Moody's assigns maximum AAA.br rating to Nu Financeira

This is an automated translation of the original release published in Portuguese

By Moody's 

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

Nubank's exceptional financial results were a key factor in the classification decision, with a net profit of R$1.9 billion in the first half of 2023. And, above all, Nu Financeira's profitability stands out, measured by the annualized net profit-to-tangible assets ratio, which reached an impressive 2.4%, surpassing the average of banks in the Brazilian National Financial System, currently at 1.5%, according to Moody's calculations.

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

Portfolio diversification with a focus on customers

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

What to expect for the future

Moody's forecasts continued growth for Nu Financeira, resulting in strong profitability for the company. This forecast is supported by the expected increase in revenues per customer and the maintenance of a low-cost operating structure, key factors that contribute to continuous 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,” highlights the report.

“The Moody's rating attests to the quality of the work we have done over the last 10 years and underscores that our business model is solid. And 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 a lot to benefit from the modernization of the financial system. Furthermore, the diversification of our portfolio has brought excellent results and we still have a lot to grow on this front,” said David Vélez, CEO and founder of Nubank.

Ba2 global rating

On a global scale, Nubank Brasil received a Ba2 rating from Moody's, which places the company on the same level as Brazil's sovereign rating and that of the country's largest incumbent banks. In line with the methodology adopted by Moody's, Nu Holdings was assigned a Ba3 rating, also on a global scale. Nu Holdings encompasses all Nubank companies, including its operations in Mexico and Colombia.

According to the analysis carried out on Nu Financeira's business in Brazil, the Moody's report highlights the company's solid capitalization and its broad customer base as significant strengths. Furthermore, liquidity is emphasized, since, in June 2023, Nubank's liquid assets represented 50.5% of its tangible assets, well above the average of 35.5% for the main retail banks in Brazil, according to Moody's. “Although this proportion is likely to gradually decrease over the next 12 to 18 months, Nubank's overall volume of liquid assets will remain at solid levels and will be large enough to cover short-term obligations,” says the Moody's spokesperson.

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 announcements made by Moody's are available on its global website, for Ba2 of Nu Financeira and Ba3 of Nu Holdings, and locally, for AAA.br. from Nu Financeira.