Billionaire Israel Englander, founder of Millennium Management, has significantly increased his stake in Nu Holdings (NYSE: NU), a move that aligns with the investment strategies of Warren Buffett and Cathie Wood.

These high-profile investors, each known for distinct approaches, have found common ground in Nu Holdings, a digital bank making waves in Latin America.

Nu Holdings, a Sao Paulo-based Brazillian neobank, has seen its stock surge by 73% in 2024, currently trading at $14.34.

Nu Holdings: A disruptor in digital banking

Nu’s appeal to investors lies in its groundbreaking approach to banking in historically underserved markets. Operating as a fully digital bank, Nu has streamlined financial services in Brazil, Colombia, and Mexico—regions long dominated by traditional banking behemoths.

With over 104.5 million customers, Nu has captured a significant market share, particularly in Brazil, where it serves more than half of the adult population. 

This remarkable growth is attributed to Nu’s intuitive platform and its ability to outpace legacy banks through technological innovation and cost efficiency.

By eliminating physical branches and leveraging technology, Nu has achieved operational excellence, translating into impressive financial results. 

In Q2 2024, the company reported a 65% year-over-year revenue increase and a 30% rise in average revenue per active customer.

“Our customer base grew to 105 million customers. The recent launch of checking accounts in Mexico and Colombia has ushered deposits of US$ 3.3 billion and US$ 220 million in those countries, respectively, and fuels our growth expectations in those operations.” – the bank said

Why Englander, Buffett, and Wood are betting big

Warren Buffett, through Berkshire Hathaway (NYSE: BRK.A), was an early believer in Nu. Buffett purchased his stake in the company for almost $750 million in 2021, around its initial public offering (IPO) phase.

Today, Berkshire holds 107 million shares, valued at approximately $1.7 billion. Despite being a small fraction of Berkshire’s massive portfolio, Buffett’s stake in Nu signals his confidence in its long-term potential.

On the other hand, Cathie Wood’s ARK Innovation (ARKK), through its Fintech Innovation ETF, has acquired 2.12 million shares, worth $30.3 million. These positions highlight a shared belief in Nu’s growth trajectory despite their otherwise divergent investment philosophies.

Nu’s profitability has also caught the eye of Millennium Management, which increased its stake by 371% in the last quarter.

The company has posted GAAP net income for six consecutive quarters, an impressive feat for a fintech in growth mode.

Revenue soared 65% year-over-year in Q2 2024, driven by a 30% increase in average revenue per active customer. Nu’s efficient model allows it to scale without a corresponding rise in costs, as evident from its expanding net interest margins, which climbed from 18.3% to 19.8%.

What’s Next: High expectations for Q3 earnings

All eyes are now on Nu’s Q3 earnings report, scheduled for release on November 13. Analysts project $2.9 billion in revenue, reflecting a 39% year-over-year increase, with earnings per share expected at $0.11.

The market will be watching closely for updates on Nu’s loan portfolio, delinquency ratios, and the broader economic outlook in its key markets.

Additionally, analysts maintain a cautiously optimistic outlook for Nu Holdings over the next 12 months, with the stock rated as a ‘buy’ on TradingView. However, the overall price target remains conservative, reflecting expectations of only modest upside potential.

That being said, Englander’s decision to copy-trade two of the most respected names in investing may turn out to be a brilliant move as Nu positions itself for even greater success in the rapidly evolving digital banking space.

This trio’s alignment on Nu Holdings shows the company’s potential to dominate the fintech landscape, making it a must-watch stock for growth-oriented investors.

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As part of Singapore’s Project Guardian which explores tokenization, Citi and Fidelity International have developed a solution that combines a tokenized money market fund (MMF) with an embedded digital FX swap.

Conventionally, if an institution outside of the United States wants to buy a US dollar MMF, that involves currency risks. They have to convert their local currency into the US dollar to buy the MMF, and when they’re ready to sell the MMF in the future, the exchange rate might have moved against them. So often when investing in a USD MMF, an institution would also execute an FX swap which switches to US dollars today, and converts back to local currency at a specific rate, say one month in the future when they plan to exit the MMF position. In conventional markets, these would be entirely separate transactions.

One target market for the tokenized version would be corporate treasurers that want to invest in USD MMFs to earn yield. But they also want to ensure they can exit the position at any time to use the funds for working capital. With this sort of solution, tokenization would make that possible in real time, which is not something available today.

Given tokenization uses smart contracts that support programmability and composability, Citi’s FX arm collaborated with Fidelity International for the project. Citi simulated the FX swap and Fidelity simulated the issuance and redemption of the MMF tokens, using interoperability protocols as they were on separate networks.

Tokenized money market fund potential

While the conventional US dollar money market fund sector is more than $6 trillion, this area is a promising sector in tokenization. McKinsey ($1.9 trillion) and Boston Consulting Group (BCG: $16 trillion) made very different predictions about the size of the tokenization market in 2030. But they both estimated tokenized funds would reach $400 billion by that date.

A key benefit is the ability to switch in and out of money market funds instantly rather than waiting for once a day issuance and redemption.

Franklin Templeton’s FOBXX and BlackRock’s BUIDL are leading the way on public blockchain, but other institutions are eagerly eyeing the opportunity. Last week there were two announcements out of Singapore. UBS is issuing tokenized USD MMF, and Libeara, a Standard Chartered tokenization startup, is facilitating an issuance in collaboration with Wellington Mangement and FundBridge Capital.

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The Bank for International Settlements (BIS) has been involved with the mBridge cross border CBDC payment system for four years. Today the General Manager of the BIS, Agustín Carstens, said the project has been handed over to the central banks. They are the central banks of China, Hong Kong, Saudi Arabia, Thailand and the UAE.

mBridge uses blockchain to enable commercial banks to make cross border payments using wholesale central bank digital currencies (wCBDCs). The design supports local currency payments. The G20 has goals of making cross border payments faster, cheaper and more transparent. mBridge is one of the potential solutions to make that happen.

China was responsible for the technology working group and recently shared plans to open source the blockchain-based software.

The BRICS Bridge issue

During the recent BRICS summit, discussion of a BRICS Bridge payment system continued. Given China and the UAE are BRICS members, alongside sanctioned countries Iran and Russia, the perception that mBridge could in any way overlap with BRICS Bridge put the BIS in a tricky position.

Talking today at the Santander International Banking Conference, Mr Carstens addressed the issue head on. “Whatever projects we put together should not be a conduit to violate sanctions,” he said. “mBridge is not the BRICS Bridge and I have to say that categorically. mBridge was not created to cater (to) the needs of BRICS. It was put together to satisfy broad central bank necessities.”

According to Bloomberg, the issue was discussed during last week’s IMF meetings. The potential for the BIS to withdraw was considered.

However, Mr Carstens stated that politics was not the driver of the BIS handover.

“I would say that the project has been so successful that we can declare that we’ve graduated out of that project. The BIS is leaving that project. Not because it was a failure and not because of political considerations, but mostly because we have been involved for four years and it is at a level where the partners can carry it on by themselves,” said Mr Carstens.

The mBridge project progressed to the minimum viable project (MVP) stage in June, although Mr Carstens said is still needs many years of work. “mBridge is not mature enough to start operating,” he added.

mBridge Steering Committee thanks the BIS

In a statement, the mBridge Steering Committee expressed its appreciation to the BIS, saying the handover would allow the BIS to redirect resources to other innovation projects at earlier stages.

“The project team remains fully committed to unlocking the full potential of the mBridge platform and will continue to explore the potential for advancing the platform from the MVP to the full production stage,” the Committee stated.

 

“The handing over of the mBridge project to the participating central banking institutions will have no impact in relation to the legal and operational arrangements on the existing and new participating commercial banks.”

Meanwhile, earlier this week the Bank of China (Hong Kong) announced it is the first fully operational Hong Kong bank that has integrated with mBridge. It will use the platform for select corporate customer payments.

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