How Nubank Thinks About 2025 Priorities and Long-Term Strategy

Thank you Ila. Thanks for having me.

Sure. So 2024 was a year where we needed to really strengthen our base in our core markets which is Brazil, Mexico and Colombia. And so to really strengthen our base in those core markets, we defined four priorities that we shared with our investors at the beginning of the year. The first one was Mexico. We have to build a really strong base in Mexico since it's our second largest market and the opportunity is gigantic. There is over 120 million population but only 12% credit card penetration. So it's an amazing opportunity for New Bank. For Mexico specifically we were very successful with some of the results that we had through the year. We almost doubled our customer base getting to 10 million customers in Mexico. So becoming now one of the largest financial institutions in the country. So we're very happy with the progress we did there. Finalized also Mexico with one of the largest deposit base balance sheets in the country. Then for Brazil specifically there were two real key targets. The first one was grow in secure lending. Secure lending in Brazil what is called in Brazil consignado is the largest profit pool in the market over 450 billion reais in portfolio and we had zero we began the year with effectively zero in this very large market we were able to grow over 650% in this product and in the year with over 1 billion dollars in portfolio in one of the categories which is called FGTS we now have over 30% market share in all the new originations and we were able to sign nine different contracts with different municipalities and state entities around the country. So very good about secure lending. The other key part of Brazil was high income. High income is a really important segment for us at new bank. We have a large participation in the high income of Brazil. But we don't have significant share of wallet. We are used as the secondary or sometimes tertiary credit card or savings account. So it's a large opportunity for growth. We were also able to do significant progress in this segment. It was the fastest growing segment we had in new bank. It was driven by having one of the highest net promoter scores in the market. We have an 84% NPS there and we ended up the year with over 700,000 customers in what we call Ultraviolet. So feel very good about the progress. It's a long-term journey because it's a very competitive segment. There's a lot that we still need to do to be competitive in this segment, but feel very good about what we were able to do. And finally, we had a good progress in what we call the money platform, which is basically as we get to close to 60% of the Brazilian adult population with hundreds of millions of customers, we have the opportunity to grow beyond financial services and launch new verticals and products to our customers. So there we were able to see over a million customers buying the marketplace. We launched a travel experience into our app. We launched a cell phone experience in our app and is the beginning of getting into a number of different new verticals and segments over the next few years.

That's right.

I think it's all of these are really it's a long-term journey. And we kind of have to do both, right? We have to dream and think very big and have a plan for us to really be meaningful in all of these different segments but also be tracking our progress in the short term. They are not necessarily mutually inconsistent. You need one to track the other one. And so it's partly strategy and partly good tactical execution.

I think there are both. I mean, there are investors that are asking for the next quarter. There are investors that are asking for the next 10 years. We like the investors that are asking about the next five to 10 years because we really think that we have an opportunity to build a generational company. It's the early days of new bank, it's day one as we call it, it's the first minute and so we are focused on that long term on building on reinvesting and building on that long-term opportunity but we understand that it's important to build trust with investors and you build trust with investors by doing what you say you're going to do and so and you do that through delivering in the short term.

I was very happy with our 2024 results as I mentioned on the four priorities. We were able to see significant progress. Specifically on financials, we end 2024 with over 11.5 billion in revenue, growing almost 60% year-over-year. So that was a significant revenue growth. We added 20 million new customers going from 94 million to 114 million customers becoming the third or second largest financial institution in Brazil in terms of number of customers with an 83% activity rate. So that means we're not just adding customers that are not doing anything. This is adding a lot of customers that are engaging significantly with our platform. Very large about 4.2 products per customers with an increasing average revenue per active customers. So we're seeing a large platform that continues growing with a consumer base that is actively engaging in more products. From an earnings perspective, we almost doubled the earnings that we had going from a billion dollars last year to almost two billion dollars of earnings this year. That's a 28% return on equity. So, we might be one of the few financial institutions in the world that manages to both grow topline at almost 60% as well as generate a return on equity of 28% at the same time. You have both growth and profitability at scale which I think is something very unique for New Bank and we were able to show that through this year. So from financial perspective very very happy with the results also that we were able to show.

Yeah I mean I think at some point we'll run out of Brazilians. That's, you know, unless Brazilians start having many more babies, we're going to run out of Brazilians. And so...

Exactly. We have the under 18 segment of our product, which by the way was also one of the fastest growing segments last year, but unfortunately at some point we run out of Brazilians. That hasn't happened yet. What we saw through 2024 is still over a million Brazilians customers coming in through the doors every month. So the rate of new customers continues to be very active. But really the opportunity then becomes engaging more having this base engage more with more products. As we launch more products for high income, as we launch the money platform, as we launched secure lending, we have more products to offer our consumers and we see that average revenue per active customer increases and number of products per customers increases. While we have one of the largest, if not the largest, fully digital consumer base in Brazil, we still only have something like 3% of revenues in financial services in Latin America. So, while it might seem that we're big, we're actually tiny. We're actually still very, very small in terms of our fair share of revenues and participation on the market. And that is now sort of the second phase of that growth is providing more product engaging more with our customer base so that we can go from grow that 3% market share in total revenues in financial services to a very much large number over the next 5 to 10 years.

That's right.

Sure. So I think it's we decompose the business in a number of different pieces. First one we need to continue adding customers. We add customers in Brazil, well, now Mexico and Colombia and that customer machine continues to be extremely healthy. What's been amazing about New Bank is we for 11 years have been able to build one of the largest fully digital customer bases with effectively no marketing or significant branding. Our marketing spend or customer acquisition cost continues to be less than $5 per customer. So, one of the lowest in the world. Our base was built fully organically through word of mouth and that's a function of the type of product that we were able to deliver and the type of consumer experience that we gave to our consumers. So we have a customer origination machine that happens at a very low cost and that's a reflection of our differentiated position in the market. Those customers then as they join our platform they start getting more products. It could be a savings account. They start doing payments through Pix. Could be a credit card could be a loan. Now with money platform they might buy a travel ticket. They might buy a TV. They might buy an iPhone. They might get a cell phone account with us with new cell. So there is more products being delivered at zero marginal cost to our customer then they start engaging with more that increasing number of products per customer drives an increasing average revenue per customer. Today on average we have something like about $10.50 per customer. Traditional banks have $40 per customers. Now we don't I don't think we're going to get to $40 per customers because there is a lot of fees that banks charge that we won't charge.

So maybe we won't get to 40, but maybe we get to 25 30 at some point. There's a huge significant growth opportunity of revenue per customer as we deliver more products and customers get to know us better and we're able to underwrite them better to get a better customer line. So that drives revenue and then we are able to scale that portfolio with an incredibly efficient cost structure where if you look at for 11 years our cost to serve a customer hasn't really increased. It's less than $1 per customer. While yes, more products is more complexity, we get significant economies of scale. We have a lot of our own technology. We built our own core banking system. We built our own databases and that gives us a lot of operation efficiency. So that means being able to serve a customer incredibly efficiently. And so if you see an increasing revenue per customer with a fixed cost to serve, you're going to see a significantly increasing profit per customer. And that's been the model and the flywheel that we continue to execute.

Yeah. So, act one in a way is a continuation of what we did in 2024. We're still operating in Brazil, Mexico, and Colombia. Even in Brazil, these early days I was discussing, we still have a lot of market share to gain. Mexico's early days, Colombia is very early days. We feel very good about the traction, but lots to do, more products to launch, more ways to engage the customers. So, we're going to be very focused on increasing the type of products that we offer in these three geographies. Consistently challenge ourselves to really innovate in terms of the product construction and what we can able to offer for our customers and that's the way that we maintain the leadership in terms of quality and net promoter score which is our leading indicator as a customer and that way we continue strengthening that position of being the leading digital bank in Latin America.

I mean, listen, I think we've heard critics, we've had critics for breakfast, for lunch, for dinner since we started the company. A lot of skepticism. We always go back to the first principles and again I think the model is just superior. It's just a superior model to bank the global mass market retail consumer. When through technology you're able to provide a product that is higher quality at a lower cost you win. That's a winning formula. That's what we're showing these three countries. Yes, operating in Latin America is volatile. Macro changes one day from the other. In 11 years, we've seen 8% GDP contraction in one year. We saw the worst recession in Brazil in 100 years. We saw presidential impeachments. We saw scandals. We saw corruption. We saw all type of negative headlines that you can possibly imagine. But we as a company are very resilient to that. And I would like to think about us as almost anti-fragile. Every time the environment changes, we use it as an opportunity to overexecute and to move faster than everybody else. It's Senna, the Formula One driver that says that it's impossible to pass 10 cars when it's sunny, but it's possible to pass 10 cars when it's rainy. And in Brazil, it's always raining and Mexico is always raining. Or at least we get a little bit of sun and then it rains again. So listen, it's part of the journey. I think it just makes us a better company. I think we're ready as the winds change, we change faster than everybody else. And ultimately executing in an environment like this becomes a comparative advantage. And that's I think what we've been able to show for over a decade. So if things are sunny, we're happy. If things are rainy, we're happy as well.

That's correct.