Nu Holdings Tops $1 Billion Quarterly Profit as Mexico Expansion Accelerates

How Nu Holdings Crossed the $1 Billion Profit Mark

Nu Holdings delivered its strongest quarter on record, with net income rising 49% to $1.06 billion — the first time the Latin American digital bank has crossed the $1 billion quarterly profit threshold. Managed revenue reached $5.88 billion, up 39% at constant exchange rates and roughly 9% above market consensus. The results pushed shares up about 8% on Wall Street.

The bank's profitability improved sharply. Return on equity rose from 29% to 33%, while the risk-adjusted net interest margin climbed from 9.5% to 12.4%. Customer accounts grew 13% to 138.9 million, and average monthly revenue per active customer increased 22% to $17.10. Deposits, at $45.3 billion, continued to exceed the $39.4 billion credit portfolio, giving Nu a stable funding base.

There were two credit signals. Shorter-term arrears of 15 to 90 days improved to 4.8% and credit costs fell 9%, while arrears over 90 days rose to 6.9% from 6.5%. Nu said seasonal factors and Brazil's Desenrola debt-relief program supported the normalization, but warned their positive effect could be smaller in coming quarters.

Mexico, where Nu received a full banking license in early August, now has 16 million customers and average monthly revenue per active customer of $12.30 — above the $5.60 Brazil recorded at a comparable stage. Management believes Mexico could eventually reach 60% to 70% of the size of the Brazilian operation, or match it if Nu reproduces its model successfully.

Where Nu's Profit Engine and Credit Risk Meet

The central question after these results is whether Nu can repeat this quarter's profitability while expanding in Mexico and managing an early rise in longer-dated arrears. The headline numbers are strong, but the composition of growth matters.

The Profit Engine: Risk-Adjusted Margins and Deposit Discipline

The jump in the risk-adjusted net interest margin from 9.5% to 12.4% is the clearest driver of the record result. Because deposits remain larger than the loan book, Nu funds its lending without chasing more expensive market funding. That deposit advantage, combined with lower credit costs in the quarter, produced the 33% return on equity despite the company still investing in international expansion. This is a verified improvement, but it largely reflects favorable credit conditions that management itself indicates may not persist.

Mexico Is Now the Expansion Story

Mexico's 16 million customers and a $12.30 ARPAC at an early stage are the strongest signals so far that Nu can monetize markets beyond Brazil. The comparison with Brazil's $5.60 ARPAC at a similar point supports the view that Mexican customers are generating revenue faster. The full banking license removes a significant operational constraint. Management's estimate that Mexico could reach 60% to 70% of the Brazilian business only becomes credible if Nu can maintain that monetization pace while keeping credit losses controlled — two variables that will determine the expansion's success.

The Credit Normalization Caveat

The increase in arrears over 90 days to 6.9% is a yellow flag, not yet a crisis. It is partly offset by the improvement in 15-to-90 day arrears and the 9% decline in credit costs. But Nu explicitly linked part of the improvement to Brazil's Desenrola program and seasonality. If those effects fade, the risk-adjusted margin could come under pressure, even as the loan book keeps growing at 37%. That is the main tension investors will watch in the next two to three quarters.

What Nu's Results Mean for Investors and Competitors

Nu's results set concrete benchmarks for investors and competitors tracking the Latin American digital banking sector. The following are tied directly to the reported numbers and management's own guidance.

• Model a less favorable credit tailwind next quarter. Management cautioned that the seasonal and Desenrola benefits behind the improvement in 15-to-90 day arrears may diminish. The 90-day-plus ratio is already rising, so profit estimates should not assume credit costs continue falling at the same 9% pace.
• Use 12.4% as the risk-adjusted margin benchmark. That level, combined with the 33% return on equity, defines the high-water mark for the current cycle. If the ratio retreats while the credit portfolio grows, Nu's profitability may normalize quickly.
• Track Mexico against Brazil's early-stage ARPAC of $5.60. Mexico's $12.30 ARPAC indicates faster monetization, but the key test is whether that revenue per customer can be sustained as the client base expands beyond 16 million and credit risk builds.
• For competitors and partners, the funding gap is structural. Nu's deposits of $45.3 billion exceed its $39.4 billion loan book, which lowers its reliance on market funding. Rival digital lenders without a similar deposit base will face a higher cost disadvantage if rates remain elevated.