Morgan Stanley recommended clients buy shares of Nubank, the largest digital bank in Latin America and the fourth-largest financial institution in Brazil.
Analysts of the American bank believe Nubank could reach a valuation of USD 100 billion by 2026 — from its current USD 36 billion.
The bank has roughly 85 million customers across operations in Brazil, Mexico, and Colombia. More than a quarter of Brazilian bank customers (27 percent) use Nubank as its main service provider, per JPMorgan. In 2021, this rate sat at 15 percent.
Some of Nubank’s investors are Sequoia Capital, Founders Fund, Kaszek Ventures, Tiger Global Management, Goldman Sachs, Berkshire Hathaway, QED Investors, and DST Global.
Shares of Nubank are trading at BRL 6.89 on Brazil’s stock exchange — 40 percent lower than when the company held its initial public offering in December 2021. But Morgan Stanley argues that the bank still holds significant growth potential, both within Brazil and across other countries, particularly in Latin America.
In Brazil, the digital bank could boost its business by tripling revenues over the next five years through cross-selling products to its “large and loyal” customer base, as defined by Morgan Stanley. Furthermore, it could successfully replicate its business model in Mexico and Colombia, aiming to reach 45 million customers within the next five years.
Investment bank Jefferies agrees with Morgan Stanley’s assessment. In a statement earlier this week, Jefferies stated that Nubank is “one of the most significant disruptors globally” and highlighted the significant opportunities in the Mexican market.
In Mexico, Nubank has recently applied for a banking license from the local regulator, the National Banking and Securities Commission (CNBV). The digital bank intends to expand its operations and product portfolio in the region, including investments, salary portability, and higher deposit limits.
It has been three years since Nubank began its operations in Mexico, where it already serves 3.2 million customers. In the first half of 2023, the bank introduced a high-yield savings account, which attracted over a million customers in less than a month.
The Nubank holding posted record profits in Q2 2023 at USD 1.9 billion — a 60 percent growth from a year prior.
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