Berkshire Hathaway buys $500 million stake in Brazil's largest digital bank

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Berkshire Hathaway buys $500 million stake in Brazil's largest digital bank

Ben Berkshire Hathaway Inc. said that Brazil's digital bank operator Nu Pagamentos SA agreed to buy $500 million of its shares as digital banking expands rapidly in Latin America's largest economy.

The investment is accompanied by another $250 million deal that includes various investors, Nu said. Both deals were signed on Friday night and put the company's value at 30 billion, Nu said.

The Nubank-owned, privately owned firm operates on its brand name in S.O. Paulo. It is the largest fintech company in Mexico and Colombia and one of the largest in the world, with 40 million users a year in Latin America, said the company. It has raised about $2 Billion since its first inception in 2013, Nu said.

Berkshire said this was the largest single investment it has ever received. The Nu has not disclosed the size of any investor's stake.

This is just a huge validation of what Nubank has been doing since the beginning, said David Vlez Monday, adding further funding has been off the table for now. With this, we are very, very well funded; we don't have any plans to raise any additional money.

Mr. Vlez said a public listing isn't in Nubank for now, although we will go public at some point. He said the company plans to keep expanding, eg investment in the four countries it operates in. He said that his main focus is organic growth, but didn't rule out acquisitions.

The deal comes amid the slow expansion of digital banking in Brazil, a nation of 213 million people where traditional banking has been being tethered for decades in a handful of big institutions and a major portion of population is left out of the financial system.

In the recent years, the Brazilian central bank has sought to increase competition by supporting large corporations wishing to service the country’s unbanked population.

With the help of the regulator, the so-called Fintechs have gone fast to profit from the pent-up demand for financial services. They got an extra boost as e-commerce expanded to meet the mobility restrictions imposed in Brazil by Covid 19 which is continuing to rage under low vaccination levels in the country.

The industry is in a virtuous cycle in Brazil, said Hughes, Hubbard Reed LLP, a partner in the Brazilian business law firm Carlos Lobo. He said that his company is seeing global interest from Brazilian investors in fintechs despite the health crisis in the country.

There are several positive factors to mitigate the pandemic, said Mr. Lobo. The large population, the share of it that still doesn't have a bank account, the acceleration of e-commerce and all this contributes to attract foreign investors said Lobo.

Mr Lobo said Brazil's economy is well done than expected. The production of the country is expected to grow 4.3% this year according to a weekly European Central Bank survey with economists released Monday.

The November 4 deals are a continuation of their January Series G fund raising round. Nubank also offers life insurance, personal loans, investment products, mobile payments and products for small businesses and entrepreneurs, the company said.

The company said it acquired Easynvest last year, a Brazilian digital investing platform with $5 billion in assets and 1.6 million customers.

Mr. Vlez, chief executive, said there were 60 million people in Latin America and 250 million in all Brazil without access to financial services.

Another key focus is to continue leading the digital banking market in Brazil, which is increasingly competitive, he said. The Increasing use of digitalization and increasing use of e-commerce all these trends seem to continue to happen irrespective of the political environment or GDP growth, he said.

Jeffrey T. Lewis contributed to this article from S o Paulo, in J. Edgar Hamilton.

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