(Bloomberg) -- Shares in Nu Holdings Ltd., the parent of Brazil-based digital bank Nubank, rallied Wednesday after the Brazilian fintech reported record revenue in the first quarter while acknowledging that its growth is coming with a higher delinquency rate.

Nubank, one of the world’s largest digital banks, had revenue of $2.7 billion in the three-month period through March, it said in a statement Tuesday. The firm reported $378.8 million in net income compared with an average estimate of $357.3 million in a Bloomberg survey of analysts. Earnings per share came in just short of estimates.

The shares rose as much as 8.2% Wednesday in New York, the biggest intraday jump since September, helping the stock extend its year-to-date rally to beyond 45%. Analysts noted the solid operational trends in what is typically a slower quarter, according to an Itau BBA report.

Launched in Brazil in 2013, the company has become one of the largest financial institutions in the country with about 92 million clients as it has expanded its offering from credit cards to an investment platform, insurance policies and more. It’s now trying to replicate that same success in Mexico, Latin America’s second-biggest economy, and in Colombia.

“We printed a 23% return-on-equity for Nu Holdings, among best-in-class financial institutions in Latin America, even though our holding company continues to be over-capitalized and our operations in Mexico and Colombia are still in the early phases of getting to profitability,” founder and Chief Executive Officer David Velez said in the statement.

While its growth in customers and cards in Brazil may start to slow as the market matures, it’s increasing its share of securitized lending. Nubank, which Chief Financial Officer Guilherme Lago called “one of the most efficient financial services companies in the world” on a call with analysts, has a market share for credit and debit cards of about 15%.

On the downside, non-performing loan rates rose in the quarter to 5% from 4.4% in the year-earlier period for loans of 15 to 90 days and to 6.3% from 5.5% for loans of more than 90 days.

Higher Delinquencies

While the first quarter often shows an increase in delinquencies, Nubank is also comfortable with the risk it’s taking and pushing to grow its credit portfolio at a faster pace, Chief Operating Officer Youssef Lahrech said on a conference call.

“When we underwrite credit our objective is not to minimize NPLs, rather our objective is to maximize the NPV of that credit grant and customer relationship,” Lahrech said. “We don’t take a position in respect to timing, the point of the cycle we’re at. We’re fairly agnostic to that. We want every origination we make to perform in good and bad times.”

Nubank added 5.5 million customers in the quarter. Since the quarter ended, it has reached the key metric of 100 million customers across its three markets of Brazil, Mexico and Colombia, the company said earlier this month. 

Mexico represents a huge opportunity for fintechs looking to tap into the population of 130 million people where cash remains king and many people lack access to traditional banking channels.

Mexico Opportunity

Nubank’s Mexico business, which already has more than $2 billion of deposits, is ahead of where Brazil was in the same early stage, Velez said on the call. An application to get a banking license there is “going well” as regulators do their due diligence, he said.

To lure customers, Nubank is offering savings rates far above the levels provided by incumbent banks, which is proving effective, but yields will eventually come down as the product evolves over time, he said. 

“There’s a really interesting disruption opportunity for the entire Mexican system, because if most of your profits are coming from deposits, frankly, the barrier to entry is not that high,” Velez said. “Yes, probably in the past, you needed branches. Now you don’t.”

--With assistance from Leda Alvim and Philip Sanders.

(Updates with share move. An earlier version corrected the year-to-date share move in third paragraph.)

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