Nu Holdings (NYSE: NU) experienced a sharp decline in its stock price on Tuesday, falling 6.3% to $12.17, after BofA Securities downgraded the company to Underperform from Neutral and slashed its price target to $10 from $16. The move came as the market digested the unexpected departure of Chief Financial Officer Guilherme Lago, who played a pivotal role in the company's journey from a high-growth digital bank to a profitable publicly traded entity.
The downgrade by BofA analyst Mario Pierry highlighted the uncertainty surrounding the CFO transition, describing Lago as "one of the company's most important executives." Pierry flagged that the timing of the change adds to the challenges facing Nu, particularly as Brazil's credit conditions show signs of tightening. The fintech has been aggressively expanding its lending operations in its home market while also pushing into Mexico, Colombia, and cautiously into the United States.
Nu announced that Rob Livingston, a former Visa executive who served as CFO for North America, will assume the role of CFO on July 13. Livingston will replace Lago, who will stay on in a special adviser role until August 31 to ensure a smooth transition. In a statement, founder and CEO David Velez expressed confidence in Livingston, calling him the "right person" to lead the company's next phase, and emphasized that the group's priorities remain unchanged.
Despite the positive long-term outlook, the market reacted negatively to the leadership change. The stock's decline was more pronounced compared to other Brazilian fintechs such as PagSeguro and StoneCo, which fell 1.1% and 3.3%, respectively, while Itau Unibanco's U.S. shares actually rose 1.7%. This divergence suggests that investors see the CFO transition as a company-specific risk rather than a broader sector issue.
Nu's first-quarter results, released earlier this year, painted a picture of a company in strong growth mode. Revenue surpassed $5 billion, net income reached $871 million, and return on equity stood at 29%. The company's customer base exceeded 135 million as of March 31. However, credit quality remains a key concern. The 15-to-90-day non-performing loan (NPL) ratio hit 5.0% for the quarter, while credit loss allowances jumped 33% quarter-over-quarter. Loans overdue more than 90 days improved slightly to 6.5%.
BofA's downgrade reflects a cautious view on Nu's ability to maintain its growth trajectory amid rising credit risks. The analyst noted that the CFO change adds a layer of uncertainty, especially as the company navigates a period of increasing loan growth and higher provisions. Investors will be closely watching how Livingston's background in credit and payments can help stabilize investor sentiment and communicate the company's strategy effectively.
Looking ahead, the market will focus on Nu's ability to manage credit discipline and capital allocation, particularly as it expands in new markets. The company has stated that its operating model, risk appetite, and long-term strategy remain unchanged, and a new CFO for Brazil will be named "in due course." However, the stock's sharp decline on Tuesday underscores the heightened sensitivity to any signs of instability at the executive level.
