Is Nu being more conservative with provisions to show balance sheet strength, or are they seeing a worsening outlook?

Guilherme Lago stated that Nu's balance sheet is robust, and provisioning is consistently conservative, not reflecting a directional outlook on the credit cycle. They assume the future will be worse than the past and stress-test cohorts for NPV positivity. He highlighted the healthy unit economics and short duration of portfolios, allowing for agile responses to credit movements. He also mentioned potential tailwinds from Brazil's income tax exemption and Desenrola 2.0 not yet factored into provisions. “The way that we have tried to do credit underwriting and consequently, to do credit provisioning is one where we always assume that the future will be worse than the past, irrespective of where any of us think we may be in the credit cycle.”

Why do local investors seem more constructive on asset quality and U.S. expansion, while foreigners might be more concerned about AI disruption or U.S. digital bank success?

Guilherme Lago identified three polarizing topics: asset quality (Nu's proven credit underwriting ability at scale), international expansion (U.S. strategy's deliberate, staged capital deployment to balance downside and upside), and AI's role (Nu's demonstrated impact on efficiency and customer growth, not just efforts). David Velez added that local skepticism is common for new country launches, as locals are often too consumed by the status quo to reimagine possibilities. “Every time we've launched a new country, the locals have been skeptical... Sometimes being a local is a little bit of a blessing. Sometimes, it's a little bit of a curse because if you're a local by definition, it's very hard for you to reimagine how things can happen differently.”

Why is Nu's incremental exposure on unsecured products while competitors focus on secured? How should we think about secured products like private payroll loans?

David Velez clarified that growth opportunities exist in both. Nu has 8% market share in unsecured loans but 25-30% of new originations. In secured loans, they started later but are growing significantly, having become the largest FGTS provider in 18 months. For private payroll, they took a more careful approach due to initial high risks and regulatory uncertainty, prioritizing long-term winning with competitive pricing and leveraging data/trust. “There is no preference necessarily here. This is a wide open market. We're very well positioned to gain -- continue gaining share across the board, even in credit cards, which has been our first product.”

Nu Holdings (NU) Q1 FY26 earnings call: guidance and Q&A

Q: Details on the new SME products, competitive edge, and potential size of the business.

David Velez highlighted Nu's 5 million SME customers acquired at zero CAC, cross-selling from individual customers. He mentioned new credit card and secured/unsecured lines of credit, including government-guaranteed programs. He sees a "blue ocean" opportunity, expanding beyond micro-entrepreneurs to larger SMEs, leveraging Nu's advantages in data and consumer trust. “I actually think this is probably one of the most underappreciated opportunities we have at Nu.”

Earnings call· Mar 2026 (Q1 FY26)· Financials· May 14, 2026

Source: earnings call transcript

Executive summary

Nu Holdings Ltd. Q1 FY26 – Record Revenue and Net Income Driven by Customer Growth and ARPAC Expansion

Nu Holdings reported a strong Q1 FY26 with record revenue and net income, fueled by robust customer growth and ARPAC expansion. The company is deepening its Brazil presence, scaling international markets like Mexico, and integrating AI across operations for efficiency and innovation. Despite increased credit provisions from seasonality and portfolio mix, management highlighted resilient unit economics and strong balance sheet buffers, positioning Nu for continued profitable growth.

Highlights

Customer base grew to over 135 million, with Brazil surpassing 115 million and Mexico reaching 15 million.
Record revenue of $5 billion, driven by ARPAC expansion to $16 per active customer.
Record low efficiency ratio below 18%, reflecting structural progress and AI-driven improvements.
Historical high net income of $871 million, compounding at over 80% annually since 2022.
Mexico achieved IFRS profitability ahead of internal plans, with ARPAC nearly doubling.

Concerns

Consolidated cost of deposits slightly higher sequentially at 88% of interbank rate due to Brazil's seasonal effect.
Risk-adjusted NIM decreased by 100 bps sequentially to 9.5% due to elevated credit loss allowance.
Efficiency ratio of 17.6% includes timing benefits (2/3) that will normalize, with full-year expected to converge to 20%.
Brazil's household debt service ratio is a concern for some investors, though management views it as nuanced.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 efficiency ratio	approximately 20% high materiality	FY26	High
IFRS Effective Tax Rate (ETR)	15% to 20% range medium materiality	remainder of 2026 · FY26	High
Managerial Effective Tax Rate (ETR)	30% to 35% range medium materiality	remainder of 2026 · FY26	High
U.S. investment OpEx headwind	less than 100 basis points on our consolidated efficiency ratio medium materiality	2026 and 2027	High
Risk-adjusted NIM trajectory	move back towards the level we operated at during the second half of 2025 medium materiality	coming quarters	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Brazil Solidified position as the largest private financial institution in the country. Still has significant growth runway in a $100B+ annual gross profit market. Customers: 115M+Monthly active customers: ~100MProfit pool share: ~7%	—	—	—	—
Mexico Became the third largest financial institution. Achieved IFRS profitability ahead of internal plan. Market opportunity is where Brazil was a decade ago, with a profit pool exceeding $40 billion. Customers: 15M+Customer base growth (4 years): ~7xARPAC: nearly doubledEfficiency ratio reduction: 78 percentage pointsProfit pool share: <1%	—	—	—	IFRS profitable
Colombia Delivered another solid quarter of net additions, approaching 5 million customers. Customers: ~5M	—	—	—	—
SME Brazil Largest SME base in Brazil, effectively built with zero customer acquisition cost. Expanding product offerings including secured and unsecured lines of credit. Significant growth opportunity in an underserved segment. Customers: 5M+Credit cards: 2M+	—	—	—	—

NU operating KPIs by quarter

NU operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Dec 2024 Q4 FY24	Jun 2025 Q2 FY25	Sep 2025 Q3 FY25	Dec 2025 Q4 FY25	This call Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Efficiency ratio	29.9% Our efficiency ratio improved significantly, closing the quarter at 29.9%, 150 basis points improvement from the previous quarter and over 610 basis points better than last year. Source: earnings call transcript	28.3% Gross profit has risen 78% annually, reaching $1.5 billion as we capture benefits of scale, cutting our efficiency ratio by more than half to 28.3% in Q2 2025. Source: earnings call transcript	—	—	—	—	-1.6 pt
Net interest margin	17.7% Conversely, our net interest margin contracted 70 basis points to 17.7% this quarter. Source: earnings call transcript	—	17.3% So the combination of lower asset yield because of the mix with a slightly more expensive funding base in Brazil has compressed net interest margins in the quarter, which is what you see on Slide 15 that has gone from 17.7% to 17.3%. Source: earnings call transcript	—	21.1% This mix shift continues to optimize our balance sheet, lifting our net interest margin, or NIM, to 21.1%. Source: earnings call transcript	22.9% Net interest income reached $3.7 billion, up 9% and net interest margin expanded 180 basis points to 22.9%. Source: earnings call transcript	+1.8 pt
Customers	—	—	127M Our customer base grew to 127 million customers, with more than 4 million net additions in the quarter while maintaining an activity rate above 83%, a clear reflection of the depth of engagement we continue to build with our users. Source: earnings call transcript	131M We closed the year with 131 million customers adding 17 million net new customers and maintaining an activity rate of 83%. Source: earnings call transcript	135M+ Our customer base now stands above 135 million customers. Source: earnings call transcript	139M Our customer base reached 139 million customers, including almost $118 million in Brazil more than $5 million in Colombia. Source: earnings call transcript	—
Activity rate	—	—	83%+ Our customer base grew to 127 million customers, with more than 4 million net additions in the quarter while maintaining an activity rate above 83%, a clear reflection of the depth of engagement we continue to build with our users. Source: earnings call transcript	83% We closed the year with 131 million customers adding 17 million net new customers and maintaining an activity rate of 83%. Source: earnings call transcript	83% Despite typical first quarter seasonality, consolidated monthly activity rate held at 83% and expanded sequentially. Source: earnings call transcript	—	0 pt
Customers Mexico	—	—	13M+ In Mexico, we surpassed 13 million customers now reaching around 14% of the adult population. Source: earnings call transcript	14M In Mexico, we reached 14 million customers, advanced our banking license process, and roughly half of our customers received their first credit card through Nu, reinforcing our role in expanding access to credit. Source: earnings call transcript	15M+ In Mexico, we crossed 15 million customers, becoming the third largest financial institution in the market. Source: earnings call transcript	16M+ Earlier this month, Mexican regulators approved our banking license in the country, and we're happy to be born as the largest digital bank in Mexico with more than 16 million customers. Source: earnings call transcript	—
Customers Brazil	—	—	—	113M In Brazil, we became the largest private financial institution by number of customers, reaching 113 million with an activity rate of 86%. Source: earnings call transcript	115M+ In Brazil, we surpassed 115 million customers and solidified our position as the largest private financial institution in the country. Source: earnings call transcript	<118M Our customer base reached 139 million customers, including almost $118 million in Brazil more than $5 million in Colombia. Source: earnings call transcript	—
Customers Colombia	—	—	—	4M+ In Colombia, we surpassed 4 million customers, and the subscription-based credit card significantly increased approval rates while maintaining healthy unit economics. Source: earnings call transcript	—	5M+ Our customer base reached 139 million customers, including almost $118 million in Brazil more than $5 million in Colombia. Source: earnings call transcript	—
15-90-day NPL ratio	—	—	—	4.1% As you see in the slide, early-stage delinquencies measured by 15 to 90 NPLs improved for the fourth consecutive quarter, declining 20 basis points to 4.1%, partially reflecting the seasonality of the quarter in Brazil. Source: earnings call transcript	5% The first quarter 2026 print of 5%, up 89 basis points from year-end, is consistent with that seasonal pattern and broadly in line with what we saw in both 2024 and 2025. Source: earnings call transcript	4.8% 15- to 90-day delinquencies improved 16 basis points to 4.8%. Source: earnings call transcript	-0.2 pt
90+ day NPL ratio	—	—	—	6.6% As a result of prior improvements in early delinquencies, 90+ NPLs declined 10 basis points, pointing to 6.6% in the quarter. Source: earnings call transcript	6.5% On the right, 90-plus NPLs, our late-stage delinquencies continue to ease, closing at 6.5% in the first quarter of 2026, 10 basis points lower than the fourth quarter of 2025 and well below the 7% peak we reached in the third quarter of 2024. Source: earnings call transcript	6.9% 90-plus delinquencies increased 35 basis points to 6.9%, broadly reflecting the seasonal migration of first quarter early delinquencies into the 90-plus bucket. Source: earnings call transcript	+0.4 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Product announcements

Product	Type	Timeline	Details
SME-specific products (Brazil)	expansion	—

Risks & headwinds

Seasonality in credit metrics Q1 annually

NPL 15-90 tends to peak in Q1; Q1 FY26 print of 5% (up 89 bps from year-end) is consistent with seasonal pattern.

Mitigation:Anticipated by models; pricing discipline ensures attractive returns and predictable losses. Risk-adjusted NIM expected to normalize after Q1.

Brazil household debt service ratio

Not quantified, but noted as a concern for investors.

Mitigation:Management views data as nuanced; employment in Brazil remains strong; income tax exemption for earnings up to BRL 5,000 is a structural tailwind improving disposable income. Short duration of portfolio allows for fast reaction to asset quality movements. Desenrola program is an additional tailwind.

Elevated Credit Loss Allowance (CLA) due to portfolio growth and mix shift Q1 FY26

CLA closed at $1.79B (up 33% QoQ FX-neutral); total exposure reached $70.7B (up 44% YoY FX-neutral); 98% of new exposure tilted towards credit cards and unsecured lending.

Mitigation:Reflects deliberate scaling and upfront provisioning (IFRS 9) for higher-yielding, higher-loss products, not underlying credit quality degradation. Balance sheet holds considerable buffers (16.2% total coverage, 2.5x 90-plus delinquency balance).

Timing items impacting efficiency ratio Next quarters

2/3 of Q1 FY26 OpEx outperformance due to timing (real estate, marketing phasing).

Mitigation:Will normalize in subsequent quarters; full-year 2026 efficiency ratio expected to converge to approximately 20%.

Regulatory risk and high FPD in private payroll loans

10% to 15% FPD (first payment default) observed; conversation about capping pricing.

Mitigation:Nu took a more careful approach, going slower and measuring risks. Believes long-term advantages (data, trust, cost to serve) will lead to market leadership.

Q&A highlights

Details on the new SME products, competitive edge, and potential size of the business.

David Velez highlighted Nu's 5 million SME customers acquired at zero CAC, cross-selling from individual customers. He mentioned new credit card and secured/unsecured lines of credit, including government-guaranteed programs. He sees a "blue ocean" opportunity, expanding beyond micro-entrepreneurs to larger SMEs, leveraging Nu's advantages in data and consumer trust.

“I actually think this is probably one of the most underappreciated opportunities we have at Nu.”

asked by Jorge Kuri · answered by David Velez-Osomo

2 min read 8 chapters

Detailed narrative

AI Transformation and Impact

Nu is undergoing an AI transformation, redesigning financial products and services from the ground up. This involves AI assistance (near 100% employee utilization, 50% engineering throughput increase), workflow reinvention (new AI-native customer experiences by year-end), and the AI-native bank (AI Private Banker for 15M+ users, nuFormer for credit card decisioning and unsecured lending).

The company leverages its scale, proprietary tech stack, and talent for AI leadership.

Brazil Market Opportunity

Despite being the largest private financial institution in Brazil with over 115 million customers, Nu's share of the addressable profit pool is only about 7%. The market exceeds $100 billion in annual gross profit and is expected to grow, offering significant runway for product expansion and deeper customer engagement.

Mexico Market Growth and Profitability

Mexico presents a substantial opportunity, with a profit pool exceeding $40 billion and growing. Nu has grown its customer base from 2 million to 15 million in four years, with ARPAC nearly doubling. The company achieved IFRS profitability in Mexico ahead of schedule, demonstrating the successful replication of its earnings-generating formula.

Credit Portfolio Dynamics

The increase in Credit Loss Allowance (CLA) was primarily driven by seasonality, portfolio growth (44% YoY FX-neutral total exposure to $70.7 billion), and a mix shift towards higher-yielding, higher-loss products like credit cards and unsecured lending (98% of new exposure). Management emphasized that these factors do not indicate asset quality degradation, but rather deliberate scaling and accurate risk pricing.

Efficiency and Operating Leverage

Nu achieved a record low efficiency ratio of 17.6% (16.6% at core), driven by strong revenue growth and OpEx below plan. While 2/3 of the OpEx outperformance was due to timing, 1/3 reflected structural efficiency gains from AI-driven improvements, software consolidation, and hiring discipline. The company expects full-year 2026 efficiency ratio to be around 20%.

Strategic International Expansion (U.S.)

Nu views its U.S. expansion as a "call option," investing a small amount of capital (less than 100 bps impact on efficiency ratio in 2026/2027) to test product-market fit. This strategy aims for significant upside if successful, with bounded downside risk, without jeopardizing core Latin American operations.

SME Business in Brazil

Nu has silently built the largest SME customer base in Brazil with 5 million customers at zero customer acquisition cost, cross-selling from its large individual customer base. The company is expanding its SME product offerings, including credit cards and new lines of credit, seeing a "blue ocean" opportunity in this underserved segment.

Private Payroll Loans Strategy

Nu has taken a more cautious approach to private payroll loans due to initial higher-than-anticipated risk and regulatory concerns, including potential pricing caps. While competitors focused on rapid growth, Nu prioritized a careful, measured expansion, believing its long-term advantages in data, trust, and cost-to-serve will ultimately lead to market leadership in this product.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.