Nubank Halts Nucoin Trading Amid Financial Scrutiny Concerns

Fintech institution Nubank has revealed the halt of trading for its cryptocurrency, Nucoin.

This announcement comes amidst growing concerns regarding the bank’s financial stability.

Change in Nubank’s Policy

In a blog post dated September 10, Nubank stated that, effective immediately, Nucoin will no longer be available for purchase or sale on its platform. The cryptocurrency was introduced in late 2022 on the Polygon blockchain as part of a rewards initiative designed to offer users a variety of benefits.

It will now function solely as an asset for accessing perks and rewards within its ecosystem. This includes discounts at Nubank Shopping and benefits in various events facilitated by the bank.

“We have opted to suspend trading right away to mitigate potential fluctuations in the value of Nucoins in the market,” the statement mentioned.

The bank stated that customers will still have the ability to exchange their Nucoins for Bitcoin or digital dollars (USDC) until December 9, 2024. Additionally, Nubank will conduct raffles with prizes reaching up to R$1 million for those who opt to redeem their coins.

While the precise motivations for this decision remain ambiguous, the sudden policy shift coincides with increasing scrutiny of the bank’s financial condition, particularly concerns about rising non-performing loans and asset quality.

Concerns Over Non-Performing Loans and Asset Quality

A Bloomberg report indicates that although the company’s stock has surged more than 60% this year, some analysts have expressed doubts, labeling it as “overvalued.”

The report shows that Nubank’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%. Concurrently, the bank decreased its bad debt provisions from $831 million to $760 million.

Fernando Fontoura, a portfolio manager at Persevera Asset Management, noted that these credit quality concerns prompted the firm to distance itself from the bank.

In June, Persevera liquidated its entire stake in Nubank, describing the situation as “crowded.” Moreover, both JPMorgan Chase and UBS lowered their ratings for Nubank to “neutral” in July, citing worsening asset quality.

However, the bank’s executives have defended its lending practices. Chief Operating Officer Youssef Lahrech pointed out during an earnings call that the bank focuses on long-term strategies rather than short-term non-performing loan statistics.

The bank’s press office also refuted the report’s claims, asserting that the concerns mentioned do not accurately represent the overall outlook on Wall Street. They clarified that the information presented in the report, based on figures from the Brazilian Central Bank, employs a different methodology for loss provisions compared to Nubank’s practices.