilian digital bank not only one of the largest publicly traded companies in Latin America, but also the third largest IPO in the U.S. this year. Nubank is looking for investors to give it a valuation of up to $50 billion. The company trades under the ticker symbol NU.
Here are five important numbers investors should know about the next Buffett-backed IPO.
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1. 48.1 million
This is the number of customers who do business with Nubank, a huge number! This total includes 47 million retail customers to whom Nubank offers debit and credit cards, deposit accounts, mobile payment services, personal loans, and online investing opportunities. These customers are mainly located in Brazil and Mexico, but also in Colombia, Chile, Peru and Argentina.
Nubank also has 1.1 million small and medium business customers, which is about the same as the number of business customers of U.S. Bancorp, the fifth largest bank in the U.S. (by assets). Nubank doesn't seem to offer any business loan products, so this could be a good area for it to expand in the coming years. It estimates that the Latin American market, with its 650 million inhabitants, will be worth $1 trillion this year.
2. 90 and 94
Nubank received a Net Promoter Score (NPS) of 90 in Brazil and 94 in Mexico. NPS measures how likely a customer is to recommend the company to others. It is a quantitative indicator of how good a company's customer service is and how much customers like the company. These NPS scores are remarkable when you consider that the average NPS for U.S. banks is around 35, and that even really good fintech companies in the U.S. only land between 70 and 89.
However, there are a few things to note. The other major banks in Brazil charge incredibly high fees and can make it very difficult to sign up for basic banking services. In addition, Nubank says it has given more than 5 million people a credit card or bank account for the first time, so the NPS numbers may be a bit exaggerated in the grand scheme of things. Ultimately, however, they show how much more satisfied customers are with Nubank compared to traditional banking services in Latin America.
3. 166 U.S. dollars
With 48.1 million customers and $8.1 billion in deposits, the average account balance per customer is about $166. This seems very little, but consider that the average GDP per capita in Latin America and the Caribbean, according to the World Bank, has lost 10.has not exceeded US$500. In the U.S., it has been above 60 since 2017.000 US dollars.
4. US$1.06 billion
This is the amount of revenue generated by Nubank in the first nine months of 2021, which nearly doubled from the same period in 2020. Of that, more than $600 million comes from interest on credit card balances and personal loans, and from investing cash in government bonds. The remaining $400 million or so comes mostly from interchange fees from credit and debit card purchases, but also from subscription revenue from the bank's loyalty program, late fees, and commissions from other services and products like the brokerage platform and insurance.
A good portion of revenue is distributed between interest and fees, although both lending and interchange fees are highly dependent on economic activity. Hopefully, the bank can continue to increase fee income from brokerage, insurance and other new products in the future.
There is certainly a lot of potential to increase your income. Nubank stated in its prospectus that average revenue per active customer (ARPAC) was less than $5 in September. For customers using credit cards and personal loans, monthly ARPAC was between $23 and $34. More traditional banks in Brazil have an ARPAC that is ten times higher, according to Nubank. While it's unlikely Nubank will reach that level, as it will never charge the same exorbitant fees as those banks, the company believes it can "meaningfully" increase ARPAC by selling more products and attracting more customers to itself.
5. 99 million US dollars
This is the loss generated by Nubank in the first nine months of 2021, which is an increase from the loss of $64 million that Nubank generated in the same period of 2020. However, considering that Nubank lost more than $171 million in all of 2020, it seems that the company will post a smaller loss this year, unless there is some sort of seasonal component in the fourth quarter. Nubank expects to continue making losses in the near future as it continues to invest in the business and acquire more customers, which is not unusual for a successful young fintech.
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