Nubank and KakaoBank: Key Metrics and Market Performance

Efi Pylarinou
7 min readJun 27, 2024

From Brazil to South Korea, a 20+ hours flight from one Fintech hub to the other. South Korea has 97+% internet penetration one of the highest globally, whereas Brazil is at 86.6% of the total population.

Inspired by a recent report on public Fintech companies by MD Finance, I am comparing Nubank, our Brazilian Fintech darling, to South Korea`s darling, KakaoBank, as they both have similar EV/EBITDA ratios (as of end of 2023 according to the MD Finance report).

KakaoBank, a mobile-only bank, is younger as it was launched in 2017 leveraging the popularity of the KakaoTalk messaging platform to offer banking services. Nubank was launched four years earlier in 2013.

KakaoBank turned profitable in 2019, just 18 months after its launch, and has consistently shown growth in profits.

Today, KakaoBank with over 23.5 million customers, is the third largest mobile bank by the number of users, after Revolut (40 million) and Nubank (100 million).

The EV/Rev ratio measures a company’s valuation relative to its revenue. It is calculated by dividing the Enterprise Value (EV) of a company by its total revenue. This ratio helps investors understand how much they are paying for each dollar of revenue generated by the company. The EV includes the company`s market capitalization, debt, and minority interest, minus cash and cash equivalents. It represents the theoretical takeover price of the company.

Source: MD Finance Report — Fintech snapshot: the most attractive FinTech companies for investors in 2024

Berkshire Hathaway was the lead investor into Nubank in June 2021 when the Brazilian neobank raised $500 Billion. At the time, it had an EV/Revenue of 55.2 and a valuation of $37.4 Billion.

At the end of the year, when it went public (December 2021), they added another $250 million. The valuation at IPO rose to $45 Billion and at the time Nubank had 48 million customers.

Compared to the EV/Revenues of private funding rounds over the past 3 yrs (2021–2023) of Fintech companies like Stripe, Ramp, Trade Republic, Atom, Checkout.com, Moonpay, and others; Nubank`s EV/Rev was high. It was 55.2 compared to 30.6 median of the 20 companies researched by MD Finance.

As a benchmark, our Fintech darling Stripe had an EV/Rev of 27.8 at the time of its last funding round in 2023. And only Figure, Bitsco, and QiTech had higher EV/Revs than Nubank, when they received their fundings.

Once Nubank went public, the market treated it differently. The EV/Rev ratio has plummeted. For 2023, its EV/Rev is 6.5, close to the levels of KeyCorp (6.3) and slightly lower than Kakao Bank`s (8.4).

MD Finance reports that publicly traded Fintechs that are market darlings, are trading at EV/Revs above 5 and with a median of 9.4.

Nubank is viewed as undervalued whereas Kakao Bank is viewed as overvalued.

These assessments are based on comparing the market price versus a theoretical Intrinsic price.

The DCF (Discounted Cash flow) value of Nubank is $8.21 which is 31% less than its market price $11.88. Its Relative Value is $35.35 (estimated by comparing it with other industry peers) which means Nubank is trading at 66% less than its relative value.

Nubnak`s Intrinsic Value indicates that it is 45% undervalued (in a base scenario and 56% in a best case, 36% in the worst).

Kakao Bank on the other hand has an Intrinsic Value that shows a 16% overvaluation which has actually been persistent. KakaoBank Corp stock price (22250 KRW) is 23% less than its DCF Value (28 944.45 KRW). Its Relative Value stock (8 226.43 KRW) is 63% less than its price (22250 KRW).

On a DCF basis, these two neobanks that are operating in markets with major traditional financial institutions, are both undervalued (in the range of 20%-30% in a basic scenario). However, their Relative Valuations reveal a major divergence. Nubank is hugely undervalued and KakaoBank is overvalued.

If I were to pick one metric that shows Nubank`s outstanding business model, it would be its consistently rising Net interest margin (NIM) to double-digit levels.

Net interest margin (NIM) measures the amount of money that a bank is earning in interest on loans compared to the amount it is paying in interest on deposits. NIM is one indicator of a bank’s profitability and growth.

The average NIM for U.S. banks was 3% as of Q1 2023. The long-term trend has been downward since Q1 1994 when the average was 4.91%.

Kakao Bank which has 23.5 million customers and a growing lending business, has NIM levels that look like those of a traditional bank. This May, Kakao Bank announced its Q1 2024 net profit which increased 9.1% (9.3 billion won) year-on-year to 111.2 billion won. This is the best performance ever on a quarterly basis. Kakao Bank’s net interest margin (NIM) however, remains at similar levels, 2.18% in Q1 2024.

NIM levels remain stuck in a tight range despite the growth of its lending business. Kakao Bank has increased its NIM since its IPO in late 2021, from just below 2% to slightly above 2%. Kakao Bank is estimated to hold about 31% of the Korean housing mortgage refinancing market and 46% of the rental deposit refinancing market.

On the other side of the world, Nubank has grown its NIM levels since its IPO in 2021, from above 8% to more than double.

In Q12024, its NIM was reported at 19.5%.

As profitability is increasingly valued in the current macroeconomic condition, I look to compare the EBITDA margin trends of Nubank and Kakao Bank.

The EBITDA margin measures a company’s earnings before interest, tax, depreciation, and amortization as a percentage of the company’s total revenue.

Kakao Bank has been profitable from day 1 of its IPO with an EBITDA margin of 7%. Its current margins have dropped to 3% which are the same as those of HSBC.

Nubank on the other hand, went public without being profitable, and only last summer it turned profitable. Again its EBITDA margins are out of any normal range with its latest quarter showing an EBITDA margin of 21.2%. Compare that to JPMorgan`s at 5% and Bofa`s at 2%.

Kakao Bank’s share price has fallen about 65% since its November 2021 IPO.

Nubank is slightly higher than its IPO price and close to its ATH at $12.80.

Kakao Bank has a different approach to Nubank which has gone after the unbanked population in Brazil. Kakao Bank has focused from the start on serving urban 30-to 50 year olds, on profitability, and digital lending. Kakao Bank is a case of successfully penetrating a relatively `overbanked` market but a market lacking digital banking services. The Economist reported that in 2019 the average adult in South Korea had 5.2 bank accounts and 3.6 credit cards. It is a better digital banking case study for developed markets.

Kakao Bank has been focused on Digital lending and its IPO was heated. At IPO it was priced to raise $2.2Billion and its shares jumped 80% on trading debut!

Developed markets can learn more from the Kakao Bank use case rather than studying the Nubank case.

Both digital banks have succeded in serving close to half the population of their countries. Kakao Bank serves 23.5 m (total the South Korean population is c. 51 million population) and Nubank serves 100 million of the c. 214 million Brazilian population.

Below is my re-cap of the two publicly traded darlings. Kakao Bank reached profitability in 18 months. It has a higher EV/Rev ratio. Both digital banks have similar Market Cap tp Employee ratio but extremely different Net Interest Margins.

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Efi Pylarinou

№1 #Finance Global Woman Influencer by Refinitiv 2020 & 2019. Top Global #Fintech Influencer, Futurist, #AI, #Blockchain +: 30yrs FINANCE — https://linktr.ee/Ef