Nu Holdings (NYSE: NU) is a Brazil-based digital bank operating under the banner NuBank. It operates in three Latin American countries, so it might not be on your radar. But if you're an investor, it should be. It's growing by leaps and bounds, and its stock has gained accordingly. Can it be part of a millionaire-maker portfolio?
The bank customers have been waiting for
Banking is an age-old business, but digital banks have been upending the industry with easy-to-use services that have been attracting millions of customers. Nu is at the forefront of the digital banking revolution in Latin America.
It serves its home country of Brazil as well as Mexico and Colombia, and it's growing at lightning speed. Revenue increased 65% year over year in the second quarter to $2.8 billion. To put that into context, it's a slowdown from several quarters of triple-digit percentage growth before inflation, and it's pretty impressive as a "slowdown" in the high-interest-rate environment. Net income more than doubled to $487.3 million.
Nu's fundamental growth strategy is that it can offer a satisfying experience for customers that improves on traditional financial services providers, including low-fee products. Once it gets customers to try its platform and see for themselves, they sign up for more products, leading to increased revenue at a lower total acquisition cost.
That's what's been playing out, and Nu reports a metric it calls average revenue per active customer (ARPAC) as one of its baseline growth metrics.
![https://img.particlenews.com/image.php?url=48lfmg_0vTiPprP00](https://img.particlenews.com/image.php?type=thumbnail_580x000&url=48lfmg_0vTiPprP00)
Image source: Nu Holdings.
Customers are also engaging with the platform as they sign up for more products, and the monthly activity rate has been holding steady at 83%.
The future is wide open
That's all in the past, but there's still enormous opportunity. Nu added more than 5 million new members in Q2 to reach 104.5 million, and the bulk of that still comes from Brazil, where it already has more than half of the adult population as customers. It's just getting started in Mexico and Colombia, where it only recently started operating, and who knows where it might go in the future. More people -- 60% of monthly active users in Q2 -- are making Nu their primary banking platform.
It's also making strong progress in its credit business . The total portfolio increased 49% year over year in Q2, and although delinquencies have been increasing, it's in line with expectations at a pressured time. Deposits increased 64% year over year, while the cost of deposits remained below blended interbank rates of Nu's countries of operation. Net interest income (NII) increased 77% year over year, and management is confident that it can generate future NII growth with deliberate credit organization.
This stock can keep it up
Nu is capturing market share and leveraging its digital systems to develop a better system and attract new business. Its stock is reflecting this journey and is up more than 100% over the past year.
There are risks with Nu stock. It's still young and launching new products. It's not profitable yet outside of Brazil. It also operates in countries with volatile economies. Its performance under these conditions sparks confidence, but the underlying conditions can't be ignored.
Can it mint millionaires on its own? While there have been single stocks that turned ordinary investors into millionaires, it's not the usual way to investing success. Most investors have the best chance of becoming a millionaire by retirement through investing in a well-diversified group of stocks , early and consistently. Nu is an excellent growth candidate for an individual portfolio.
Nu does seem to have exceptional potential, and if it can keep up its robust growth, which it looks like it can, it should be a winning stock for any investor.
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Jennifer Saibil has positions in Nu Holdings. The Motley Fool recommends Nu Holdings. The Motley Fool has a disclosure policy .
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