Nu Holdings: Scaling Global Fintech Dominance Amid Temporary Margin Headwinds

In the rapidly evolving fintech landscape, Nu Holdings (NYSE: NU) stands at a critical inflection point. While near-term margin pressures have sparked investor caution, the company’s strategic expansion into high-growth markets, coupled with disciplined risk management, positions it to dominate Latin America’s financial services sector. This analysis argues that strategic bets in Mexico, Colombia, and Brazil’s secured lending—alongside a fortress balance sheet—outweigh temporary margin compression, making NU a compelling buy for long-term investors.

Customer Scalability: A Global Engine of Growth

Nu’s first-quarter results underscore its unmatched ability to scale. With 4.3 million new customers added in Q1 2025, total users now exceed 118.6 million—nearly 60% of Brazil’s adult population and 67% YoY growth in Mexico to 11 million users. This hyper-growth trajectory is fueled by Nu’s digital-first model, which retains an 83% monthly active user rate and delivers $11.2 in monthly revenue per customer—up 17% YoY.

The recent approval of Nu Mexico’s banking license in April 2025 marks a turning point. This regulatory milestone allows Nu to transition from a payments-focused platform to a full-service bank, enabling mortgages, savings accounts, and credit cards—products with higher lifetime value. As Mexico’s deposit base grows 18% QoQ to $5.4 billion, the company is primed to capture $245 million in Mexico revenue (nearly doubling YoY), with margins set to expand as scale economies take hold.

Unit Economics: High-Growth Markets Validate the Model

While Nu’s net interest margin (NIM) dipped 20 bps sequentially to 17.5% due to rising Brazilian interest rates and deposit pricing in Mexico, its unit economics remain robust:

• Brazil: Unsecured loan originations hit R$17.3 billion (USD $3.5 billion) in Q1, with NPLs stabilizing at 4.7% for 15–90-day delinquencies and 6.5% for 90+ days—below historical averages. Secured lending via FGTS (Brazilian housing fund-backed loans) and public payroll partnerships now account for 20% of Brazil’s loan book, offering ROEs "above triple digits" due to minimal credit risk.
• Mexico: Despite margin compression from deposit growth investments, revenue nearly doubled YoY, and the 11 million customer base is a beachhead for premium financial products.
• Colombia: Deposits grew 30% QoQ to $1.8 billion, signaling early traction in its third key market.

Margin Recovery Thesis: Brazil’s NIM Stability + Mexico’s Convergence

Nu’s margin pressures are temporary, driven by three factors:
1. Brazil’s SELIC Rate Lag: The central bank’s aggressive rate hikes (to 13.75% in 2023) have yet to fully reprice into loan portfolios. Management expects NIMs to stabilize in H2 2025 as repricing completes.
2. Mexico’s Deposit Buildout: Nu is intentionally pricing deposits competitively to secure $5.4 billion in low-cost funding, which will eventually reduce reliance on costlier external funding.
3. FGTS Loan Scalability: With nine new public payroll lending partnerships planned by year-end—expanding beyond the initial INSS/SIAPE programs—secured lending’s high margins will offset unsecured loan dilution.

Crucially, excess capital of $4.3 billion (vs. $2.7 billion in 2023) provides a buffer to navigate macro uncertainty. Meanwhile, cost efficiency improved to a 24.7% efficiency ratio—a 740 bps YoY drop—proving its ability to scale without over-investing.

Risk Mitigation: Prudent Lending and Regulatory Expertise

Nu’s risk management is a pillar of its model:
- Credit Discipline: Brazil’s NPL trends are within guidance, and provisions for credit losses rose 32% YoY to $159 million, reflecting prudence.
- Regulatory Strength: The appointment of former Brazilian Central Bank President Roberto Campos Neto as Vice Chairman signals enhanced regulatory navigation, critical as Nu expands into banking licenses.
- Capital Resilience: A 15.7% common equity tier 1 (CET1) ratio exceeds regional peers, ensuring flexibility to weather shocks.

Why Buy Now?

Nu’s $26.3 billion revenue run rate by 2028 (per analysts) and $5.4 billion net income projection are not mere targets—they reflect a scalable, defensible model. While short-term margin headwinds will linger, they pale against the long-term value of:
- Mexico’s banking license unlocking $2 billion+ in annual revenue by 2026,
- FGTS/secure lending’s 100%+ ROE potential, and
- Brazil’s 30% adult penetration rate offering room for premium product upsells.

Conclusion: A Fintech Titan in the Making

Nu Holdings is not merely a growth story—it is a strategic juggernaut converting scale into profitability. While margin compression and macro risks are real, they are outweighed by the geographic and product diversification now taking shape. With a 27% ROE, a fortress balance sheet, and leadership from industry veterans, Nu is poised to capitalize on Latin America’s $500 billion unmet financial services demand.

Investors focused on long-term dominance should act now: Buy NU before the market recognizes Mexico’s full potential and Brazil’s margin recovery. The next leg of growth is already underway.

Disclosure: This analysis is for informational purposes only and does not constitute financial advice.