Nu Q1 2025 Earnings Update!
NU Strong Customer Growth, Huge Profits, and Affordable Valuation!
NU 0.00%↑ stock has been punished heavily in the last few months as the weakness of BRL puts pressure on consolidated USD growth, and Trump’s Trade War raises concerns of a weakening economy in Nu’s core markets of Mexico, Brazil, and Colombia.
In the last month, however, BRL has strengthened against USD by 5%, and Trump has caved to pressure and rolled back some tariff measures, sending Nu stock up 23%.
There was quite some optimism going into the earnings, but unfortunately, according to the market, Nu didn’t deliver, sending the stock down 8%!
The market quickly corrected, and Nu, at the time of writing this, is down 2.8%!
So, what caused this panic?
It wasn’t top-line numbers, as total revenue grew 18.7% to $3.45B, slightly beating the analyst estimate of $3.27B.
It wasn’t the number of customers, as Nu added 4.4M customers in Q1 and 19.3M over the past 12 months.
3 Key KPI’s that likely caused this decline were:
1.8% decrease in monthly ARPU.
35.6% increase in interest cost.
17.2% increase in loan loss provision.
However, I find such a reaction from the market foolish and shortsighted.
In this article, I will review Nu’s Q1 2025 financial results. If you are interested, I wrote a full Deep Dive about Nu, which covers all of the most important aspects an investor needs to know about the company.
Let’s jump in.
1. Customer Level Results
2. Brazil
3. Mexico
4. Colombia
5. Deposits and Loan Portfolio
6. Revenue
7. Profitability
8. Conclusion
1. Customer Level Results
Nu continues to onboard customers at an absolutely mindboggling pace.
The number of customers grew by 19.4% Y/Y and 3.9% Q/Q to 118.6M!
83% of these customers are monthly active customers. The activity rate has remained flat for 3 years, which indicates that Nu continues to add high-value active customers. This is quite impressive, as one could expect a slight decrease in activity rate after adding tens of millions of new customers.
Each active customer generated $11.2 monthly ARPU in Q1, a decrease of 1.8% Y/Y!
In the graph above, we can see that this was the first time in 2 years that ARPU declined Y/Y.
This was largely driven by Nu gaining more customers in Mexico and Colombia!
From 19.3M customers, Nu added in the last 12 months, 33.7% came from Mexico and Colombia. Nu is still early in their monetization journey in Brazil, so in Mexico and Colombia, they have so much work to do.
Currently, around 59% of customers use Nu as their primary bank, with the average customer using 4.1 products.
In the graphs above, we see that it takes a significant amount of time for Nu to develop new customer cohorts. It takes about 9 months to convince 50% of new customers to use Nu as the primary bank, and about 21 months to get them to use 4 Nu products.
While this is a huge improvement from a few years ago (dark vs lighter purple lines), this still means that gaining millions of users outside Brazil has a negative effect on average ARPU.
Especially, as these newly gained users are more likely to be of lower income, as those are the ones who are the easiest to acquire. Higher value customers require more products, which are often lacking when entering a new market.
Per the above graph, it takes Nu about 48 months to get a new customer to the $11 ARPU, whilst long-term customers generate double the ARPU.
As Nu develops Mexico and Colombia, ARPU is likely to increase later in the year, especially as Nu releases new products in Mexico after receiving a full banking license.
Overall, I don’t believe that the 1.8% decrease in ARPU is cause for concern!
2. Brazil
Brazil, as Nu’s home and Latin America’s largest country by population and GDP, remains a huge opportunity for the company!
As of Q1 2025, Nu has 104.6M customers in Brazil, an increase of 12.8M Y/Y, serving around 59% of the adult population!
The number of customers grew 14% Y/Y, whilst the share of adult population increased from 53% to 59%, and the activity rate from 84% to 85%.
At such a scale, it will become much harder to add new customers, as realistically, it would be crazy if the share of the adult population reached 70%. So, the focus in the next few years will shift from user growth to user monetization.
Total revenue in Brazil grew 12.8% Y/Y, 36% on FX-neutral basis, to $2.34B!
In the graph above, we see that revenue growth was the lowest in 9 quarters. Nu said that they were significantly impacted by the seasonality, as Q1 is typically a weak quarter for banks, as spending slows down after Christmas and New Year.
As Nu matures, it will be affected more by seasonality, previously, the effects of seasonality didn’t affect them as much, as they were small and were growing very aggressively.
Nu Brazil reached $24.4B in deposits, adding $1.3B during the quarter and $2.4B in the past 12 months, up 11% Y/Y!
Additionally, Nu originated BRL 20.2B in loans this quarter, an increase of 64% Y/Y and 9.8% Q/Q. Using the exchange rate of 14. May 2025, that is $3.6B.
That is an especially strong result, which will be reflected in earnings as more of these loans start to get paid off during the year.
Originations growth was driven by a 70.6% increase in secured and a 63.2% increase in unsecured loan originations.
Share of secured loan originations increased from 13.5% to 14.4%. While secured loans charge a lower interest (thus the lower origination yield), they are more beneficial in the long term. This is because secured loans generally are larger, have longer durations, smaller default risk, and create a long-term relationship with a customer.
Overall, Nu has only a 5% market share in Brazil!
While they have a somewhat strong position in the card and personal loan segments, they are hugely behind in others.
This is a massive opportunity. Nu has less than 1% market share in payroll loans, small business credit, investments, payments, insurance, and others.
Just getting these segments to a 5% market share would 5-10X the business in Brazil!
With 59% of adults in Brazil using Nu’s platform, the company is well-positioned for future growth and could easily get way more than 5%.
3. Mexico
As of this quarter, Nu Mexico has more than 11M customers, around 12% of the adult population.
This is an increase of 112% from 2023 and 10% Q/Q!
While I doubt that Nu could ever match Brazil’s 59% adult share, I am confident they can grow to multiples more than the 12% they have now.
While Nu has grown immensely in the last few years, its presence in Mexico in terms of overall revenue share is still largely insignificant.
They have around a 2% market share in bank cards and less than 1% in personal loans and retail deposits.
A reminder that Nu received a full Mexican banking license just last month. Previously, the company operated under a non-bank financial institution license (SOFIPO), which is a special Mexican regulatory framework that allows FinTechs to provide some banking services, but with a lot of limitations.
A full banking license will allow Nu to offer more services to its clients, enabling it to attract more customers and increase wallet share with existing customers.
As of this quarter, Nu Mexico has $5.4B in deposits, an increase of $0.9B Q/Q and $3.1B Y/Y. That is 135% Y/Y growth in deposits!
The fact that Nu has been able to grow deposits without the benefits of a full banking license really highlights their excellent execution.
Overall, revenue in Mexico grew 48% Y/Y to $147M. While this is strong growth, it is much lower than the 202% Y/Y growth in Q4 2024.
I find it likely that growth will reaccelerate later in the year.
4. Colombia
With more than 3M customers, Nu Colombia has already onboarded 8% of the adult population, quite impressive considering they only began operations 5 years ago.
This quarter, Nu Colombia reached $1.8B in deposits, up $0.5B and 38.5% Q/Q!
They didn’t collect any meaningful deposits in Q1 of 2024, as Nu only began collecting deposits in late 2023.
Nu didn’t disclose anything else about Colombia, as the business is still small.
I will be paying close attention to see how Colombia develops. So far, user and deposit growth have been stronger than in Mexico and Brazil at this age in the market.
5. Deposits and Loan Portfolio
Total Nu deposit balance grew 30% Y/Y to $31.6B, driven by a 350% growth in net deposits. On an FX-neutral basis, deposits grew 48% Y/Y.
Q1 2025 net deposits of $2.7B were driven by a 277% increase in net deposits per customer!
Total loan portfolio grew 23% Y/Y and 40% FXN to $24.1B.
302% FXN growth in secured loans and 71% FXN growth in unsecured loans were the main contributors to the loan portfolio growth. Credit card loan share of the portfolio decreased from 77% in Q1 2024 and 71% in Q4 2024 to 68% this quarter.
This change in the portfolio mix displays Nu’s strategy to originate less risky, higher-quality long-term loans.
$13.8B of this loan portfolio generates interest, or 57.3%, a large increase from 49.5% in Q1 2024!
This means that Nu is less reliant on revolving credit card balances that are paid off monthly and don’t generate interest.
The quality of their loan portfolio remains stable.
The share of 15-to-90-day nonperforming loans increased from 4.1% to 4.7% Q/Q, but decreased from 5% Y/Y.
90+ day NPL decreased from 7% in Q1 and Q4 2024 to 6.5%.
Such delinquency ratios in a tough macro environment in Brazil demonstrate the quality of Nu’s underwriting.
6. Revenue
Total revenue grew 18.7% to $3.25B, driven by a 19.8% increase in interest income and a 13.1% increase in fee income!
However, net revenue (which I defined as Fees + Interest income – interest cost (NII) – provision for loan losses) grew only 10.7% Y/Y to $1.38B.
The main causes of this lower growth were a 35.6% increase in interest costs and a 17.2% increase in provision for loan losses!
As a result of an increase in interest costs, the net interest margin (NIM) declined from 19.5% in Q1 2024 to 17.5% this quarter, with net interest income (NII) growing 13.4% to $1.84B.
The higher interest costs were largely caused by Nu more aggressively growing its deposit base in Mexico and Colombia. In Brazil, the NIM remained stable Y/Y at 21.8%.
Let’s remember that because of banking regulations, deposits from one country can’t be used for loans in another. This means that Nu must build a new capital base in each country.
Provision for loan losses increased more than the NII (17.2% vs 13.4%) because of a strong growth in the overall loan portfolio and a larger share of unsecured loans in the portfolio (24% vs 20%). IFRS 9 requires banks to estimate and recognize future loan losses immediately when a loan is issued.
When a bank issues a lot of loans like Nu did, it books high loan loss provisions before it generates any meaningful interest income from these loans.
Additionally, unsecured loans default at a higher rate, thus they require a higher upfront loss provision.
These are temporary headwinds, so NIM should increase meaningfully in the next few quarters.
7. Profitability
In Q1 2025, Nu generated $557M in net income, up 47% and 74% FXN Y/Y!
$569M of the net income was generated in Brazil, 102% of the total net profit, indicating that Nu’s operations in Colombia and Mexico lost $12M.
In the chart above, we see that Nu, is a profitability machine that has no intention of stopping. Net income margin reached a record 40.4%, an increase from 30.4% in Q4 2024 and 38.5% in Q4 2024.
ROE, which basically measures a bank’s return from its net assets, grew from 23% in Q1 2024 to 27%!
Most banks can only dream of such a high ROE. This level of profitability can only be possible with incredible operational efficiency.
Cost per active customer decreased 22.2% Y/Y from 90 cents to 70 cents.
Nu is better at using technology to serve a large number of customers than possibly any other bank in the world!
Nu’s efficient operating model allows low prices and high profits. This is a potent combo for explosive global growth!
8. Conclusion
I suggest that those wishing to understand the business in more detail read my Deep Dive!
In regard to this quarter, Nu is in a strong shape, and the market’s reaction is unwarranted and shortsighted.
1.8% decrease in monthly ARPU was caused by a strong customer growth in Mexico and Colombia!
Strong growth in users means that Nu’s customer portfolio is now younger and less developed, and it will take some time for these customers to use more products.
35.6% increase in interest cost was the result of dedicated efforts to grow their deposit base in Mexico and Colombia!
This is a thought-through strategy to strengthen the balance sheets of Mexican and Colombian entities, with the goal of rapidly growing their loan portfolio. This was not caused by a deteriorating capital position.
In the next few years, the interest costs in these markets will likely decrease as Nu attracts cheaper deposits from retail customers.
17.2% increase in loan loss provision was driven by frontloading loan losses as per IFRS 9!
Nu issued a lot of new loans, losses are booked now, but interest will be collected in the next quarters and years.
Shift towards a loan portfolio less based on credit cards and more on interest-bearing loans bodes well for Nu’s future profitability.
Overall, trading for a P/E of 32, I find Nu to be an incredibly attractive long-term investment for patient long-term investors.
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Thank you for this writing. A quick question, how is it possible that their Net Income Margin of 40% is double their Net Interest Margin of 19.5%?