Nu Holdings Ltd. NU

The business

Nu is a branchless consumer bank sold through a phone app: credit cards, unsecured personal loans, secured lending, deposits, and a growing shelf of investment and insurance products for the Latin American mass market. The engine is Brazil consumer credit: credit income of $3.6B was 61% of Q2 gross revenue and grew 61% year over year, on a $39.4B total portfolio ($26.0B cards, $10.3B unsecured, $3.1B secured). Brazil holds roughly 118M of the 138.9M customers, runs an 86% activity rate, and funds the book with $36.4B of the $45.3B deposit base at 88% of the interbank rate. Float income ($1.5B) and fees ($816M) make up the rest. The structural edge, named and left for deeper work elsewhere: a $1.0 monthly cost to serve against a $17.1 ARPAC, which is what a 19.5% efficiency ratio looks like next to incumbents running at least double that.

What the financials don't show is where the credit risk now sits and what just changed. The book is deliberately shifting toward unsecured personal loans in a mass-market borrower base management underwrites assuming, in Vélez's words on the call, "the future will be worse than the past." Two things moved this quarter: Mexico went from break-even (Q1) to a full bank launch, reaching 16M customers by July with $5.7B of deposits and a $12.3 ARPAC at only 16.5% penetration of its cohort curve; and management committed to a US entry capped, per the call, at 100 basis points of efficiency-ratio drag while it spends 12 to 30 months building US credit models. Colombia adds 5M-plus customers and $3.3B of deposits. The Selic cut trims NU's float yield but lowers funding cost and borrower stress.