Nu's Q1 2025: Unpacking Contradictions in Secured Lending, Credit Yields, and Expansion Plans

Secured lending growth and strategy, credit card yields and mix, secured lending and risk management, impact of secured lending on NIM, and expansion strategy beyond Latin America are the key contradictions discussed in Nu's latest 2025Q1 earnings call.



Customer Growth and Market Penetration:
- Nu Holdings added 4.3 million customers in Q1 2025, reaching 119 million customers across all markets, with nearly 100 million monthly active customers.
- This growth highlights deep engagement and quality of customers, particularly in Brazil where 60% of the adult population are now customers, and 85% are active users.
- The drive for growth is attributed to the digital banking model's advantage in reaching underpenetrated markets, especially in Mexico and Colombia.

Credit Portfolio Expansion:
- Nu Holdings' credit portfolio reached $24.1 billion in Q1, growing 8% quarter-over-quarter and 40% year-over-year on an FX-neutral basis.
- The increase in credit card and lending products, especially unsecured and secured loans, reflects enhanced credit underwriting capabilities and strategic investments.
- This expansion is supported by credit model upgrades and improved access to private payroll loans, which offer significant market opportunities.

Financial Performance and Margin Stability:
- Net interest income grew 34% year-over-year, reaching $1.8 billion, despite a 5% quarter-over-quarter decline.
- The net interest margin in Brazil remained stable at 21.8%, supported by increased loan-to-deposit ratios, while Mexico and Colombia margins are temporarily impacted by strategic investments.
- Investment in deposit bases in Mexico and Colombia to fund credit growth and optimize funding costs are the primary factors affecting short-term margins.

Digital Banking Model and Operating Leverage:
- Nu Holdings' average revenue per active customer (ARPAC) continues to increase, surpassing $25 per customer after 7-8 years, with a 5x increase from the first year.
- This is driven by the deepening of product usage and cross-selling, demonstrating the model's strength in generating leveraged returns.
- The model's ability to scale efficiently and maintain low costs per customer remains a key competitive advantage in capturing market share.