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Why Nu Holdings Stock Rose 15.3% This Week

Motley Fool - Fri Mar 31, 10:44AM CDT

What happened

Nu Holdings (NYSE: NU), a Brazil-based digital bank, saw its stock price soar 15.3% this week, as of the opening bell on Friday, according to S&P Global Market Intelligence.

The markets were up overall this week, with the major indexes higher by 1.6% to 2% at Friday's open.

So what

There appeared to be no direct catalyst that drove Nu Holdings higher this week. More than likely, the stock rode what was a rebound for the banking industry, which is up about 3.4% this week, according to the KBW Bank Index.

This comes after a couple of weeks of sharp declines for most banks following the crisis in the industry.

Federal regulators' efforts to shore up banks with liquidity and provide a backstop to avoid more failures seemed to steady the market. The big news earlier this week that assured investors was the announcement that the FDIC had sold the assets -- deposits, loans, and branches -- of Silicon Valley Bank to First Citizens BancShares.

Now what

While Nu Holdings trades on U.S. markets, it is based in Brazil and is not as directly tied to what's going on in the U.S. banking industry. That might explain why the stock is up about 18% year to date as of today, while the banking industry is down approximately 19% this year in the U.S.

Nu Holdings has been growing rapidly, coming off record revenue in fiscal 2022, up 128% year over year to $4.5 billion. It also posted its second straight quarter of profitability in the fourth quarter, with net income of $58 million.

Nu has a few things going for it, starting with its growth. It added 4.2 million customers in the fourth quarter and 20.7 million in 2022, giving it 75 million customers. This is up 38% from the previous year and makes Nu the fifth largest bank in Brazil, where 44% of adults are its customers.

It also has low overhead as a digital bank, with an efficiency ratio of 47.4%.

And it has expanded into Mexico and Colombia, where there are huge opportunities for growth. In addition, Warren Buffett and Berkshire Hathaway have it in their portfolio.

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SVB Financial provides credit and banking services to The Motley Fool. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and SVB Financial. The Motley Fool has a disclosure policy.

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