Warren Buffett's Increasing Investment in Digital Banking Across Africa and Asia

Warren Buffett has recently increased his investment in the growing digital banking sector within Africa and Asia.

What Happened: Nu Holdings (NYSE: NU) — a company backed by Buffett’s Berkshire Hathaway — has taken the lead in a new funding initiative for the Tyme Group, which is based in Singapore.

Tyme Group focuses on establishing digital banking services in emerging markets. In this latest round, Nu Holdings has invested $150 million to acquire a 10% stake in the company. This investment is part of a larger $250 million Series D funding round that values Tyme at approximately $1.5 billion, as reported by TechCrunch.

Since its inception in 2019, Tyme has successfully raised around $600 million. The startup is primarily backed by African Rainbow Capital, which controls a 40% majority stake.

Why It Matters: Tyme Group mainly operates in South Africa and the Philippines, boasting 10 million users and 5 million users in those respective regions. The company offers a hybrid model that includes both physical service locations and robust online banking services.

In South Africa, Tyme operates under the name TymeBank, while in the Philippines, it is known as GoTyme. The services provided include debit cards, checking accounts, savings options, buy now pay later plans, and cash advances, catering to a diverse clientele.

Looking ahead, Tyme has plans to go public with an IPO in the U.S. by 2028, with a secondary listing anticipated in South Africa. Additionally, the company aims to expand its footprint into Indonesia and Vietnam by 2025.

Nu Holdings may assist Tyme in diversifying its geographic reach through strategic partnerships and could potentially increase its stake as the trend towards digital banking in emerging markets continues to grow.

David Vélez, CEO of Nubank, expressed enthusiasm about the collaboration, stating, "We are excited to work with Tyme to share many of our learnings of scaling this model to hundreds of millions of customers." Nu Holdings is well-known in Brazil due to its successful digital bank, Nubank, which has also made recent expansions into Mexico and Colombia.

In its most recent quarterly report, Nu Holdings revealed a record revenue of $2.9 billion, marking a 56% increase year-over-year. The company now has approximately 109.7 million global customers, including around 9 million in Mexico and 2 million in Colombia, which are its latest markets.

Following the earnings report, numerous analysts have adjusted their price targets for Nu Holdings, including:

• Goldman Sachs: Maintained Buy rating and raised the price target from $17 to $19
• Susquehanna: Maintained Positive rating and increased the target from $16 to $18
• KeyBanc: Maintained Overweight rating and adjusted the target from $15 to $17

Berkshire Hathaway previously invested $500 million in Nubank back in June 2021 and currently holds approximately 86 million shares of Nu Holdings, valued at around $1 billion, according to the recent 13F filing.

Furthermore, Nu Holdings has also started to explore cryptocurrency services. The company has indicated plans to allocate part of its cash reserves to Bitcoin, representing one avenue through which Buffett gains exposure to this leading cryptocurrency, despite having previously referred to it as "probably rat poison squared."

Price Action: On Tuesday, Nu Holdings stock is trading at $11.75, within a 52-week range of $8.06 to $16.15. The stock has exhibited a 44% increase year-to-date in 2024.

Buffett, Investment, Banking