Nu Holdings Ltd. Q2 FY2025 earnings call

• Nu continues to strengthen its position as a leading digital bank in Latin America. Customer base grew with 4.1 million net additions, and activity rate remained above 83%.
• Gross profit reached a record high of $1.5 billion, driven by strong net interest income expansion and stable credit loss allowances. Gross profit margin improved to 42.2%.
• Significant additions to the management team: Roberto Campos Neto joins as Vice Chairman and Head of Public Policy, Eric Young as Chief Technology Officer, and Ethan Eismann as Chief Design Officer. These additions aim to elevate execution on long-term strategy and prepare for international expansion.
• Nu's cross-sell strategy expands single product relationships into a broad ecosystem, deepening loyalty and creating value through diverse products like credit, insurance, and investments in crypto.

In Q2 2025, Nu Holdings delivered strong growth. The customer base expanded to nearly 123 million customers with over 4.1 million net additions. Revenue reached $3.7 billion, representing an 85% annualized growth rate since 2021. Gross profit rose to a record high of $1.5 billion, up 78% annually. The efficiency ratio was 28.3%. Monthly ARPAC crossed $12.2, up 18% year-over-year. Total credit balances reached $27.3 billion, up 40% year-over-year on an FX neutral basis, with secured lending up 200%, unsecured loans 70%, and credit cards 24%. Total deposits were $36.6 billion, up 41% year-over-year on an FX neutral basis.

• Expect margin expansions as the balance sheet is optimized, gradually reallocating liquidity from cash into credit and lowering cost of funding in Mexico and Colombia.
• Continued investment in growth and profitability, with focus on becoming the largest and most loved financial institution in Latin America.
• Anticipate further improvements in risk-adjusted NIM as the business model delivers results and profitability is adjusted alongside growth.

• Macroeconomic uncertainties in markets where Nu operates could impact asset quality.
• Timing mismatch in credit provisions due to front-loading expected credit losses not fully offset by interest earning portfolio growth.
• Seasonal dynamics affecting delinquency metrics, such as the 90-plus day NPL ratio increase following seasonal patterns.

Q: Significance of management team changes for Nu Holdings in the next phase and international expansion?

A: Roberto's addition strengthens regulatory and strategic positioning in Latin America. Eric and Ethan's additions prepare Nu to build world-class products and play in the big leagues as it considers internationalization over the next few years.

Q: Loan origination dynamics, including differences in Q2 versus prior quarters?

A: Unsecured lending remains strong with continued growth expected. Secured lending had a one-off headwind from INSS disruption but expects resumption of growth. Public payroll loans excluding INSS saw over 50% growth. Overall portfolio growth remains healthy.

Q: Asset quality, specifically Stage 3 formation and macro concerns?

A: Increase in Stage 3 formation is mostly due to seasonal factors. Asset quality is monitored with stress tests assuming future credit cycle deterioration, and cohorts are underwritten to withstand unfavorable economic cycles.