THE Nubank (NU, NUBR33) discloses its balance sheet for the first quarter of 2022 next Monday, 16th, after the market closes. The largest fintech in Latin America is expected to record a loss in the first three months of the year: the loss should be around R$416 million, according to an average estimate by the banks BTG Pactual (from the same controlling group as Exame) and Itaú BBA. Revenue should be R$ 2.3 billion according to BBA – BTG has no estimates for the data.

Investors’ focus, however, should be on the bank’s credit portfolio. The big question is whether fintech is able to expand lending without increasing the default rate.

It is worth remembering that the moment of high interest rates is challenging for the credit sector. This is because, as the Selic rate rises, money becomes more expensive and consumers find it more difficult to honor their debts, increasing default levels.

Even so, analysts expect Nubank to be able to deliver growth on the unsecured credit front – as is the case with personal credit – while maintaining the flow of payments.

“Nubank will likely be the outlier among digital banks, with faster growth in the loan portfolio and less pressure on the NPL [Non Perfoming Loan, indicador de empréstimos não pagos]”, reported a report by Itaú BBA.

The view is shared by BTG, which projects the gross loan portfolio to grow by around 30% in the quarterly comparison, with credit cards and personal loans growing by 25% and 45%, respectively.

“We expect net growth in the interest-bearing loan portfolio (revolving credit + personal credit) of around $700 million quarterly – above what we saw in the fourth quarter of 2021,” the analysts wrote in a report.

José Augusto Albino, founding partner of Catarina Capital, also recalls that the credit business is new in Nubank’s operation, and highlights that the success of the segment can validate the thesis of investment in the company.

“The main thesis is that Nubank manages to bring new financial solutions into its platform, achieving synergies within a very active customer base. In the case of credit, the challenge is to scale the operation without increasing delinquency”, said Albino.

The manager, specializing in technology investments, invested in Nubank’s initial public offering (IPO), but zeroed out the position in the company about a month ago, worried about market conditions. According to Albino, it was a short-term technical move, which can be reversed depending on the balance sheet result and the performance of the shares.

Both Itaú BBA and BTG Pactual also see an unfavorable scenario for the stock, and recommend the sale of the shares despite the constructive vision for the growth of the loan portfolio.

“We are fans of Nubank’s history. However, with the worsening macroeconomic scenario, stronger inflation and higher interest rates, we are naturally more concerned about the deterioration of asset quality, especially in the low-income and unsecured loan segments, to which Nubank has greater exposure”, said BTG analysts.

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Post lock-up volatility

In addition to the reaction to the balance sheet numbers, there is another factor that may affect Nubank’s shares next week. This is because fintech brought the end of the lock-up period to the same balance sheet date.

The lock-up period is a contractual clause that defines a period after the initial offering of shares in which investors – usually linked to the company – cannot sell their securities. With the end of the lock-up, it is natural that there is a selling pressure on shares.

The justification for bringing the end of the lock-up forward was to reduce volatility events for Nubank’s shares, linking the end of the clause to the balance sheet. The decision, however, was poorly received and could have controversial consequences.

“If Nubank’s balance sheet is negative and there is a selling pressure from investors in lock-up, the market will start to wonder if the big names that bet on fintech stopped believing in the thesis”, explained Albino.

Bradesco BBI estimates indicate that the end of the clause could release 854 million shares on the market.


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