Nu Holdings (NYSE:NU) shares ended Friday's session at $13.59, a decline of 1.45% for the day and 1.2% for the week, as the market absorbed the company's recent approval for a full banking license in Mexico. The stock's performance came amid notably elevated trading activity, with approximately 762.1 million shares changing hands over the five trading days, representing about 20% of the company's Class A shares outstanding as of late June. Average daily volume surged to 152.4 million shares, more than double the 65-day average, though the heightened turnover did not catalyze a significant revaluation of the stock.
Despite the weekly decline, Nu outperformed broader benchmarks. The iShares MSCI Brazil ETF (NYSEARCA:EWZ) fell 1.9%, the S&P 500 dropped 1.6%, and the Nasdaq Composite declined 2.9% over the same period. The relatively modest outperformance suggests investors are closely scrutinizing the balance sheet implications of the Mexican expansion rather than simply celebrating the customer growth narrative.
Mexico Operations Under the Microscope
Nu Mexico now serves over 15 million customers, a figure that represents approximately 15% of Mexico's adult population. The company holds deposits exceeding $5.9 billion, but these figures translate to a deposit per customer ratio of roughly $393. This metric serves as a broad indicator of monetization potential rather than an average account balance, but it highlights the challenge of converting customer growth into deeper financial relationships.
The newly granted banking license, which must be finalized within 30 calendar days starting July 10, opens the door for Nu to offer payroll deposit services and increase deposit limits. Founder and CEO David Vélez has characterized Mexico as a crucial market, with plans to invest $4.2 billion in the country through 2030. The company reports acquiring 12,000 new customers daily in Mexico, and the market achieved break-even during the first quarter, with its efficiency ratio improving by 78 percentage points over four years.
Financial Performance and Credit Costs
Nu's group-level financials provide the capacity for continued investment. First-quarter net income reached $871 million, a 41% increase on an FX-neutral basis, while revenue exceeded $5 billion and return on equity stood at 29%. However, credit costs remain a significant constraint. Loss allowances increased by 33% from the previous quarter to $1.79 billion, and the risk-adjusted net interest margin declined by 100 basis points to 9.5%.
The company ended Friday with a market capitalization of $65.65 billion and a trailing price-earnings ratio of approximately 21. The stock has declined 18.8% year-to-date, reflecting broader market pressures and investor caution around Latin American financial stocks.
Share Buyback and Upcoming Catalysts
The $1 billion share buyback program approved in June provides a modest cushion. At Friday's closing price, the authorization would cover roughly 73.6 million shares, or 1.9% of the Class A total. The program remains discretionary and subject to market conditions. Nu's public calendar shows no company events scheduled for the week of July 20-24, with the annual meeting set for August 6 and second-quarter results due on August 13.
Investors will be monitoring execution in Mexico and whether trading volumes normalize in the coming weeks. Key risks include accelerated growth in unsecured lending potentially increasing delinquencies and provisions, the need for higher expenses in Mexico before deposit and fee revenues expand, and currency fluctuations affecting U.S. dollar-reported results.
