By Tatiana Bautzer and Carolina Mandl

SAO PAULO, (Reuters) – Brazil’s current economic crisis may be an opportunity for Latin America’s newest lender, David Velez, founder and CEO, Nubank digital bank, to increase market share aggressively despite the more risky environment.

This fintech, which is worth $52 Billion in Latin America, was listed on the New York Stock Exchange just two months ago. Although shares of the fintech have suffered since, Velez stated that the company, with 48 million customers and a recent expansion in Mexico, is well-positioned to grow.

Velez indicated that he expected the ratio for non-performing loans to increase this year because of high inflation in Brazil, increasing interest rates, and a slowing economy.

However, he believes Nubank will keep its NPL rates below the average market rate due to its extensive use of data in underwriting policies. Nubank’s 90 day default rate for credit cards was 3.3%, which is below the industry average of 4.8%.

Velez said Tuesday that the riskier outlook could even offer a chance for Nubank to grow faster, in a video interview. Nubank is funded with retail deposits and does not rely on credit markets. It also has large cash reserves since December’s $2.6 billion initial public offer (IPO).

“We may have had the opportunity to accelerate, and even take more.” [market]Velez explained that the share and leave rates of interest are even lower so our products can be more competitive. Velez said the bank’s short credit portfolio, which is six weeks in duration for credit card loans and between four to six for personal credit, allows them to better assess risk.

Analysts see expanding Nubank’s credit base as key to profitability. Based on estimates, Morgan Stanley According to (NYSE) analysts, Nubank receives less than 200 Brazilian reais ($37.67 per year) from every active client than Itau Unibanco holdings, which earns more than 1,200.

According to Morgan Stanley, mortgages are the most lucrative credit product for retail banks. Next came payroll loans and personal loan.

Nubank plans to offer payroll loans and expand the range of credit options offered to customers by Creditas partner Creditas.

ROLLER-COASTER DEBUT

Velez indicated that it was not surprising that Nubank’s U.S. shares were down more than 20% from their initial stock market listing on Dec. 9. This is due to the larger rout in technology stocks.

We have always warned investors about volatility. He said that Brazil and Latin America were volatile.

Nubank’s current selloff has brought its market capitalization down below the level of giant Brazilian banks Itau Unibanco Holding SA, Banco Bradesco SA.

Velez indicated that while Nubank’s stock may be affected by an increase in Brazilian interest rates, it will have no impact on the bank’s long-term growth as people look for cheaper financial services.

Velez explained that Nubank survived two recessions as well as a president impeachment in Brazil and the COVID-19 pandemic.

One channel that can increase your revenue is to sell more investment products via its broker Nu Invest. Easynvest was acquired in September 2020.

Nubank’s app is expanding its services, including e-commerce, gambling, and insurance. This service can be accessed mostly via partners, in which Nubank has a stake, through its venture capital fund.

BRICKS AND MORTAR

Velez, a fierce advocate of digital banking only admits that Nubank must consider physical presence for specific clients in the future.

He said that “eventually, if you want to move through on some segments, then we might have to consider having an offline presence to enable us to better serve our customers,” and cited high-net worth clients looking for mortgages as examples.

Velez said that the fintech may even be open to partnering with brick-and mortar banks in order to provide mortgages. Velez said, “We are happy to partner any large traditional bank.”

Nubank has plans to offer checking accounts in Mexico later this year. This is after receiving regulatory approval for Akala’s acquisition.

Velez stated that the Mexican branch has grown quickly and is a pleasant surprise. Nubank now holds 760,000 customers, making it the largest credit card issuer in the country.

He also said Mexico is less competitive than Brazil in terms of financial penetration.

It will take more time for the bank to expand in Colombia, the CEO said. Nubank is currently in the initial stages of getting its operating licenses.

($1 = 5.3087 reais)