Nubank, a prominent fintech bank, recently made the decision to suspend trading for its cryptocurrency, Nucoin. This abrupt change was announced in a blog post on September 10, where the bank disclosed that Nucoin can no longer be bought or sold within its app. The cryptocurrency was initially launched in late 2022 on the Polygon blockchain as part of a reward program for users to enjoy perks. However, it will now be solely used as an asset to unlock benefits and rewards within Nubank’s ecosystem, such as discounts at Nubank Shopping and advantages in various experiences promoted by the bank. The reason provided for the immediate suspension of trading was to prevent potential fluctuations in Nucoin’s market value.
Concerns Over Nubank’s Financial Stability
The decision to suspend Nucoin trading comes at a time when Nubank is under scrutiny for its financial health. Reports have raised concerns about the bank’s rising non-performing loans and the quality of its assets. Despite Nubank’s stock surging by over 60% this year, analysts have expressed reservations, considering it to be “overvalued.” The bank’s non-performing loans, which are overdue by 90 days or more, reached a record 7% in the second quarter, surpassing the industry average of 5.5%. It is noted that Nubank reduced its bad debt provisions from $831 million to $760 million during the same period. Fernando Fontoura, a portfolio manager at Persevera Asset Management, stated that concerns over credit quality prompted the firm to distance itself from Nubank, leading them to sell off their entire position in the bank in June.
Downgrades from Major Financial Institutions
Further adding to Nubank’s challenges, major financial institutions like JPMorgan Chase and UBS downgraded their ratings for the bank to “neutral” in July. They cited deteriorating asset quality as the reason behind their decision. Despite these downgrades, Nubank’s executives have defended the bank’s lending practices. Chief Operating Officer Youssef Lahrech emphasized during an earnings call that the bank prioritizes long-term strategies over short-term non-performing loan metrics. It remains to be seen how Nubank will navigate through these challenges and regain trust from investors and analysts.
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