Nu Holdings Ltd. Q3 FY2025 earnings call

• Customer Growth: The customer base grew to 127 million, with over 4 million net additions in Q3 2025, and an activity rate above 83% reflecting strong user engagement.
• Revenue and Profitability: Record revenues over $4 billion, net income of $783 million, and gross profit rising sharply. The cost-to-income ratio was 28%, showing efficiency.
• Market Performance: In Brazil, it serves over 60% of the adult population and leads in the SME segment. In Mexico, it has over 13 million customers, with ARPAC near $12.5.
• AI Strategy: Vision to be AI-first, integrating foundation models for personalized experiences, risk management, and productivity. Developed nuFormer model for credit performance improvement.
• Credit Portfolio: Total balances at $30.4 billion, up 42% YOY; loan originations reached a record $4.2 billion, up 40% YOY; deposits at $38.8 billion, up 34% YOY.

In Q3 2025, Nu Holdings saw significant segment performance. The customer base expanded to 127 million customers with over 4 million net additions during the quarter, maintaining an activity rate above 83%. Revenue reached over $4 billion, with ARPAC surpassing $13. Gross profit showed a sharp rise. The credit portfolio had total balances of $30.4 billion, a 42% year-over-year increase on an FX-neutral basis. Deposits stood at $38.8 billion, up 34% year-over-year on an FX-neutral basis. Net interest income was $2.3 billion, a 32% year-over-year increase. Gross profit was $1.8 billion, up 32% year-over-year. The cost-to-income ratio was 28%. In Brazil, Nu serves over 60% of the adult population and is the largest in the SME segment by number of accounts. In Mexico, it has over 13 million customers, approaching 14% of the adult population.

No specific forward-looking guidance on top-line or cost of risk was provided. The focus remains on scaling in core markets (Brazil, Mexico) and leveraging the U.S. potential with a national bank charter. The company emphasizes long-term investment in growth and innovation while maintaining efficiency.

• Regulatory Risks: Concerns about the Mexican regulator's proposed cap on card interchange fees, which could hinder financial inclusion and credit deepening.
• Macro Risks: Potential deterioration in asset quality across segments, products, or geographies could lead to a reassessment of growth strategies.

Q: Could you provide thoughts on the provisions and the lower provisions seen this quarter?

A: Asset quality has been positive. Over the past two quarters, asset quality has performed as expected, and there have been effects from reactivating defaulted customers and precision in credit modeling techniques.

Q: Can you explain the contraction in net interest margin?

A: The contraction in net interest margin is due to the mix of credit towards less risky assets and a slightly more expensive funding base in Brazil. However, the risk-adjusted margin expanded because of a much lower cost of risk.

Q: Could you elaborate on the Mexico ARPAC and the impact of the interchange fee cap?

A: ARPAC in Mexico is mostly interest-related. There are concerns about interchange fee caps inhibiting financial inclusion, and the company is in active dialogue with the industry and government.

Q: Can you share asset quality metrics for Mexico?

A: Asset quality in Mexico has been good, with strong growth in the credit book and improving cost of funding, but specific NPL disclosures for Mexico are not provided yet.

Q: What are your thoughts on the cost of risk and future NIM growth?

A: The cost of risk depends on asset mix and loan-to-deposit ratio. No guidance on cost of risk is provided, and the company focuses on managing the business with a keen eye on data and asset quality.

Q: How do mortgage and FGTS regulation impact your operations?

A: The company is not prioritizing mortgage due to its long-term duration. FGTS regulation will lead to a decrease in originations but is not expected to materially impact the portfolio.

Q: What is the profitability potential for Mexico?

A: Mexico has compelling unit economics with higher ROA and ROE. However, there is no specific timeline for net income or ROE; the company is focused on long-term investment.