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    NU
    Earnings call· Sep 2025(Q3 FY25)

    Nu Holdings Ltd. NU

    Nov 13, 2025 Source

    Executive summary

    Nu Holdings Q3 FY25 — Strong Customer Growth, ARPAC Expansion, and AI-First Strategy

    Nu Holdings delivered a robust Q3 FY25, marked by significant customer expansion across Latin America, particularly in Mexico, and record financial performance. The company is strategically investing in its AI-first vision, developing proprietary models like nuFormer to enhance risk management, personalization, and operational efficiency. While net interest margins saw some compression due to portfolio mix and funding costs, risk-adjusted margins expanded, underscoring disciplined underwriting and a focus on sustainable growth.

    Highlights

    5

    • Customer base grew to 127 million, with over 4 million net additions, maintaining an activity rate above 83%.

    • Record revenues surpassed $4 billion, driven by customer expansion and ARPAC growth.

    • Net income reached a record $783 million, with ROE at 31%, up 39% year-over-year FX-neutral.

    • Gross profit rose sharply to $1.8 billion, up 32% year-over-year FX-neutral, with gross profit margin at 43.5%.

    • Efficiency ratio decreased to 27.7%, reflecting continued productivity and operating leverage.

    Concerns

    3

    • Net interest margins contracted by 40 basis points QoQ to 17.3%, primarily due to mix shift towards lower-risk assets and higher funding costs in Brazil.

    • Mexican regulator's proposed cap on card interchange fees could inhibit financial inclusion and credit deepening, though fees are a smaller portion of current revenue.

    • FGTS loans are expected to see a decrease in originations due to new regulation, though not material to overall portfolio growth.

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Brazil
    Focus on broadening product portfolio, deepening engagement, and executing credit strategy for risk-adjusted returns. Aggressive stance on segmented deposits (Money Boxes/Cajitas) for primary banking relationship customers increased funding costs.
    Customer base: over 60% of adult populationSME segment: largest player by number of accountsCredit card limit increase program: 1/3 rolled out in Q3 FY25, 1/3 expected in Q4 FY25
    		————
    Mexico
    Main focus on expanding customer base, deepening product adoption, and advancing financial inclusion. ARPAC nearing Brazil levels, reflecting strong unit economics of credit card business. Recent adjustments to deposit yields reduced consolidated funding cost. Asset quality performing well, with a new lending product doing "really, really well."
    Customer base: 13 millionAdult population penetration: 14%Banked population penetration: nearly 25%ARPAC: $12.50Cost to serve: below $1Credit book growth: 50%-70% annualizedLDR: 15%
    		————
    Colombia
    Continued strong traction, demonstrating scalability of the model.
    Customer base: approaching 4 million customersDeposits: growing steadily with funding costs below interbank rate
    		————

    Operational metrics

    25
    Customer base
    127 million4 million net additions QoQ
    Q3 FY25

    Reinforcing position as leading digital bank in Latin America.

    Activity rate
    above 83%
    Q3 FY25

    Reflection of depth of engagement with users.

    ARPAC
    $13surpassed $13 this quarter
    Q3 FY25

    Led to record revenues of over $4 billion.

    Gross profit
    $1.8 billionup 32% YoY FX-neutral
    Q3 FY25

    Reflects consistent top line growth and improved risk-adjusted performance.

    Cost-to-income ratio
    27.7%decreased slightly
    Q3 FY25

    Reflecting continued progress in productivity and operating leverage.

    Adjusted Net Income
    $783 millionrecord high
    Q3 FY25

    Another quarter of solid profitability even with investments in growth and innovation.

    Mexico adult population penetration (2019 Brazil comparison)
    10%
    2019

    Brazil's penetration when it entered its inflection point, compared to Mexico's current 14%.

    Mexico ARPAC
    $12.50
    Q3 FY25

    Reflecting strong customer engagement and favorable unit economics of credit card business in Mexico.

    Mexico cost to serve
    below $1
    Q3 FY25

    Much better than Brazil at a similar stage of development.

    nuFormer model parameters
    330 million
    Q3 FY25

    First generation of proprietary AI model.

    nuFormer model training data
    600 billion
    Q3 FY25

    Unprecedented scale of data by financial industry standards for AI model training.

    AI credit performance improvement
    3x higher
    Q3 FY25

    Average improvement compared to typical successful machine learning model upgrades.

    Secured lending growth
    133%YoY FX-neutral
    Q3 FY25

    Part of credit portfolio diversification.

    Unsecured loans growth
    63%YoY FX-neutral
    Q3 FY25

    Part of credit portfolio diversification.

    Secured and unsecured loans as % of total balances
    35%up from 27% a year ago
    Q3 FY25

    Reflects ongoing diversification and maturation of portfolio.

    Loan originations
    $4.2 billionup 40% YoY FX-neutral
    Q3 FY25

    Record high, with growth from unsecured and secured lending.

    Cost of funding (as % of interbank rates)
    89%improved from 91%
    Q3 FY25

    Demonstrates ability to grow volumes while enhancing efficiency.

    Credit loss allowance expenses
    7% declineQoQ FX-neutral
    Q3 FY25

    Mainly reflecting lower provisions in credit cards and unsecured loans.

    Risk-adjusted net interest margins
    9.9%expanded from 9.2%
    Q3 FY25

    Underscoring resilience and quality of portfolio.

    15-90-day NPL ratio
    4.2%
    Q3 FY25

    Remained well within expectations, slightly below historical Q3 seasonality.

    90+ day NPL ratio
    6.8%
    Q3 FY25

    Increased marginally, in line with expected seasonality and underlying portfolio dynamics.

    Interest expense growth
    24%QoQ
    Q3 FY25

    Driven by higher funding costs in Brazil due to aggressive segmented deposit offerings.

    Mexico credit card revolvers
    80%
    Q3 FY25

    Compared to 10%-15% for Nu's portfolio in Brazil.

    Mexico unbanked customers
    20%
    Q3 FY25

    Portion of 13M+ customers who did not have banking/credit access before Nubank.

    Credit limit increase program rollout
    1/3
    Q3 FY25

    Rollout of the Q2 FY25 program, with 1/3 in Q2, 1/3 in Q3, and 1/3 expected in Q4.

    Industry KPIs

    10
    MetricValueDetails
    Loans$30.4 billionUSD
    Deposits$38.8 billionUSD
    Rotce ROE31%%
    Fee income lines—
    Allowance reserves—
    Net interest income$2.3 billionUSD
    Net interest margin17.3%%
    Net charge offs npls4.2% (15-90 day NPL), 6.8% (90+ day NPL)%
    Provision for credit losses7% decline%
    Efficiency ratio operating leverage27.7%%

    Risks & headwinds

    3
    Mexican regulatory cap on card interchange feesNear-term, as a public consultation has been issued.

    Could inhibit financial inclusion and credit deepening by making unit economics for new-to-credit customers less compelling.

    Mitigation: Active dialog with other industry participants and the government to find a good balance.

    FGTS loan regulation changesOngoing

    Expected to decrease FGTS originations.

    Mitigation: Not expected to be material to overall portfolio growth; potential offset by increased public payroll loans.

    NIM compression from asset mix and funding costsQ3 FY25

    Net interest margins contracted by 40 basis points QoQ to 17.3%.

    Mitigation: Disciplined approach to optimizing risk-adjusted returns, expanding originations in lower-risk segments, leading to expansion of risk-adjusted NIM.

    What to watch in Q4 FY25

    5

    Mexico regulatory interchange fee decision

    Next quarter
    CurrentPublic consultation issued
    TargetResolution or further clarity on proposed caps

    Why it matters

    Could impact unit economics for new-to-credit customers and financial inclusion efforts in Mexico, affecting long-term growth strategy.

    We are concerned with the idea of caps and price control there because they may actually inhibit, the financial inclusion and credit deepening than we have seen in Brazil and other countries as they make the unit economics of new-to-credit customers less compelling.

    Q&A highlights

    5

    Seeking explanation for the lower provisions this quarter, given risk migration and improved Stage 3 formation.

    Lago attributed lower provisions to better-than-expected asset quality, intensified policies for reactivating customers who cured debt (leading to higher recoveries), and greater precision from predictive AI technology in credit modeling. He highlighted robust coverage ratios.

    “We have also had some effects of the policies that we have intensified over the past now 3 to 4 quarters of reactivating customers in Brazil who had defaulted with us a few years ago and only now after they have cured their debt, we are also kind of offering them additional credit opportunity that has materially improved the recovery levels.”

    asked by Yuri Fernandes · answered by Guilherme Marques do Lago

    2 min read5 chapters

    Detailed Narrative

    01

    AI-First Strategy and nuFormer Model

    Nu Holdings is pursuing an "AI-first" vision, integrating foundation models into operations to create an AI-native banking interface. This strategy aims to enhance customer personalization, deliver contextual offers, and improve risk management by reducing credit and fraud losses. The company developed nuFormer, a proprietary model with 330 million parameters trained on 600 billion tokens, which has already led to a 3x improvement in credit performance compared to typical machine learning upgrades. This model enabled a major upgrade to credit card limit policies in Brazil, increasing limits for eligible customers while maintaining risk appetite.

    02

    Mexico's Rapid Scaling and Strategic Importance

    Mexico has surpassed 13 million customers, reaching 14% of the adult population, and is now a key "S-curve" for Nu Holdings. ARPAC in Mexico has reached $12.50, nearing Brazil's levels, driven by strong credit card engagement and favorable unit economics. The cost to serve in Mexico is already below $1, outperforming Brazil at a similar stage. Management views Mexico as a market with significant long-term monetization potential, with a higher income per capita and a credit card market where 80% are revolvers.

    03

    Credit Portfolio Diversification and Risk Management

    The credit portfolio reached $30.4 billion, up 42% YoY FX-neutral, with secured lending growing 133% and unsecured loans 63%. Secured and unsecured loans now represent 35% of total balances, up from 27% a year ago. This shift towards lower-risk segments, including public payroll loans, has strengthened overall portfolio quality. Despite a nominal NIM contraction, risk-adjusted net interest margins expanded to 9.9% due to lower credit loss allowance expenses, reflecting disciplined underwriting and improved recovery levels.

    04

    Deposit Franchise and Funding Cost Dynamics

    Total deposits reached $38.8 billion, up 34% YoY FX-neutral. The overall cost of funding, expressed as a percentage of interbank rates, improved from 91% to 89%. However, dollar-wise interest expenses increased due to a deliberate strategy to offer more aggressive rates on segmented deposits (Money Boxes/Cajitas) in Brazil for primary banking relationship customers. This was partially offset by lower funding costs in Mexico and Colombia.

    05

    Efficiency and Profitability

    The company achieved a record net income of $783 million and a 31% ROE, up 39% YoY FX-neutral. The efficiency ratio decreased to 27.7%, demonstrating continued progress in productivity and operating leverage. Management emphasizes strategic investments for long-term value creation, even if they create short-term cost pressures, with a clear trend of efficiency gains and margin expansion as the company scales.

    AI-generated summary of the company’s earnings call. Not investment advice.