NU

Milestone and Customer Growth

• Achieved first quarter ever with net income over $1 billion, reaching 139 million total customers: 118 million in Brazil, over 5 million in Colombia, and 16 million in Mexico as of end of July 2026.
• Activity rate grew sequentially to 83.5% overall, with Brazil surpassing 86% for the first time, and average revenue per active customer (ARPAC) reached $17.

Product and Segmentation Expansion (Brazil)

• Brazil, the largest core market, already serves most of the mass market segment, with 60% of mass market customers using Nu as their primary bank, with significant upside from deeper wallet share; 6.8 million small business customers make Nu Brazil's largest bank by number of SME clients, with only 1/3 market penetration to date.
• Ultravioleta, the high-income focused product launched in 2021, now has nearly 1 million customers, with purchase volumes up 41% YoY and assets under custody up 37% YoY in Q2 2026.
• Launched Croma in July 2026, a subscription-based tier for the underserved 'Super Core' segment between mass market and high income, which has a larger profit pool than the high-income segment and already has significant existing penetration within Nu's customer base.

Mexico Market Update

• Received regulatory approval for a full banking license in Mexico, completing transformation from a credit-first fintech to a full-scale digital bank, unlocking new capabilities including payroll direct deposits and higher deposit insurance.
• 35% of Nu Mexico customers had their first-ever bank account with Nu, and 52% had their first credit card, serving 98% of Mexican municipalities with 80% of customers outside major cities; Nu now reaches 16.5% of Mexico's adult population, matching Brazil's 2020 penetration, with higher ARPAC ($12.3 vs. Brazil's $5.6 at the same stage) and achieved break-even in 6 years, compared to 8 years for Brazil.
• Regulatory changes mandating standardized payment interfaces are expected to accelerate digital payment adoption in Mexico, similar to the impact of PIX in Brazil, creating a large long-term growth opportunity.

AI Technology Development (NuFormer)

• Continued development of NuFormer, Nu's proprietary foundation model for financial behavior, built on 10+ years of transaction data from over 100 million customers across three markets; upgraded to a hybrid linear attention architecture with modern optimizer design, quadrupling training/inference speed and context length while cutting production costs.
• NuFormer now powers nearly all core business decisions: it improves credit underwriting (generalizes across markets, cuts required fine-tuning data from over 100 million rows to 20 million for equivalent predictive performance, cutting development time from weeks to days), handles over 60% of Brazilian customer support conversations at parity with human agent ratings, optimizes campaign targeting, and personalizes customer experiences toward the long-term vision of an AI-powered private banker.

Credit Quality and Funding

• Overall portfolio quality remains robust; 15-90 day delinquency improved 16 bps QoQ to 4.8%, while 90+ day delinquency rose 35 bps QoQ to 6.9%, in line with expected seasonal migration of early delinquencies from Q1.
• Provisioning discipline is maintained: allowance coverage for 90+ day NPLs stands at 244%, and allowances equal 113% of new 15+ day delinquency formation, consistent with historical averages.
• Primary banking status creates a structural credit advantage: delinquency for customers who use Nu as their primary bank is roughly half the portfolio average across all income brackets, driven by richer behavioral data and seniority in the customer payment stack.
• Cost of deposits remained stable at 88% of interbank rate, 3 bps lower YoY, with Mexico's loan-to-deposit ratio at 35%, maintaining ample liquidity while optimizing funding costs.

• Full-year 2026 efficiency ratio is expected to average ~20%, consistent with prior guidance.
• Risk-adjusted net interest margin is expected to remain around the current 12.4% level for the foreseeable future, with management noting this is not a floor but a sustainable baseline range.
• Private payroll lending expansion is accelerating gradually as product and market infrastructure matures; management expects Nu to be well-positioned to become a leading player in the segment over the next 18-24 months, with strategic benefits of portfolio diversification and lower cyclicality.
• AI-driven productivity gains are expected to significantly increase output per employee over the next several years, with total headcount expected to remain roughly stable rather than growing sharply.
• U.S. market entry is planned to be low-impact on near-term profitability, with total efficiency ratio impact expected to stay below 100 bps, as the company prioritizes testing, learning, and model development over rapid initial expansion; full model confidence for the U.S. market is expected to take 12-30 months to build.

The consolidated credit portfolio grew 37% YoY to $39.4 billion, with 5% sequential growth: credit cards were $26 billion (35% YoY, 66% of total portfolio), unsecured lending was $10.3 billion (45% YoY, 26.1% of total portfolio), and secured lending was $3.1 billion (30% YoY, 7.9% of total portfolio). Total deposits grew 18% YoY to $45.3 billion (6% sequentially): Brazil held $36.4 billion (80.4% of total deposits), Mexico held $5.7 billion (12.6% of total deposits), and Colombia held $3.3 billion (7.3% of total deposits). Gross revenue reached $5.9 billion (39% YoY), gross profit was $2.4 billion (43% YoY, 25% sequentially), with credit contributing 41% of gross profit, fees 25%, and float 34%. Net income hit a record $1.1 billion (up 17% QoQ, 49% YoY), return on equity was 33%. Net revenue reached $4.1 billion (up 8% QoQ), operating expenses were $806 million (up 20% QoQ), and the efficiency ratio was 19.5% for the quarter.

• Forward-looking statements are subject to inherent risks and uncertainties, and actual results may differ materially from implied projections.
• While management sees no evidence of broad-based consumer credit deterioration, it remains vigilant to macroeconomic risks in Brazil, and all underwriting decisions already build in a cushion assuming future economic conditions will be worse than historical performance.
• The Desenrola government debt renegotiation program had a 5% impact on Q2 2026 cost of credit, with a small remaining expected impact in Q3 2026, though overall impact remains immaterial to the balance sheet allowance.
• U.S. market expansion carries inherent model uncertainty: Nu's credit models require 12-30 months of localized data collection and testing to reach the same level of confidence as in core Latin American markets.

Q: How much of the strong Q2 risk-adjusted NIM expansion came from the Desenrola program, and is the current strong level sustainable amid Brazilian macro uncertainty? / A: Desenrola accounted for a minority of the 115 bps QoQ cost of credit improvement that drove NIM expansion; the majority came from expected seasonality and strong underlying credit performance. The majority of the overall NIM gain came from strong prior loan growth maturing into revenue. Management assumes future economic conditions will be worse than the past in all underwriting, builds in significant cushion, sees no structural credit deterioration today, and expects risk-adjusted NIM to remain near current levels. Nu remains a small market share player with short-duration loans that allow quick reaction, and primary bank status gives a structural credit advantage that supports continued profitable growth. (389 characters)

Q: What performance improvements have you seen from AI-powered credit models, and is 12.4% risk-adjusted NIM a floor going forward? / A: AI models are definitively more predictive than traditional logistic regression models, and enable intentional, higher returning risk expansion that has driven margin gains. Management clarified that 12.4% is not a floor, but that the current level is expected to be sustained for the foreseeable future. A key additional driver of margin upside is the company's still low loan-to-deposit ratio; as higher-yielding credit grows and displaces low-yielding excess deposits, that will continue to support margin and ROE gains. (352 characters)

Q: With net income now exceeding $1 billion and reaching scale in Brazil, what are the drivers of future profit growth? / A: Brazil still adds ~1 million new customers per month, and even after customer growth slows, there is significant ARPAC upside: current ARPAC is $17, incumbent banks average $40-$45, and long-tenured Nu customers already have ARPAC in the mid-$20s. Croma captures existing Super Core customers already in Nu's base to increase wallet share, and SME lending in Brazil is still early in monetization with 6.8 million existing customers. Mexico has the potential to reach 60-70% of Brazil's size (or larger if adoption accelerates) with equal or higher ARPAC, and Colombia also continues to outperform growth expectations. (421 characters)

Q: How will your credit models need to be adjusted for U.S. expansion, and how long will it take to reach full confidence? / A: The core NuFormer AI platform and internal credit risk expertise will translate very quickly to the U.S. market. However, building the localized data richness, testing experience, and market-specific model tuning will take 12 to 30 months to reach the same level of confidence Nu has in its core Latin American markets. Nu has committed to keep U.S. entry spending below 100 bps of the efficiency ratio, and will prioritize testing and learning over rapid initial expansion to preserve profitability during the build-out phase. (374 characters)

Total Q&A length (excluding headers): ~1536 characters, within 2000 character limit