Nu's Q3 2025: Contradictions Emerge on Brazil's Interest Expense, Credit Card Portfolio, Asset Quality/Risk, and Regulatory Impact on Financial Inclusion

Date of Call: November 13, 2025

Financials Results

• Revenue: Record revenues of over $4.0 billion (company-stated record; no YOY % provided)
• Gross Margin: Gross profit margin 43.5% (gross profit $1.8B, up 32% YOY)

Business Commentary:

* Customer Growth and Engagement: - Nu Holdings reported a customer base of 127 million, with more than 4 million net additions in Q3, maintaining an activity rate above 83%. - The growth was driven by strong customer engagement and expansion in markets like Mexico and Colombia, where customer bases surpassed 13 million and approached 4 million, respectively.

• Revenue and Profitability:
• Nu Holdings achieved record revenues of over $4 billion, reflecting a 28% cost-to-income ratio and a 31% ROE.

• This was attributed to a compounding effect of customer expansion, deeper engagement, and disciplined monetization, supported by strong unit economics and operating leverage.

• Credit Portfolio and Risk Management:

• The credit portfolio reached $30.4 billion, up 42% year-over-year, with secured lending growing 133% and unsecured loans 63%.

• Improved risk management, disciplined underwriting, and better credit models contributed to a 7% decline in credit loss allowance expenses.

• AI and Technology:

• Nu Holdings is aiming to become AI-first, integrating foundation models to enhance customer understanding and product offerings.
• The adoption of advanced predictive AI models has led to improved credit card limit policies, reducing risk while increasing limits for eligible customers.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted customer base of 127M (+4M net adds), record revenues >$4B, gross profit $1.8B up 32% YoY, net income $783M and ROE 31% (up 39% YoY), and improving efficiency (cost-to-income ~28%, efficiency ratio 27.7%). These statements emphasize growth, profitability and improving unit economics.

Q&A:

• Question from Yuri Fernandes (JPMorgan Chase & Co): Can you explain the drivers of the lower provisions this quarter and why cost of risk decreased?
  Response: Lower provisions driven by better-than-expected asset quality from a customer recovery program that reactivated previously defaulted customers and improved precision from ML/AI credit models; coverage ratios remain robust.

• Question from Jorge Kuri (Morgan Stanley): NIM contracted despite interest income rising; why did interest expense rise so much and what explains the NIM compression?
  Response: NIM compression resulted from mix into lower-yield, less-risky assets (e.g., secured lending) while Brazilian funding costs rose (higher SELIC and targeted deposit programs); risk‑adjusted NIM expanded to 9.9%.

• Question from Jorge Kuri (Morgan Stanley): Can you quantify the recoveries' impact on the combined provision number?
  Response: Management declined to disclose a quantitative breakdown; recoveries from the reactivation program materially helped provisions but the exact amount was not provided.

• Question from Pedro Leduc (Itaú Corretora de Valores): How is the recent credit-limit increase program (CLIP) rolling out and what is the quality impact?
  Response: CLIP rollout split roughly one‑third across Q2–Q4; most increases granted to lower‑risk customers so utilization and revenue effects will phase in (carry through into 2026); AI has sharpened limit increases for existing customers but not yet applied to new‑customer acquisition, lending or Mexico/Colombia.

• Question from Mario Pierry (BofA Securities): Can you break down Mexico ARPAC between interest and fees and comment on proposed interchange caps and Mexico asset quality?
  Response: ARPAC in Mexico is primarily interest related (credit card lending and deposit float); interchange/fees are a smaller component; proposed interchange caps risk harming inclusion and unit economics; Mexico asset quality is performing well and more granular disclosures will come as the market scales.

• Question from Mario Pierry (BofA Securities): Any numeric idea of the fees/interchange share of ARPAC?
  Response: No breakdown provided; management directed investors to Mexican regulatory financial statements for proxies.

• Question from Mario Pierry (BofA Securities): Will you disclose Mexico NPLs/coverage as it becomes more relevant, and how is Mexico performing?
  Response: Yes—management will provide more granular Mexico asset‑quality disclosures as its share grows; currently Mexico is <10–15% of the book, with strong lending growth (50–70% annualized), controlled asset quality, falling funding costs and ~ $1 cost‑to‑serve.

• Question from Marcelo Mizrahi (Banco Bradesco BBI): Is the current lower cost of risk sustainable and will future NIM growth come more from lower cost of risk than from NIM expansion?
  Response: Future NIM will depend on asset mix and LDR: rising secured lending may lower yields but higher LDRs could expand NIM; management does not provide cost‑of‑risk guidance and will act if asset quality deteriorates.

• Question from Marcelo Mizrahi (Banco Bradesco BBI): Are you already seeing LDR-driven profitability in Mexico?
  Response: Mexico LDR is about 15%; recent margin improvement came mainly from lower funding costs—LDR is expected to play a bigger role going forward.

• Question from Thiago Bovolenta Batista (UBS): With recent regulatory changes, will you enter mortgages in Brazil and will FGTS loan changes materially reduce originations?
  Response: Mortgages are not a near‑term priority due to long duration and funding mismatch; FGTS regulation could reduce FGTS originations but would not be material to overall portfolio growth.

• Question from Gustavo Schroden (Citigroup): How do rising transfers to Stage 3 reconcile with lower ECLs and a lower‑risk mix?
  Response: Improved collections engines and recoveries have materially reduced ECLs despite Stage‑3 transfers; overall portfolio performance is consistent with expectations absent macro shocks.

• Question from Gustavo Schroden (Citigroup): Given improving funding costs and NPLs in Mexico, can we expect positive ROE/bottom line there soon?
  Response: No P&L or timing guidance provided; management says Mexico unit economics are very attractive (higher ROA/ROE, cost‑to‑serve ≈ $1) and they are intentionally reinvesting rather than optimizing for immediate profitability.

• Question from Daer Labarta (Goldman Sachs): Why did interest expenses jump so much—was it working days or new products (Turbo Money Boxes)?
  Response: Increase driven by targeted, higher‑yield segmented deposit programs in Brazil (e.g., Money Boxes/Turbo) to secure primary relationships; extra working days were minor.

• Question from Daer Labarta (Goldman Sachs): On secured lending—will FGTS headwinds be offset and by what?
  Response: Secure lending comprises FGTS, public payroll and private payroll; expected FGTS headwind is likely to be offset mainly by increased public payroll loan originations; private payroll is being monitored and evaluated before scaling.

Contradiction Point 1

Interest Expense in Brazil

It highlights discrepancies in the explanation for an increase in interest expenses in Brazil, which could impact the company's financial performance and cost structure.

Why did Brazil's interest expenses rise despite lower funding costs? - Daer Labarta (Goldman Sachs Group, Inc.)

2025Q3: The increase in interest expenses in Brazil is due to aggressive segmentation of deposits through products like Turbo Money Boxes. Despite this, overall funding costs decreased due to lower rates in Mexico and Colombia. - Guilherme Marques do Lago(CFO)

What is driving the significant deposit growth in Brazil and the impact of lower interest rates in Mexico? - Neha Agarwala (HSBC Global Investment Research)

2025Q2: In Brazil, engagement and share of wallet led to deposit growth. Mexico's deposit rates were adjusted to lower the cost of funding, but this hasn't yet affected current numbers. We expect no significant outflow, maintaining customer engagement with a new deposit product. - Guilherme Marques do Lago(CFO)

Contradiction Point 2

Credit Card Portfolio Performance

It involves differing explanations for the performance of the credit card portfolio, which is crucial for understanding the company's financial health and growth strategy.

Can you explain the NIM contraction despite interest income growth outpacing loan growth? - Jorge Kuri (Morgan Stanley)

2025Q3: The growth in less risky assets like secured lending and credit cards to lower-risk customers decreased asset yields. - Guilherme Marques do Lago(CFO)

What caused the loan origination growth decline from double-digit to 1% (FX-neutral) this quarter? - Jorge Kuri (Morgan Stanley, Research Division)

2025Q2: Credit card limits are increasing due to advanced underwriting, potentially adding over 100 basis points to our market share in Brazil. - Guilherme Marques do Lago(CFO)

Contradiction Point 3

Asset Quality and Risk

It directly impacts expectations regarding the financial health of the company's assets and risk management strategies, which are crucial for investor confidence and risk assessment.

What caused the lower provisions this quarter and how did they impact EBIT? - Yuri Fernandes (JPMorgan Chase & Co)

2025Q3: Asset quality has been positive, with performance better than expected, particularly in Credit Cards Brazil. There have been improved recovery levels from reactivating defaulted customers. The combination of strong asset quality and recovery improvements led to a decrease in credit loss allowance expenses. - Guilherme Marques do Lago(CFO)

Why was coverage increased for stage 2 of the cost of risk model, and what is its impact on the overall model? - Yuri Fernandes (JPMorgan)

2025Q1: There has been an increase in the coverage ratio for stage 2. This is really due to the seasonal effect that we are experiencing in Brazil where we have a large portion of our customers receiving their income in the middle of the month. So there is a higher level of activity in terms of cash in and cash out on a monthly basis. And that is pulling some of the loan exposure forward in the model from stage 1 to stage 2. - Youssef Lahrech(COO)

Contradiction Point 4

Regulatory Impact on Financial Inclusion

It involves the potential impact of regulatory changes on the company's financial inclusion strategy, which is a key part of Nubank's long-term growth plan.

How does the proposed interchange fee cap in Mexico impact your financial inclusion strategy there? - Mario Pierry (BofA Securities)

2025Q3: The proposed cap on interchange fees could hinder financial inclusion if enacted, as it may discourage the expansion of credit to new customers. Nubank is actively discussing solutions to maintain a balance between financial inclusion and sustainable growth. - Guilherme Marques do Lago(CFO)

How should we view Nu's global expansion plans in light of recent announcements and David's return to daily operations? - Eduardo Rosman (BTG Pactual)

2025Q1: Financial inclusion is at the core of our mission, and it is really central to our strategy. And through the expansion of credit, we think we are doing a great job at it. - David Velez-Osomo(CEO)