Eugene Ng

Nu Holdings $NU 3Q26 Earnings - Rev $6.3b +45% ↗️🟢 - GP $2.6b +43% ↗️🟢 margin 41.5% -45 bps ↘️🔴 - EBT $1.7b +41% ↗️🟢 margin 27.9% -70 bps ↘️🔴 - Net Inc $1.1b +39% ↗️🟢 margin 17.4% -69 bps ↘️🔴 Revenue by Geography - Brazil $4.0b +40% ↗️🟢 - Mexico $349m +58% ↗️🟢 - Colombia $143m +146% ⤴️🟢 Revenue by Type - Rev $6.3b +45% ↗️🟢 - Credit Income $3.8b +52% ↗️🟢 - Float Income $1.6b +27% ↗️🟢 - Fee Income $0.9b +51% ↗️🟢 Biz Metrics - Customers 142.6m +12% ↗️🟡 - Brazil Cust 119.9m +9% ↗️🟡 - BR Individual $113m +8% ↗️🟡 - BR SME $6.9m +17% ↗️🟢 - Mexico Cust 16.6m +27% ↗️🟢 - Colombia Cust 6.1m +61% ↗️🟢 - Total Active Cust 119.3m +13% ↗️🟡 - Credit Card Cust 59.8m +5% ↗️🟡 - Unsecured Lending Cust 15.2m +7% ↗️🟡 - Payment Volume $44.2b +21% ↗️🟢 - Credit PV $30.4b +26% ↗️🟢 - Debit PV $13.8b +12% ↗️🟡 - Total Loan Portfolio $41.6b +37% ↗️🟢 - Credit Card $27.2b +36% ↗️🟢 - Unsecured $11b +43% ↗️🟢 - Secured $3.4b +26% ↗️🟢 - Total IEP $25.2b +42% ↗️🟢 - Credit Card non-IEP $16.5b +30% ↗️🟢 - Credit Card IEP $10.7b +46% ↗️🟢 - Cust Loans $14.4b +39% ↗️🟢 - Total Deposits $47.5b +22% ↗️🟢 - Brazil $38.6b +27% ↗️🟢 - Mexico $5.3b -13% ↘️🔴 - Colombia $3.5b +52% ↗️🟢 - Cost of Deposits 87% of I/B rate ↘️🟢 - MARPAC (rev) $17.7 +21% ↗️🟢 - MACPAC (cost) $1.1 +10% ↗️🟡 - Efficiency ratio 19.3% -100bps ↘️🟢 - NII $3.9b +56% ↗️🟢 - NIM $2.1b +45% ↗️🟢 22.5% margin +290bps ✅ - Risk-adj NIM 12.1% +130bps ↗️🟢 - ROE 32% +50bps ↗️🟢 - NPL 15-90 4.9% +60bps ↗️🟡 - NPL 90+ 7.3% +60bps ↗️🟠 - NPL 15-90 over IEP 8.0% ↘️🟢 - NPL 90+ over IEP 12.1% ➡️🟢 1 | Continued strong growth across Brazil, Mexico, and Colombia. In Brazil, we are approaching 120 million customers, and our activity rate expanded for the seventh consecutive quarter to a record 86.3%. That is remarkable at our stage in the country where we already serve more than 65% of the adult population. Mexico is where we are now building that same scale. We reached 16.6 million customers, growing 27% YoY and now serving 17% of the adult population. This quarter also marked a major milestone in our transition to a full bank. We added 870,000 customers in the quarter, and our Nu banking status makes our proposition even more compelling. Colombia is becoming another clear proof that our model travels. We closed the quarter with 6.1 million customers, already reaching 15% of the country's adult population and growing 62% YoY. 2 | Two one-off items that lowered risk-adjusted NIM, Desenrola had 55bps in Q2, little in Q3, and one-time receivables charge from BCB that reduced risk-adj NIM by 63bps. Ex these, recurring risk-adj NIM expanded from 11.9% to 12.7% QoQ. I also want to acknowledge 2 one-off items that affected reported risk-adjusted NIM in the second and third quarters. In Q2, Desenrola contributed 55 basis points to risk-adjusted NIM and only had an immaterial benefit in Q3. In the third quarter, we recorded a onetime charge on receivables acquired from payment institutions that were subsequently placed under extrajudicial liquidation by Brazil Central Bank, reducing riskadjusted NIM by 63 basis points. This was unrelated to the credit performance of our customer loan portfolio. So excluding these events, our recurring risk-adjusted NIM expanded from 11.9% in Q2 to 12.7% in Q3. 3 | Not giving loan growth guidance for 2027 as it can be volatile QoQ in the short-term due to opportunistic lending initiatives. Not expecting a dramatic growth deceleration. First, in terms of loan growth, we're not giving guidance for next year. But as you do point out, we have had very strong loan growth this past quarter and just in general, for the past couple of quarters, if you look at a YoY basis. What I'd ask this community to do is not to focus too much on individual quarter loan growth or quarter-over-quarter because we sometimes will expand our lending opportunistically. For example, when we have a new generation of credit models that are launched, that provides an opportunity to, for example, offer credit line increases or new loans for existing customer segments. With that being said, as David and I both discussed earlier, we're not seeing anything at this point that would cause us to expect a dramatic decrease in the near future in terms of our loan growth. We understand that there is a -- it's a fraught economic environment, but we are -- our underwriting approach is built for that. 4 | Nu is well prepared for BCB’s new rules on underwriting, and remains high disciplined with credit underwriting. We assume that there is going to be a downturn in the next day and that losses will double. And we still have to remain profitable even under those circumstances. And that's been one of the core underwriting philosophies we've had since day 1. As far as the actual macro prudential measures go that the Central Bank has just announced, we believe that these rules reward responsible underwriting and transparency, and that's always guided how we o er credit. We are waiting for these rules to go into e ect, of course. But at this point, we are very well prepared for them, again, both individually as well as holistically in terms of the impact on our business. 5 | Expect risk-adj NIM to remain strong into Q4, don’t expect a significant decline. Nu continues to take disciplined risks. Q1 has a seasonally higher cost of risk. And we expect risk-adjusted NIM to keep its underlying economic strength into Q4. We see no reason why that would be shifting. Keep in mind that when we take risks, it's deliberate. We expand into segments when the risk-adjusted returns justify it and where we can o er market-leading pricing. That's our approach. Now for next year, we're not giving guidance. And I would just remind the audience that in Q1, there is a higher seasonal cost of risk. 6 | NU partnered with >35 merchants, Amazon, Shopee, Samsung, and Uber. In the third quarter, we partnered with more than 35 merchants, including Amazon, Shopee, Samsung and Uber to o er additional bene ts to our customers. This growing ecosystem helps us reward engagement and deepen customer relationships. This is what compounding at scale looks like, continuing to grow our credit business, expanding monetization opportunities and deepening relationships with an already massive customer base. 7 | Nu US is leveraging on the proven model in Brazil that is being replicated in Mexico, and accelerating in Colombia. Brazil is our proven model. Mexico is replicating it with strong economics, and Colombia is now accelerating. Meanwhile, Nu U.S. and Nu Global are laying the foundations for our next phase of growth. What connects them is the same technology platform, operating model and customer-centric approach. We're not building separate businesses from scratch, but taking a proven model into new markets, leveraging what we learn along the way. This quarter marked an important step in taking our model beyond Latin America. 8 | Nu US rolled out accounts offering 3.5% APY interest and transfers to BR/MX/CO. Seeing early signs of word-of-mouth virality similar to early days. On September 10, we launched Nu U.S., beginning the rollout of an account offering 3.5% APY with fee-free transfers to Brazil, Mexico and Colombia and a credit card with no annual fee and a unlimited 1.5% cash back. In just our rst few weeks, we already reached customers across all 50 states. In only the rst few weeks, we have begun seeing the early signs of wordof-mouth growth and virality that reminds us of our early days of Brazil, Mexico and Colombia growth. We expect word of mouth to be an important growth engine from the start, particularly among customers with ties to Latin America. This is exactly the strategy we're pursuing, reaching communities connected to our core markets and offering them a natural bridge between their nancial lives in the U.S. and their families and friends back home. Fee free transfer makes that bridge real. Customers can send money directly to Pix accounts in Brazil, to bank accounts in Mexico through CLABE and to Bre-B-enabled accounts in Colombia. 9 | Nu US is not competing in the very high-income, well-served competitive segment that require physical banking branches. First, the U.S. is a gigantic market. And when you kind of dig in and double-click in some of the areas, what you realize is that there is a segment of the market that is incredibly well served, very competitive. Lots of different banks compete for these customers, very high income. You need banking branches to serve them well. You have millions of dollars. 10 | Nu is focusing on the mass segment in the US that has less financial access and lesser competition, where banks don’t pay interest on deposits, similar playbook to LATAM. And then you have the largest percentage of the market that increasingly actually have less access to financial services, and there is actually less competition. And when you start realizing what that lack of competition means, you start realizing that consumers in the U.S. are actually paying a lot of money for banking services in nonobvious ways. So for example, over 60% to 70% of all deposits in the U.S., banks are paying 0. That's actually a very similar metric that what we saw in Brazil and Mexico, where big banks paid 0 to something like 70% of deposits before we began. The fact that we were able to build a consumer brand and use the significant cost structure advantage that we have to offer high yield and pass the yield to our customers is one way to use our cost structure advantage to e ectively shift the profit pool that the big incumbent banks have that today is going to pay banking branches all the way to the consumer. And so that's one opportunity. 11 | The US banks charge a lot of fees to the mass market consumer due to the lack of competition, similarly see opportunity for Nu to come in and flatten and take market share. There is a lot of fees. The amount of fees when you look at fee revenue as a percent of total revenue is similar to what we saw in Latin America 15 years ago. It's partly is also a function of lack of competition, frankly, especially in the mass market consumer. You're paying very high fees for checking accounts, savings accounts, overdraft and remittances, which is an area where we obviously launch 5% to 10% to send money. So there is a lot of -- once you add all the di erent fees, when you add the lack of a yield, when you add some of the interest rates in certain segments, this is a very expensive banking system. And so from that perspective, if you think about it from rst principles, it's a bit of the same of what we saw in Brazil and Mexico. 12 | Nu is leveraging on their credit underwriting, massive hiring from top US lenders, and the willingness to build a great brand and be the primary accounts, to be the fintech that eventually really cracks the US market. So from first principles, for some subsegments and niches in the U.S., it's the same in some ways, a very similar playbook. And we have a number of di erent advantages that also are not obvious, for example, on credit capabilities. We think we are, as I said earlier, perhaps one of the best, if not the best in the world and now really knowing how to underwrite credit on behalf of our consumers. And a lot of that was because we brought a lot of DNA from some of the top lenders in the U.S. since the beginning. So this credit as a superpower, which would be huge in a market like the U.S. that requires credit. And a lot of people ask, why haven't fintechs cracked the U.S.? Well, some of them sort of have, but partly it's also because none of them really were able to do or willing to do credit well, while at the same time, building a great brand and consumer obsession and becoming a primary bank account and kind of playing all the elements of our business model. So anyway, we think it's a very big opportunity. 13 | Nu will be able to move faster in the US versus LATAM because they have a strong positive credit bureau and FICO scores for new fintech entrants, whereas that was non-existent in Brazil, allowing them to iterate faster on credit. So there are some differences between Brazil and the U.S. Obviously, in the U.S., you end up having a positive credit bureau and a FICO score readily available for anybody that comes in as a newbie in the market. In Brazil, we didn't really have that. So that took a long time for us in Brazil. It also took us several years to -- and we continue to do so to optimize our -- basically our team, our credit infrastructure, the way we do our policies, testing a number of different algorithms. And so that entire credit muscle took a learning curve that by the time we got to Mexico and Colombia was much more developed. And now that we get to the U.S. is a very well-tuned system that can iterate very fast in developing new models and allow us to test and learn much faster. 14 | That said, it is credit and it will take time to scale in a disciplined manner over time, treat credit losses as capex/R&D as long-term investments to build the credit scoring model. That being said, obviously, this is credit. You do -- it does take some time. You need losses so that your model learns from the losses. In a way, losses tend to be -- is the CapEx, is the R&D investment. So these models need to have some losses, you need to iterate. You need to do foundational models. So it's effectively provided different type of credits and di erent type of modalities to different type of segments so that your models start learning. And that will take some time to learn and get it for a new market. It's not your traditional consumer internet product that you can scale to millions of customers on day 1. You need a lot of testing. You need some foundational testing, but it will denitely be much faster and better than any other country we've done in the past. 15 | Nu remains committed to scale investment only if they see product-market-fit and unit economics trending towards hurdle rates, using 100bps of efficiency ratio for 2026 and 2027. Importantly, we're approaching both initiatives with discipline. We will scale investment only as we validate product-market fit, see unit economics trending toward our hurdle rates and clear key regulatory and risk checkpoints. Under our current plans, Nu U.S. and Nu Global together remain within our commitment of up to 100bps of efficiency ratio impact in each of 2026 and 2027. 16 | Headwind from FGTS loans was sufficiently offset by both public and private payroll lending. Improvements in both public and private payroll lending allowed us to offset the headwind from FGTS-backed loans and overall originations are now running at a higher pace than before that decline. Private payroll originations continue to accelerate month-over-month as we gain condence in scaling the product supported by improving underwriting models and increasingly mature processes across the market that help reduce operational risk. 17 | Nu is getting more comfortable with private payrolls as they have more performance data and is growing rapidly off a small base. Expect to be one of the leading players next year. And the short answer is yes; we are getting very comfortable with private payroll at this point. As you know, we didn't launch at the same time as other banks last year because we were concerned both about the credit risk as well as the operational risk elements within the private payroll space. We now have enough performance data as well as the operational processes in the industry and the environment have improved enough where we can accelerate in that space. It's growing very quickly right now, doubling quarter-over-quarter o of a small base, just to be clear. And we see no reason why we shouldn't be one of the leading, if not the leading private payroll providers at some point in the next year…So we feel quite condent both in terms of going after the private payroll space, but also about the overall development of that market, not having a material impact or negative second order e ect on our existing portfolio. 18 | Mexico’s deposit base has been shrinking because Nu is deliberately optimising it towards lower cost funding. In Mexico, we continue to deliberately optimize our deposit base towards lower cost funding while maintaining ample liquidity. 19 | Optimistic about Mexico digitalizing more of financial services, where it is currently still very physically cash heavy. Directionally will be a secular tailwind to Nu. It's a super positive development in Mexico…And I think Mexico, after a few years of testing at different approaches, we see in President Sheinbaum, really real conviction of going in this direction. Digitalized in Mexico means more access to financial services for more people. Mexico still has 12% credit card penetration. So it's tiny really, a lot of cash heavy. That also means decreasing informality. That also means decreasing crime. That means increasing access to credit because once you digitalize, then you generate a lot of data that can be used by rms like us to provide credit. So anyway, it kind of goes very much in the direction of what the government has been saying about financial inclusion. 20 | See opportunity for Colombia to change how the interest rate cap is calculated protecting consumers from borrowing at high rates from loan sharks. On Colombia, there is -- I think there is a good chance that there will be some kind of change in the way the interest rate cap is calculated. It's maybe less likely that it will be removed completely. But the way it's currently calculated makes no sense because it's an average of consumer and corporate credit, and they both have very different risk profiles. So -- and it is -- I think it's becoming clearer and clearer that having such a low cap basically means the creation of a very large black market where customers are -- majority of customers in Colombia are getting lending and credit at 1,000% interest rate from loan sharks. It's one of those laws that have good intentions about protecting consumers from high interest rates. But in reality, it just throws everybody to -- or the majority of the population to the black market and then you don't have any protection, any regulation and you pay way higher rates. So I think it's high likelihood that there is a rethinking how at least as a rst step on how this rate is calculated to liberalize a little bit. And depending on what that means, there could be a significant improvement in access to credit. 21 | NPLs should be better assessed over IEP than the total portfolio as IEP as % of total portfolio grows. In order to interpret these numbers, one structural shift matters. As we optimize for risk-adjusted returns, a growing share of our portfolio earns interest. Interest-earning balances reached 61% of the total portfolio this quarter, up from 59% last quarter and 44% 3 years ago. This matters because delinquency is concentrated in interest-earning balances rather than in credit card purchases that customers pay in full every month. As their share grows, delinquency measured over the total portfolio naturally increases even without a deterioration in underlying credit performance or an increase in exposure. 22 | Nu does not take macro positions, they simply assume that the future will be worse than the past, and that buffer will still make it a good decision. So we don't necessarily take a macro position about the economy. We just simply assume that the future is going to be much worse than the past because unfortunately, that's what we've seen since we began in 2013. The macro environment we have seen in the past 13 years has been not great to use a great word. So the only thing we have seen, unfortunately, is bad macro. And so when we make a credit decision, we assume the future will be worse than the past. And therefore, we have to use a significant buffer on underwriting decisions. And even then, that decision would have to be positive NPV…So from that perspective, all of our credit decisions right now and the way we continue are covered with a significant buffer for them to be good decisions. 23 | While Nu has done numerous small investments, and don’t rule out a full M&A, their preference is for organic growth. And so that means that we will look at potential M&A. We have in the past. We've announced, for example, an investment in Tyme in South Africa and the Philippines. We've done a small investment in India. We've done a number of investments like that. And we will consider -- we can consider M&As. But I would say our strong preference is for organic growth. And I don't say -- never say never. The bar would have to be extremely high for us to do a full M&A. I wouldn't say it's impossible, but it's a very, very, very high bar. 24 | Nu is still small in the overall Brazil market, they have cherry picked the best credit and risk-adjusted opportunities that are short-term duration and information rich. Expect to grow faster and keep taking share from competitors. The second point is we are to consider is we are still very small in the overall Brazilian market. And this means that we have effectively grown and continue to grow cherry-picking some of the best credit and riskadjusted opportunities in the market. We are e ectively operating in products that have very short-term duration that are very information-rich and that allow us to accelerate or decelerate relatively quickly as we see di erent opportunities. And therefore, being small, we can continue growing mainly by taking market share from our competitors in the market, and that opportunity will continue in 2027 and beyond as we are -- everything we have done in challenging scenario has been e ectively taking market share, and we expect that we'll continue taking market share given the signi cant operating advantages and competitive advantages that our model has. 25 | Nu focuses on being the primary banking of their customers, because they get richer data that allows them to assess their credit risk better leading to better underwriting, and results in higher loan repayment priority. A key part of this resilience comes from our primary banking relationships. The more customers concentrate their financial lives with Nu, the richer the data we generate, the better we can assess their credit risk and the more important our position becomes in their payment priorities. This creates a powerful reinforcing cycle. Deeper customer relationships support better underwriting, which in turn allows us to keep expanding credit while optimizing risk-adjusted returns. Once again, this is why we view customer primacy as a fundamental component of our credit superpower. 26 | Being the primary bank account results in positive selection, and Nu can become the highest in the credit stack for customers, that they will be the first to be paid off, and that becomes a very strategic cost advantage. And finally, I think it's important to just highlight one point that Rob made, which is we have reached a position that is very unique in the Brazilian market and very soon also in Mexico and Colombia, which is we are the largest primary bank account in the country, 2x largest, we think, than the other -- the second player. And being the primary bank account means effectively you get positive selection, not negative selection, you get positive selection. And you are, in a way, senior in the credit stack of the customer. You are the card that consumers will pay first. And so that gives us a huge advantage in underwriting credit and managing delinquency in a tougher scenario. We're not the marginal lender. We're not the one that's giving the fth card or the sixth card or the sixth loan. We're the primary relationship for the majority of our customers, for 60% of our customers. And so that's a very strategic position because we get that positive selection. 27| That brings a lot of proprietary data which can then be fed into Nu’s credit models, which is one of the most sophisticated. And obviously, that also brings a lot of proprietary data that then is fed into perhaps the most sophisticated credit stack in the world, which we think we're increasingly building that here in the markets that we operate, signi cant advantage on credit underwriting. So anyway, all those data points kind of tells you -- I won't give you specific guidance on growth rates, but we think as we have done in all cycles, if there is a cycle coming in, we continue to think that our growth is more secular. It's more in a way, a little uncorrelated with the market because people continue to transfer markets -- transfer market share away from some of the big incumbent banks towards Nubank, and that's the trend that will continue irrespective of the macro scenario.