NU Q1 2025 Earnings Report

NU EPS Results

• Actual EPS: $0.11
• Consensus EPS: $0.12
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.09

NU Revenue Results

• Actual Revenue: $3.25 billion
• Expected Revenue: $3.09 billion
• Beat/Miss: Beat by +$158.49 million
• YoY Revenue Growth: N/A

NU Announcement Details

• Quarter: Q1 2025
• Date: 5/13/2025
• Time: After Market Closes
• Conference Call Date: Tuesday, May 13, 2025
• Conference Call Time: 6:00PM ET

NU (NYSE:NU) is a holding company, which engages in the provision of digital banking services. The company was founded by David Vélez Osorno, Cristina Helena Zingaretti Junqueira, and Adam Edward Wible on February 26, 2016 and is headquartered in George Town, Cayman Islands.

NU Q1 2025 Earnings Call Transcript

Key Takeaways

• During Q1 2025, Nooh added 4.3 million customers, reaching 19 million in Brazil, 11 million in Mexico and 3 million in Colombia, and now serves 100 million monthly active users with an engagement ratio above 83%.
• In Mexico, customer growth was up 70% over the past four quarters, FX‐neutral deposits more than doubled to $5 billion and revenues nearly doubled to $245 million, with a full banking license now approved to accelerate product rollout.
• The company’s operating leverage remains a tailwind as cost to serve has fallen over 80% in recent years to under $1 per customer, while average revenue per active customer can expand more than fivefold over time.
• Net interest income rose 34% YoY to $1.8 billion, but consolidated NIM declined 20 bps to 17.5% due mainly to higher credit loss allowances and strategic deposit investments in Mexico and Colombia.
• First-quarter provisions increased seasonally, with 15–90-day NPLs up 60 bps to 4.7% and total allowance rising to $973.5 million, reflecting typical Q1 credit loss patterns and portfolio growth.

Presentation

[Operator]

Good evening, ladies and gentlemen. Welcome to Nooh Holdings conference call to discuss the results for the first quarter of twenty twenty five. A slide presentation is accompanying today's webcast, which is available in Nooh's Investor Relations website, www.investors.new in English and www.investidoirespontono in Portuguese. This conference is being recorded, and the replay can also be IR website. This call is also available in Portuguese.

[Operator]

To access, you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese room. After that, select Mute Original Audio. Please be advised that all participants will be in a listen only mode. You may submit online questions at any time today using the Q and A box on the webcast. I would now like to turn the call over to Mr. Guillermo Sotto, Investor Relations Officer at Nuholdings. Mr. Sotto, you may proceed.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

Thank you, operator, and thank you everyone for joining our earnings call today. If you have not seen our earnings release yet, a copy is posted in the results center of our Investor Relations website. With me on today's call are David Valles, our Founder, Chief Executive Officer and Chairman Youssef Lareche, President and Chief Operating Officer Guillermo Lago, Chief Financial Officer. Throughout this conference call, we'll be presenting non IFRS information including adjusted net income. These are important financial measures for new holdings but are not financial measures as defined by IFRS and may not be comparable to similar measures from other companies.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

Reconciliations of non IFRS information to IFRS information are available in our earnings release. Unless noted otherwise all growth rates are on an year over year basis. I would also like to remind everyone that today's discussions might include forward looking statements, which are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties and could cause uncertainties. Please refer to the forward looking statements disclosure in our earnings release.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

I will now turn the call over to David. Please go ahead, David.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

Good evening, everyone, and thank you for joining us today. We kicked off 2025 with strong momentum. During the first quarter alone, we added 4,300,000 customers, reaching a total of 19,000,000 across all our markets. That includes a 5,000,000 in Brazil, Eleven Million in Mexico. And just last month, we crossed 3,000,000 customers in Colombia.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

We now serve nearly a hundred million monthly active customers, keeping our activity ratio above 83%. These numbers reflect not just scale, but deep engagement and quality. While 100,000,000 monthly active customers position us as perhaps the largest financial institution in Latin America in terms of number of customers, I would like to quickly provide a high level reminder of the big opportunity we still have ahead of us. Brazil is our most scaled and mature market. About 60% of the adult population is a customer.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

85% are active, and close to 60% of these customers use new as their primary bank, translating into a market share of principality of over 30%. And yet, our gross profit market share is just 5% as we're in the early stages of monetizing our customer base through larger usage and cross sell of products. Additionally, recent upgrades to our credit models, including new AI capabilities, are enabling us to responsibly expand credit access and unlock further growth. But we're just as focused on noncredit opportunities, which remain equally ripe for disruption. This gap is our opportunity.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

We're doubling down. We're investing our earnings to close the distance between principality and market share and to expand the size of the market itself. Let's turn to Mexico, our next major growth frontier. Mexico is Latin America's second largest banking market, but more importantly, it's one of the most underpenetrated. The bigger opportunity here isn't just to win market share.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

It's to expand the market itself. Our momentum in Mexico is strong. In the past four quarters, our customer base grew 70%, reaching 11,000,000 customers. Deposits more than doubled on an FX neutral basis, exceeding $5,000,000,000. Our credit portfolio grew 60% FX neutral to nearly 1,000,000,000.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

Revenues nearly doubled FX neutral, reaching 245,000,000 last quarter. These are early signs, but strong ones, that our model is working in Mexico. And I'm also very happy to announce that just a few weeks ago, we were approved to get our banking license in this country, license that is going to enable us to accelerate our growth and provide many more products to our customers. Between Brazil, Mexico, and Colombia, we see a wide range of actionable, high conviction, and profitable growth opportunities. We are investing proactively and deliverably to system.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

As we continue growing our customer base and our penetration within these large markets, we will continue to benefit from the strong operating leverage of our business model. Our average revenue per active customer or RPAC increases towards the levels of incumbent banks, while our cost remains largely unchanged at or below $1 per customer. On the left hand side of the slide, you'll see the historical RPAC progression across customer cohorts. In the first twelve months, a cohort typically generates just about $5 per customer in revenue. But as product usage deepens and cross sell increases, ARPAK can grow more than fivefold, surpassing $25 after seven to eight years.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

And this figure could continue to rise and rise at a faster paces as we narrow the gap within common banks, which generate ARPAK of over $40 by launching new products and entering new segments. On the right hand side, you'll see our cost to serve over time. Thanks to scale efficiencies, process automation, and sustained investment in technology, these costs have declined by over 80% in the past years and now remain below $1 per customer. Even as the business has grown significantly in scale and complexity, we expect this trend to continue. So taken together, these two trends illustrate the strength of our operating leverage, one of the defining features of our digital banking model and the most significant source of earnings unlock potential in our business.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

And we're very much early in this journey. The largest customer cohorts forming the just past three years when we added nearly 60,000,000 customers and doubled our customer base are only now beginning their monetization curves. To summarize, while we've already reached a significant number of customers across Latin America, our market penetration remains relatively low, including in Brazil, and the opportunity to further grow revenue is enormous. The shift from cash to digital payments and from offline to digital banking are structural decades long trends, especially in underpenetrated markets like Mexico and Colombia. As the category leader in digital banking across the region, we are exceptionally well positioned to capture outsized value from this transformation.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

That's why we remain steadfast in our commitment to long term value creation, not short term earnings optimization. Just as we're doing with the strategic ramp up of our deposit franchises in Mexico and Colombia, which we will discuss later today, we will continue making significant investments aimed at maximizing sustainable shareholder value over time, even if that means accepting near term pressure on margins. We believe this is the right approach to build a durable, profitable, and category defining company for the long run. And with that, I'd like to pass the floor to our CFO, Guillermo Lago, who will walk us through the details of our financial results. Over to you, Lago.

[Guilherme Lago, CFO at Nu Holdings]

Thank you, David, and good evening, everyone. We had a strong start to the year with continued customer growth. We now serve approximately 59% of Brazil's adult population, 12% in Mexico, and 8% in Colombia. And these figures exclude under eighteenth and SMEs, two segments that are growing even faster than our core adult base. A key differentiator of our digital banking model is our ability to drive principality.

[Guilherme Lago, CFO at Nu Holdings]

NewBank isn't just a secondary wallet for ad hoc remittance or occasional purchases. It is the primary banking relationship for most of our active customers who use us every single day. Our DAOMAL ratio continues close to 50%, one of the highest in the fintech industry globally. This creates significant competitive moats, including stronger unit economics and access to richer transactional data. Our credit portfolio reached $24,100,000,000 in q one, growing 8% quarter over quarter and 40% year over year, both on an FX neutral basis.

[Guilherme Lago, CFO at Nu Holdings]

As expected, credit card growth was seasonally softer in q one, consistent with historical patterns. Meanwhile, our lending products, both unsecured and secured, continue to grow faster than our credit card portfolio, gaining share within the overall credit mix. We expect this shift in composition to continue over the coming quarters. Now for the past two years, we've been sharing with investors the significant opportunity we see in secure lending. While our approach is fundamentally different from the rest of the industry, built on a % digital originations, it is exciting now to show tangible traction with a 300% increase in balances over the past twelve months.

[Guilherme Lago, CFO at Nu Holdings]

Now turning to loan origination performance. Total loan originations reached a record of 20,200,000,000.0 reais in q one, up 64 year over year. Unsecured loans were the main driver, reaching an all time high of 17,300,000,000.0 reais. This reflects the strength of our credit underwriting capabilities. As you may recall, in late twenty twenty two, we deliberately pulled back from this asset class in response to adverse credit conditions.

[Guilherme Lago, CFO at Nu Holdings]

Since then, we have fine tuned our credit models and acquisition funnels. And today, we are seeing the strongest momentum yet in both origination volumes and unit economics. Credit underwriting is never a straight line, and our ability to step back, recalibrate, and return with speed and discipline is a key competitive advantage. On the secured side, growth this quarter was temporarily impacted by a disruption in the FGTS loan API, which paused originations for nearly ten days across the market between late February and early March. Nonetheless, public payroll loans gained further traction, growing over 50% quarter over quarter.

[Guilherme Lago, CFO at Nu Holdings]

Now, finally, we see the new private payroll product in Brazil as a unique opportunity to break into a segment historically dominated by Brazil's top three incumbent banks. Private payroll loans will open the door to customer relationships, customer data, and customer collateral that were previously out of reach. We are all in. While we don't expect any material short term impact on our unsecured lending business, we are confident that the scale and the strategic value of this opportunity far outweighed near term risks. Just like we did with FGTS, where we've become the market leader, we are building a digital native product from scratch, using our cost advantages to deliver the best offer in the market.

[Guilherme Lago, CFO at Nu Holdings]

Now let's turn to the breakdown of our credit card portfolio. Growth in interest earning installments reaccelerated in q one, now accounting for 29% of the total credit card portfolio. This compares to q four, which typically sees a seasonal increase in noninterest balance due to higher purchase volumes. We also saw momentum supported by strong originations in PIX Financing and other transactional based credit products. On peaks financing specifically, while we have not yet fully resumed growth in some higher risk segments, as testing continues, we've optimized in app conversion flows.

[Guilherme Lago, CFO at Nu Holdings]

This drove strong origination volumes, especially towards the end of the quarter. Now let's zoom in on PIX Financing and our other transactional credit products. This is another clear example of our disciplined approach to credit. In the second half of twenty twenty four, we saw that among riskier bands, Peaks Financing usage began to negatively impact NPS and reduce engagement, posing a risk to principality. We acted quickly, tightening eligibility criteria for those segments.

[Guilherme Lago, CFO at Nu Holdings]

This led to a deliberate decline in volumes and yields. But once again, we are not optimizing for linear growth. We are building sustainable, resilient value for both customers and shareholders. The constraint in PIX Financing wasn't lack of demand or unfavorable unit economics, but our choice to protect customer experience and long term principality. Now since then, we've gradually re expanded access, improved in app flows, and launched new features, leading to record high originations in March.

[Guilherme Lago, CFO at Nu Holdings]

This recovered, achieved without compromising credit quality, highlights our agility, our customer first mindset, and our long term orientation. On the funding side, total deposits reached $31,600,000,000 in q one, up 48% year over year and 1% quarter over quarter, both on an FX neutral basis. Growth was driven by strong momentum in Mexico and Colombia, while Brazil saw a modest 1% decline, yet outperforming typical q one seasonality, which averages a 5% drop. We have continued investing in our deposit franchises in Mexico and Colombia. Scaling local currency retail deposits, it is critical, not only to fund consumer credit at competitive terms, but also to generate data that powers our credit underwriting and customer segmentation models.

[Guilherme Lago, CFO at Nu Holdings]

We are very pleased with the pace and scale of our growth in these markets as it has significantly de risked our funding strategy there. Now, naturally, these investments have led to a gradual increase in our average funding costs. We've begun optimizing both the design and the pricing of our deposits in Mexico and Colombia, while still maintaining strong growth and engagement. Over the coming quarters, we expect funding costs to trend down as the base matures. Though we will remain ready to adjust quickly in response to short term opportunities or shifts in competitive dynamics.

[Guilherme Lago, CFO at Nu Holdings]

In Q1, net interest income, or NII, grew 34% year over year and 5% quarter over quarter, both on an FX neutral basis, reaching a new all time high of $1,800,000,000 Consolidated net interest margins, or NIM, declined 20 basis points to 17.5%, reflecting the different stages of our geographies, as we will see on the next slide. In Brazil, NIMs expanded quarter over quarter and remained stable compared to the prior year. The business continues to grow with strong profitability and resilience, supported by a competitive deposit base. The evolution of our asset mix, coupled with a gradual increase in our loan to deposit ratio, or LDRs, is expected to drive further NIM expansion in the coming years. Now in Mexico and Colombia, NIMs were temporarily impacted by our decision to invest in building local deposit franchises.

[Guilherme Lago, CFO at Nu Holdings]

These are deliberate strategic investments aimed at unlocking large scale, low cost funding, deepening our customer relationships, and enabling sustainable credit growth. It is nothing but the same playbook we have successfully executed in Brazil. Moving on to gross profit, which totaled 1,300,000,000.0 in q one, down 3% sequentially, but up 32% year over year, both again on an FX neutral basis. The quarter over quarter decline and the corresponding drop in gross profit margins to 40.6% was mainly driven by higher credit loss allowance and increased interest expenses in Brazil. This reflects the rise in SELI credit, which we have not yet fully repriced across the entire portfolio.

[Guilherme Lago, CFO at Nu Holdings]

Additionally, the expansion of our deposit bases in Mexico and Colombia, while a strategically important investment, has placed short term pressure on margins. Youssef will dive deeper into the credit allowance dynamics shortly, but I will give you a preview. It is a seasonal effect and largely in line with prior years. Let's turn to operating efficiency. In q one, our efficiency ratio improved to 24.7%, reflecting a five twenty basis points sequential improvement and a seven forty basis points improvement year over year.

[Guilherme Lago, CFO at Nu Holdings]

This quarter's results includes a one off impact of $47,000,000 from the recognition of DTA credits. Yet, excluding this effect, the efficiency ratio would have been 26.7%, still a 320 basis points improvement quarter over quarter, reinforcing our position as one of the most efficient players globally. Net income reached $557,000,000 in q one, up 74% year over year on an FX neutral basis. As expected, sequential growth was more moderate due to the typical first quarter seasonality. But we still delivered another quarter of very strong bottom line performance.

[Guilherme Lago, CFO at Nu Holdings]

This result translated into a 27% annualized ROI, even while holding over $4,000,000,000 in excess capital across our geos and at the holding company. This places Nguyen among the most profitable financial institutions in Latin America. As we discussed Nguyen Bank's consolidated results as we have been doing across this presentation, it can be easy to lose sight of the performance of our digital banking business. Why? Because our reported results combine three very different realities.

[Guilherme Lago, CFO at Nu Holdings]

Number one, a more mature and scaled operations in Brazil. Number two, two high growth early stage markets in Mexico and Colombia where upfront investments are still significant. And three, a holding company with close to $3,000,000,000 in excess capital. That's why we are now taking a moment to zoom in on Brazil on a stand alone basis. It is the best proof point of the strength and scalability of our digital banking model, and it is a good preview of where Mexico and Colombia are headed over time.

[Guilherme Lago, CFO at Nu Holdings]

As you look at the evolution of our scale and efficiency in Brazil, the takeaway is clear. The model delivers healthy profitability even while offering best in class customer experience, wider access to financial services, and below market pricing. And we are just getting started. There's still a long run away ahead of us. With that, I'll hand it over to Youssef to walk you through asset quality and the overall health of our credit portfolio. Thank you.

[Youssef Lahrech, President and COO at Nu Holdings]

Thank you, Lago. Hello, everyone.

[Youssef Lahrech, President and COO at Nu Holdings]

Starting as usual with NPL trends. This quarter, fifteen to ninety days NPLs rose by 60 basis points to 4.7%, broadly in line with expectations and slightly below the historical seasonal increase of 70 basis points. As for 90 plus NPLs, we saw a 50 basis point decline to 6.5% outperforming historical trends. This improvement is consistent with the lower early stage delinquency levels we observed in prior quarters as 90 plus NPLs lag 15 to 90 by one to three quarters. Allowance rose to $973,500,000 this quarter driven by two main factors.

[Youssef Lahrech, President and COO at Nu Holdings]

One, continued portfolio growth and two, seasonal increase in early stage delinquencies we typically see in Q1. This dynamic weighed on our risk adjusted NIM, which declined to 8.2%. Of the 130 basis point reduction, roughly three quarters stemmed from seasonal effects on CLA with the remaining impact primarily linked to short term NIM pressures in Mexico and Colombia, as Lago mentioned earlier, reflecting our strategic investment in building local deposit franchises in those two markets. Now turning to our coverage ratios. In the left hand chart, we show the coverage ratio over total balance.

[Youssef Lahrech, President and COO at Nu Holdings]

This metric reflects the historical evolution of our consumer credit portfolio. Over time, as the share of our interest earning portfolio from credit cards increased and more recently as unsecured lending, which carries higher risk, gained share, the ratio has trended upwards as expected. The most recent uptick also mirrors the increase in credit loss allowance we just discussed, which were driven by portfolio growth and typical first quarter seasonality. On the right hand side, we present the coverage ratio over 90 plus NPLs. This ratio highlights the prudence of our risk management approach, which is based on front loading provisions under the expected credit loss model.

[Youssef Lahrech, President and COO at Nu Holdings]

A higher ratio here means we're reserved for potential losses down the line, in line with our disciplined and forward looking credit philosophy. With that, we'll now open the call up for questions. Thank you.

[Operator]

We will now start the Q and A session for investors and analysts. If you wish to ask a question, please click on raise your hand. If your question is answered, you can exit the queue by clicking on Put your hand down. Please limit yourself to one question and a follow-up. If you have further questions, please re enter the queue.

[Operator]

I would like to turn the call over to Mr. Guillermo Sotto, Investor Relations Officer.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

Thank you, operator. Please open the line for Jorge Curry from Morgan Stanley.

[Jorge Kuri, Analyst at Morgan Stanley]

Hi, everyone. Thanks for the call, and congrats on the numbers, and thank you also for the additional disclosure. And and I actually wanted to ask about the NIM in Brazil, Twenty One Point Eight Percent new disclosure. That you know, it's it's basically flat since the third quarter even though Selic rates are roughly 200 basis points higher, which increases your funding cost. You have gone through the PIX reduction, which is, you know, very high yielding asset.

[Jorge Kuri, Analyst at Morgan Stanley]

And in general, first quarters are normally seasonally weak for margin. So can you help us understand what's behind the resilience of that Brazil NIM. And I I know you don't provide any guidance, but is is it fair to say that the the NIM has really, you know, bottomed, and we should see a continued improvement from here? Thank you.

[Guilherme Lago, CFO at Nu Holdings]

Hi, Jorge. This is, this is Laibo. Thanks so much for your question. I think you were, referring to, on slide 16 in which we we provide the disclosures for NIMS for Brazil and NIMS from from a consolidated basis. And, yes, we did see movements in portfolio mix, especially as we'll pull back from fixed financing as we increase our exposure towards less risky customers, which would be all else constant a headwind for NIMs.

[Guilherme Lago, CFO at Nu Holdings]

We also saw a going up, which all else constant will be a slight headwind for for NIMs in the short term. But I think conversely, Jorge, we did see kind of increases in LDRs, loan to deposit ratios, which somehow offsets those those two headwinds. And therefore, we have had kind of a more resilient net interest margins throughout 2024 and the first, you know, quarter of twenty twenty five. Going forward, we do expect that the benefits from balance sheet, releveraging with increases in LDRs to be the main kind of, driver for our expansion in NIMS. And in the medium term, we would expect NIMS to, go up, even though we can't necessarily have a high conviction outlook for one quarter here, one quarter there.

[Guilherme Lago, CFO at Nu Holdings]

It's never linear, but we do see upside from where we are today.

[Jorge Kuri, Analyst at Morgan Stanley]

Thank you, Lago. And and if I may ask a follow-up question, you you and it's a clarification, I guess. You mentioned that part of the origination of secured loans was impacted because FGTS was not originating for ten days. Is that ten working days out of the total working days of the quarter? Or or, you know, how do we think about the magnitude of that impact?

[Jorge Kuri, Analyst at Morgan Stanley]

In other words, if we if we would just look at the average origination per day or the the origination adjusted for those days, you know, the 2,900,000,000.0 reais in originations that you did in the quarter would have been how much higher, again, just assuming a normal rather than the ten day loss that you had?

[Guilherme Lago, CFO at Nu Holdings]

I think this this issue this operational issue that the market had with FGTS probably caused, know, a 10% impact in the quarter. So for FGTS, so that's the order of magnitude that I would I would consider for that, Jordan.

[Jorge Kuri, Analyst at Morgan Stanley]

Alright. Thank you, and congrats again.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

And our next question comes from Eduardo Hosman from the PTG Pactual.

[Eduardo Rosman, Analyst at BTG Pactual]

Hi. Hi, everyone. Congrats on the numbers. I think I have a question to David. Because a a couple of days after the fourth quarter was out, I think this this was at the February, David was part of a a podcast, a new cast, where it talked about, you know, a lot of things, but a but a strong message came from the big excitement about, you know, the launch of new Beyond LATAM.

[Eduardo Rosman, Analyst at BTG Pactual]

Right? Then at the March, we saw the announcement that, you were back to day to day operations, right, taking direct leadership. So just trying to understand here how how we can inter understand that. You know? Is it fair to say that, maybe, Brazil and Mexico are maybe I know that they are the priorities, but it's fair to say that they are, again, you know, top priorities and maybe, you know, going beyond Lata.

[Eduardo Rosman, Analyst at BTG Pactual]

It's a little bit more kind of a delayed, or or should we still expect, you know, any announcement, you know, by the end of the year? Just trying to understand the the recent announcements and the message. Thanks.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

Sure, Roseman. Thank you for the question. Yes. So Brazil, Mexico, and Colombia continue to be very much the focus of of of the company right now. As you see in the story, there is a lot to do even in Brazil as we continue to monetize this base.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

However, we've always thought that the thesis that we're executing since 2013, which is that the future of global consumer banking is of the digital banking market, the digital banking model. It's a global thesis. It's not specific to Brazil. It's not specific to Mexico. Some of the advantages that even Lago mentioned here in this slide where you suddenly have this business model that can grow faster, reach more customers, generate higher return of equity for shareholders, and generate higher NPS, prove that this model is the right model to bank a very significant percentage of the population.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

So we are thinking about that now for the next five to ten years. We are thinking about that potential for internationalization. We are making progress with a small percentage of our allocation. I'm not ready yet to announce when we'll have more data specifically about what the strategy there is going to be. We did do think that it's gonna be a big part of our story over the next five to ten years.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

But, but for now, I think all I can say is we are very, very, very focused on these three markets. And a lot of the work that we continue to do in improving platforms, in improving systems, in improving the the overall quality that we have in our product, all of that ultimately is going to help out, in any potential internationalization via the markets that we operate today.

[Eduardo Rosman, Analyst at BTG Pactual]

Okay. Thanks a lot, David.

[David Vélez, Founder, CEO and Chairman at Nu Holdings]

Thank you.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

And our next question comes from from Itau BBA.

[Pedro Leduc, Analyst - Equity Research at Itaú BBA.]

Thanks, guys, for taking my question. On provision expenses and and then tying it up with NIMs, historically, you guys have always overcome higher provision expenses by pricing it very adequately. No other specifics in Brazil and Mexico. But when I look at the overall NII post cost of risk, it it has been slipping a little bit. Risk adjusted in for several quarters now.

[Pedro Leduc, Analyst - Equity Research at Itaú BBA.]

So my question is in in respect to this direction going forward, why do you think you can adjust or stabilize the overall risk adjusted NIMs, and where do you think it's gonna come from? Is it gonna be lower cost of risk, which honestly was the biggest surprise for me this quarter with the the higher cost of risk given that we've been underwriting more selective in the last three quarters. So trying to reconcile these pieces going forward. Thank you.

[Guilherme Lago, CFO at Nu Holdings]

Leduc, thanks so much for your question. Let me, try to, refer you to a few slides, and then I think it will help help us tie the the the story that we have. So if you go to slide 24, you will see the evolution of our risk adjusted net interest margin, which I believe is something that you were alluding to. The risk adjusted margin in the very last quarter, first quarter of twenty twenty five, had a drop of about a 30 basis points. About three fourths of the drop, three fourths is entirely seasonal.

[Guilherme Lago, CFO at Nu Holdings]

So every first quarter of every year, especially due to the dynamics in Brazil, as you have seen in the first quarter of twenty twenty four, as you have seen in the first quarter of twenty twenty three, you do see an increase in CLA, and you do see an increase in cost of risk in the quarter. In fact, if you take a look at the delta cost of risk in every first quarter of every year, the one in the in 2025 was by no means higher than the average of what we have experienced over the past three years, and you can see the cost of risk in 2024. So let's say three fourths of this was seasonal. The other one fourth, Leduci, was basically the result of the contraction of NIM resulting from the investments that we are doing in the deposit base of Mexico and Colombia. So it is the way that we are seeing the business now when we put this on a consolidated basis, it is, it's harder and harder to have a very accurate perspective of each of the business because you basically have three different pieces.

[Guilherme Lago, CFO at Nu Holdings]

You have Brazil, which is a more mature, though not yet mature operations. You have Mexico and Colombia, which are high growth, you know, operations in which we are making a lot of investments, and you have a holding company that is now holding about $3,000,000,000. So I think going forward, if you take a look at Brazil specifically, you would expect to see NIMs stable to growing as we re leverage the balance sheet and with, now a very attractive risk adjusted margins, that should be largely stable or going up. We do expect to continue to invest in Mexico and Colombia and the extent to which we're going to make those investments will largely depend on the additional customer engagement and the competitive dynamics that we will have there. The final thing that I would say is that in this quarter, Aledoki, I think for the first time we provided a standalone portray of the performance of Brazil.

[Guilherme Lago, CFO at Nu Holdings]

So if you go to slide 21, you will see the evolution of, you customers, revenues and net income in Brazil and the returns that we have had in Brazil on a standalone basis. And you can see that on the right hand side, even when you keep, you know, net interest margins relatively flat as we had from 2024 to 2025, you can continue to see returns on equity going up primarily due to the releveraging of the balance sheet and the operating leverage that we have in in our business. And in our view, the portrayed that we are offering here on slide 21 serves not only as a reference that the business model works at scale in Brazil, but also paints the direction to which we believe Mexico and Colombia will be going in the future.

[Pedro Leduc, Analyst - Equity Research at Itaú BBA.]

It's very complete, Nago. Thank you.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

And our next question comes from Tito Labarta from Goldman Sachs.

[Tito Labarta, Vice President at Goldman Sachs]

Hi, good evening. Thank you for the call and taking my question. I guess my question is a follow-up on the just the secured lending overall. Very good trends in the quarter despite not being able to originate the FGTS loans for those ten days. But maybe just help us think a little bit more about how how that opportunity is for you because it seems like you're starting to really accelerate there, not not just on FGTS, but also you mentioned public payroll lending grew, like, I think it was 50%, in the quarter.

[Tito Labarta, Vice President at Goldman Sachs]

Then you have private payroll. Help us I know you don't have any give any guidance, but just help us think about how big can a secured lending portfolio get for you, and how aggressive can you be there in in FTTS, public payroll, and private payroll? Just to think about that long term opportunity set for you given it's it's still, you know, very early stages for you.

[Guilherme Lago, CFO at Nu Holdings]

Hi, Tito. Thanks so much for the question. Look, I'll to address those three pieces of your questions head on. I would just start by drawing your attention to the slide six in which we provide our most recent view on the profit pool of Brazil. And I think helps at least it helps me now get some perspective on what is the size of the market, and where is our growth potential there.

[Guilherme Lago, CFO at Nu Holdings]

So if you go to slide six, you will notice that this is a fairly large kind of a profit pool in which we started with credit cards, where we now have 15% market share there. We continue to grow across all of the segments. And the second product that we launched was personal loans that you can see on the left hand side of the screen, which is the single largest profit pool per se, where our customers, if I take the social security numbers of our customers, and take them to the central bank database, they now account for nearly 60% of that profit pool. So that means that we don't need to fish outside of our fishbowl to be able to grow our shares in unsecured personal loans by almost 10 x. Right?

[Guilherme Lago, CFO at Nu Holdings]

So so that's a massive growth for us. Mhmm. Then you go into payroll loans, which is the one that you explicitly asked. We still have a market share there of less than than 1% and then you go above and beyond the private payroll loan that has recently been launched in which we are extremely excited to be part of. So if I were to slice your question in three, now public payroll loans, FGTS and private payroll loans, I would say that in public payroll loans, we are starting to see very encouraging traction there.

[Guilherme Lago, CFO at Nu Holdings]

We grew by 50%, but we are nowhere near where we wanna be in this product. We are still ramping up our connectivity with a number of the collateral systems. We are signing up collateral agreements with the largest states and municipalities. We are improving the portability flow for our customers and from customers of third party players. And as we start to see potentially interest rates dropping in Brazil over the coming quarters, you would expect to see the portability of public payroll loans to go up.

[Guilherme Lago, CFO at Nu Holdings]

But that is a product that was born offline. It was born through loan brokers and bank branches originations. So it's harder for us to change the behavior, but the early signs are super encouraging and we think we will get there faster than we originally thought. Now the interesting thing to do is that when you go into FGTS, which is a product that was already born digital, it was no there was no loan brokers. There was no bank branches.

[Guilherme Lago, CFO at Nu Holdings]

It is a product that we have been able to accelerate even faster. We think that in 2024, we accounted for approximately 20 to 25% of the entire originations of FTS in Brazil. In the first two months of 2025, we may have accounted for about 30% of there and growing. So it goes to show that when we are able to put that at play, our low cost advantages, we can have, you know, a fairly impactful role there. And in private payroll loans, we don't think it's gonna be any different than the FGTS.

[Guilherme Lago, CFO at Nu Holdings]

Why? It's a product that is being born fully digital already. It is a product that we will be able to serve to know a very large number of our customers with a very low cost base with the best UX and and with a disruptive price. So now we are excited with, with this product. We are still testing and learning some of the collateral types.

[Guilherme Lago, CFO at Nu Holdings]

I don't think there is any special kind of a first mover advantage to try to take a little bit more risk on the collateral structures until it's, it's better tested. But it's certainly a product that we expect to be leaning in very aggressively in the coming quarters and years.

[Tito Labarta, Vice President at Goldman Sachs]

Great. That's helpful, Lago. If if I can, just one quick follow-up on that. You mentioned that you do not expect any material short term impact from potentially, I guess, maybe refinancing some unsecured, loans into the private payroll. Can you give just maybe a little bit more color why you don't seem to think that there should be any impact, for you guys on that?

[Guilherme Lago, CFO at Nu Holdings]

Because we basically think that the the size of the pie will the growth of the size of the pie will far outweigh any potential short term cannibalization on unsecured personal loans. Right? And it is the best product for our customers. It's the product that we will know, put in front of every single customer that can benefit from this, and we think that we will be able to grant more credit, better credit and to more customers than we could otherwise do and this should be, you know, even stronger trend than potential short term negative impacts on unsecured personal loans. And of course, if you going back to I think Leduc's question, Chito, on a risk adjusted basis given this product is expected to have lower risk, not no risk, but lower risk.

[Guilherme Lago, CFO at Nu Holdings]

On a risk adjusted basis, it should also give us a very, you know, good kind of a gross profit going forward.

[Tito Labarta, Vice President at Goldman Sachs]

Very clear. Thank you, Lago.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

And our next question comes from Thiago Batista from UBS.

[Thiago Batista, Executive Director at UBS Group]

Hi, everyone. Thanks for the opportunity. Congrats on the result. I have one question on the credit card. When I look for the active cardholders in this quarter, we saw a small contract a small expansion, sorry, probably because this product seems to be close to the maturation in Brazil.

[Thiago Batista, Executive Director at UBS Group]

But call call call our attention that there were about 9,000,000 cardholders during the first Q that are active in terms of revenues, but not in terms of transactions, which means about, let's say, 22% of your car card holder base. This level of clients that are not using the card for new transactions is a concern for new. Do you have any strategy to try to to reduce this number? And, I want to connect with this if, the restart that you, announced, the refinance program, somehow could improve, the number of active users of our our

[Youssef Lahrech, President and COO at Nu Holdings]

Hey. Thanks for the question. This is, Youssef. Yeah. As you point out, there's there's always a fair number of credit card customers, that are active from the revenue definition standpoint, but not necessarily from a transacting standpoint.

[Youssef Lahrech, President and COO at Nu Holdings]

A lot of that, can be driven just by, credit limit constraint. As you know, we tend to be very conservative, especially initially with new customers around how we grant credit limits. And so we wait to see both utilization and, you know, good risk behavior before we go and expand those credit limits. And what we find is when we expand those credit limits, we then see transacting behavior pickup. So that's not a new phenomenon by any stretch.

[Thiago Batista, Executive Director at UBS Group]

Okay. Thanks, and congrats for, the new acquisition of of Giladme. The new Giladme.

[Guilherme Lago, CFO at Nu Holdings]

The new Giladme. We have two now. But but but, Chagwaj, I think we forgot to address one of your questions. You asked about the renegotiations. So we did announce the renegotiations in early second quarter of twenty twenty five.

[Guilherme Lago, CFO at Nu Holdings]

So it has no impact whatsoever to our financial statements. We do expect it to have a mild positive impact in our financial statements in the coming quarters with higher recoveries. But more than that, and to your point, we do expect to actually see this fostering more activity within some of the credit cards. And thanks for Guillermo. We are very glad with his acquisition.

[Thiago Batista, Executive Director at UBS Group]

And thank you, Thiago.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

Thanks, Thiago. And our next question comes from Gustavo Schroden from Citi.

[Gustavo Schroden, Equity Research Director at Citi]

Hi, good evening guys and thanks for taking my question. My question is regarding the debt renegotiation plan that you announced last month, EcoMesu, which is the largest renegotiation campaign from the bank. So my first question, if it is related to Peak's finance product and if the idea is to bring customers back to an eligible base for credit again, aiming to increase credit origination in Pitfinance? And if that wouldn't create a more hazard effect, putting pressure on the sustainability of Pitfinance product, creating a vicious cycle of acceleration and deceleration in the product origination in the coming quarters? And if you want that, if you could share with us how the program is evolving, giving some quantitative metrics on these and what are the main impacts expected in the balance sheet, P and L and asset quality indicators?

[Gustavo Schroden, Equity Research Director at Citi]

I'm it's still not clear for me if it shouldn't increase the write off balance, while discounts could negatively impact its p and l. Thank you.

[Youssef Lahrech, President and COO at Nu Holdings]

Hi, Gustavo. Thanks for the question. So just a few a few things on this program. As Lago mentioned a minute ago, this this is a new program, so it hasn't had any impact on the first quarter. We expect it to have a a fairly small but positive impact on the second quarter.

[Youssef Lahrech, President and COO at Nu Holdings]

The way we we think about it is this is an opportunity to give, some of our customers a fresh start. You know, some of those customers may have had, you know, lateness and delinquency delinquency issues in the past. A lot of them have actually managed to resolve their debts either partially or fully, and so we wanna give them an an an extra incentive, to get back on track with their debts by providing, in some instances, in a in a a very selective way, access to credit again. So we you know, for some of them, we will, reactivate their cards. For some of them, we may offer, discounts, which are very much in line with discounts we provide in in in collections, and we have for years now successfully.

[Youssef Lahrech, President and COO at Nu Holdings]

And it's very carefully designed and carefully tested to actually avoid any issues of moral hazard. So we tend to exclude people who have shown signs of recidivism. We don't want to get people into cycles of debt. It doesn't serve customers. It doesn't serve, us.

[Youssef Lahrech, President and COO at Nu Holdings]

And it's it's, designed carefully to incentivize, you know, people paying down their past debts, resolving them, and then getting a fresh start. Again, with, often very small limits, to begin with as as part of this fresh start, often with secured deposits, acting as a collateral for those new limits, and then very gradually increasing those limits over time as we have done very meticulously, in the past as we see good repayment behavior. So all of that is kinda designed to provide, you know, incentives for customers to to, show, you know, that they can handle the credit again and promote, you know, healthy credit behaviors. And then, you know, that you alluded to, whether this is related in any way to PIX financing. No. It's it's not, in any way, a PIX financing play or anything like that.

[Gustavo Schroden, Equity Research Director at Citi]

Alright. Thank you.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

And our next question comes from Mario Pierry from Bank of America.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

Hey, guys. Good evening. Congratulations on the results. Thanks for taking my question. I really wanted to focus on the net interest margin.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

And Lago, you mentioned, right, that margins in Brazil, you think that they should be going up. But my concern is, it feels like or the data shows that you're growing a lot more in secured loans. That should technically have lower margins than unsecured. Also, when we think about your funding, when we look at the bulk of your funding today is the short maturity. And as you expand into loans over longer duration, I would imagine you have to increase the duration of your funding as well and that should be a little bit more expensive. So given that perspective, help me understand why you think margins then can continue to go up in Brazil. And then it's very helpful that you show this breakdown of margins in Brazil of 21.8% net interest margin. I can't believe that the margins in Mexico or Colombia are going to be as profitable as these.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

And as you showed, right, your margins in Brazil Two Years ago were like 10%. So I would imagine as you're growing into Colombia and Mexico, your margins are probably not going to be at the same pace as Brazil. So technically, we should continue to see margins coming down as the composition of loans in Colombia and Mexico continue to gain bigger share of your loans. And finally, when I look you showed this slide, the loan to deposit ratio of 44%, I think it's one of your slides. I think you're only doing loans to interest you're doing deposits to interest earning loans.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

And you are consolidating the whole balance of deposits and loans. But I would my understanding is that deposits that you have in Mexico cannot be used to lend in Brazil. So when I look at just a loan to deposit ratio, not looking at interest earning loans, it feels like that number is growing a little bit. So can you help me also understand? So my question then is the funding cost.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

I don't know how they can improve, especially if you have to increase the duration of those deposits? Thank you.

[Guilherme Lago, CFO at Nu Holdings]

No, Mario, thanks for the question. Let me try to unpack a little bit and go point by point. If you don't mind, let me talk about Brazil and then I'll talk about Mexico and Colombia and then we can try to pull everything together. So I think in Brazil, I don't think that as you corrected, pointed out that cost of funding has a lot of room to improve from where it is today. So we don't expect even though we have we have lots of funding, in Brazil, we don't don't expect that we will aggressively lower our cost of funding.

[Guilherme Lago, CFO at Nu Holdings]

We want to be the place, where now all Brazilians receive payments, make payments, store value, so we want to be very competitive, there. And, yes, you are correct that as we grow the duration of our assets, so too, we will have to grow the durations of our liabilities going forward, and that would actually kind of, if anything, increase a little bit the cost of funding that we would have. Having said that, I think, first, we still have plenty of deposits within our Brazilian franchise, and we still have, a lot of medium to long term funding from retail deposits in Brazil that is already embedded in our today's cost of funding and that in itself already enables us to increase in a fairly decent amount the size of our secure loan book. Remember that our unsecured loan book and our credit card book are very short dated and can be adequately funding funded without any massive increases in, in the duration of our liabilities. So why do did I say that net interest margins in Brazil are expected to remain as they are and in the medium and long term increase is because of the deleveraging of the

[Guilherme Lago, CFO at Nu Holdings]

So as our loan to deposit ratio in Brazil continues to go up, by which I mean our kind of our loan book will continue to outpace our deposits, we believe that the increasing releveraging of the balance sheet will be a fairly relevant tailwind for our net interest margins in, in the country. Having said that, just wanted to I know that you you you you have a full appreciation of that. I would just wanted to highlight this, Mario, which is the evolution of our net interest margins in Brazil, even if they stay flat for illustration purpose only. We can still materially increase the profitability of the business through operating leverage. Right?

[Guilherme Lago, CFO at Nu Holdings]

So as we have seen the evolutions of CAC and cost to serve. But I but I wanted to address your question head on on net interest margins for Brazil. Now let's go to net interest margins for Mexico and Colombia. Yes, I think in Mexico, in the next few quarters, very likely the net interest margins there will be much tighter than they are in Brazil until we continue to grow and optimize our cost of funding and our loan to deposit ratio in the country. Almost the same way that we did as you may recall Mario in Brazil about three point five to four years ago in which we optimize the funding when we thought that the timing was right from a competitive and customer value proposition perspective.

[Guilherme Lago, CFO at Nu Holdings]

We do expect to do so in Mexico and Colombia at some point in time, not necessarily in the next few quarters. And at that point in time, we do expect the profitability of Mexico to converge towards Brazil. I think Mexico's unit economics of our core products, namely credit cards and lending are as compelling, if not more attractive than the ones in Brazil. So I I wouldn't necessarily discard the scenario in which the profitability of Mexico can, you know, meet if not exceed that of Brazil. I think Colombia has no a more a more tighter kind of NIM that I think the profitability there will likely be lower than in Mexico, but it's still ahead of our kind of a minimum 30% ROE threshold.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

Clear. But when you talk about profitability in Mexico being higher than in Brazil, you're talking about the ROE or you're talking about the net interest margin?

[Guilherme Lago, CFO at Nu Holdings]

I'm talking about the ROE and the ROE, both. I'm not talking about the net interest margin.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

Okay. Thank you.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

And our next question comes from Yuli Fernandez from JPMorgan.

[Yuri Fernandes, Executive Director at JP Morgan]

Hello. Good evening, and thank you for the opportunity of asking questions. And and also wish you good luck to to both here. I have a a question on cost of risk, a follow-up, and and it's a question regarding stage two, the coverage of stage two. So it is clear, like, first q is seasonal.

[Yuri Fernandes, Executive Director at JP Morgan]

We have fifteen ninety days. You also had higher origination. But when we go to to the stage two, in particular to the relative trigger, we note an increase this quarter on your coverage. You used to have, I don't know, high high teens, 20% coverage on stage two for for your relative trigger. And this quarter, you you build a little bit of more coverage.

[Yuri Fernandes, Executive Director at JP Morgan]

So just checking, you know, why is, you know, building why NUMEX is building more coverage for stage two if we're seeing, you know, a little bit of more risk in that in that bucket or if you're just being conservative. And whenever your cost of risk normalize after the first two seasonality, we could see some buffer for your cost of risk to move down. Thank you.

[Youssef Lahrech, President and COO at Nu Holdings]

Hi, Yuri. Thanks for the question. This is Youssef. So, yeah, I see you're correct in your observation. So, there's there's two, two things going on with stage two.

[Youssef Lahrech, President and COO at Nu Holdings]

As you note, one is just the normal seasonality we see in the first quarter. Stage two closely correlates to early stage delinquencies, and those tend to peak in the first quarter. So there's that one effect. And then there's another effect beyond that, which, has to do with the, the relative trigger both in magnitude and in coverage ratio. What we do, Yuri, is from time to time, we will recalibrate the those triggers in our provision model.

[Youssef Lahrech, President and COO at Nu Holdings]

We've done such a recalibration in the first quarter, so we've updated the criteria for, the relative criteria for to enter stage two, and it resulted in two things. One is a slight increase in the coverage ratio for that component of stage two, and you will notice at the same time a slight decrease in the coverage of stage one, because we pulled out some of those, loans from, the net exposure from stage one. But if you look at the combined impact of both stage one plus stage two, the aggregate has only increased by by a little bit by about 5% or so. And we think some of some of that recalibration is just to pull forward of loans we would have classified as stage two later on in the future. So there's a bit of a onetime effect there.

[Yuri Fernandes, Executive Director at JP Morgan]

No. That's super clear, Josef. And and indeed, we we saw, like, the the total coverage, like, considering all stages has been has been moving up, especially for for credit cards. If I may have very quickly one unrelated follow-up, just an accounting uncertainty I have here. On the 47,000,000 DTA, given this is DTA, this is already, you know, post taxes, or or should we think on this on a on net taxes for your net income for the quarter?

[Guilherme Lago, CFO at Nu Holdings]

No. You should you should think about this as a post tax basis already, Yuri.

[Yuri Fernandes, Executive Director at JP Morgan]

Super clear. Thank you, Lago, and congrats on the margins showing signs of stabilization here. Thank you.

[Guilherme Lago, CFO at Nu Holdings]

Thank you all.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

So thank you, everyone. We now have approached six minutes of the call. So we are now concluding today's call. On behalf of Nuholdings and our Investor Relations team, I want to thank you very much for your time and participation in our earnings call today. Over the coming days, we will be following up with questions received tonight, what we are not able to answer.

[Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings]

And please do not hesitate to reach out to our team if you have any further questions. Thank you, and have a good night.

[Operator]

The new Holdings conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.

Participants

Analysts

• Guilherme Souto, IR Officer and Director of Market Intelligence at Nu Holdings
• David Vélez, Founder, CEO and Chairman at Nu Holdings
• Guilherme Lago, CFO at Nu Holdings
• Youssef Lahrech, President and COO at Nu Holdings
• Jorge Kuri, Analyst at Morgan Stanley
• Eduardo Rosman, Analyst at BTG Pactual
• Pedro Leduc, Analyst - Equity Research at Itaú BBA.
• Tito Labarta, Vice President at Goldman Sachs
• Thiago Batista, Executive Director at UBS Group
• Gustavo Schroden, Equity Research Director at Citi
• Mario Pierry, Managing Director at Bank of America Merrill Lynch
• Yuri Fernandes, Executive Director at JP Morgan