Nu : S&P upgrades Nubank Brazil to 'BB' on a global scale and investment grade to 'brAAA' on a local scale

São Paulo, May 2nd, 2024 - S&P Global Ratings upgraded Nu Financeira S.A. - Sociedade de Credito, Financiamento e Investimento (Nu Financeira), one of the group's main operating entities and a core subsidiary, to 'BB' on the global scale and to investment grade 'brAAA' on the national scale, the same level of the incumbent banks and at the cap of Brazilian Sovereign rating. This is the agency's second upgrade assigned to NuFinanceira in less than one year.

Factors that led to the rating upgrade were that Nubank "maintained strong credit growth, with improving results and a better competitive position in Brazil's banking industry as a digital nonbank financial institution (NBFI)." Per the report, "Nubank's market position is not only stronger than other Brazilian NBFIs, but is now more comparable to the most domestic banks in the industry."

S&P also emphasizes Nubank's portfolio growth, customer loyalty, increasing efficiency, and better financial margins as contributing factors strengthening Nubank's market position. The credit portfolio-80% of which consists of credit cards and 20% personal loans-grew 49% annually on a foreign-exchange-neutral basis as of December 2023. This is partly because of its active customer base of 78 million, which grew 27% year-on-year as of the same date.

The report also states, "With this ongoing expansion, ever since achieving breakeven at the holding level, Nubank has been continuously reporting stronger results. The institution reported US$1.2 billion of adjusted annual profits at the end of 2023, materially higher than the previous US$204 million adjusted results of 2022. We think Nubank will continue posting above-average results in the next few years."

"The new upgrade from S&P Global Ratings is an acknowledgment from market stakeholders to Nubank's solidity. We are confident in our special blend of proprietary technology, exclusive and superior credit underwriting models, data-driven decision-making and disciplined risk management. With that, we can offer the best products at the most competitive rates to customers, while generating increasingly strong returns to shareholders," states David Vélez, Nubank CEO and cofounder.

This rating represents a new upgrade given to Nubank from S&P, which in June of 2023, had already increased the local rate from brAA to brAA+ with a stable outlook, thanks to an increase in financial margins and operational efficiency, and the stabilization of the company's asset quality despite market deterioration.

Future outlook

Nubank's continued growth trajectory reflects in S&P's decision to set a stable outlook for the company rating. "The stable outlook indicates that we don't expect any changes to Nubank's credit quality in the next 12 months. We expect that the entity will continue improving its financial performance through its sticky and large customer base and through the gradual diversification of revenue sources. We expect results to improve during 2024 and 2025. Moreover, we expect Nubank to remain a leading digital NBFI in Brazil without compromising the quality of its assets and capital metrics."