Nu Holdings Ltd. (NYSE:NU) experienced a 3.1% decline in its stock price on Wednesday, closing at $14.23 in afternoon trading. The drop followed the company's introduction of Croma, a new premium card package in Brazil, which has shifted investor focus from customer acquisition to wallet share and revenue quality.
Croma, launched on July 28, offers 0.8% cashback on general purchases and 5% cashback on qualifying subscription transactions. The package also includes mobile connectivity, toll payment features, and investment bonuses. It carries a monthly fee of 39 Brazilian reais (R$39), which is waived for customers who spend at least R$4,000 per month or maintain R$30,000 in savings and investments.
Tulio Oliveira, vice president for Croma and Ultravioleta, stated, 'This is how we acknowledge and strengthen our bond with those who select and rely on Nubank.' The fee waiver is a key feature, encouraging customers to concentrate their spending and deposits within Nu's ecosystem.
The potential financial impact is significant. If one million users each pay the full monthly fee, annual gross fees could reach R$468 million, though this does not account for waivers, rewards, partner expenses, or taxes. This user base would represent less than 1% of Nu's Brazilian customers, who already exceed 115 million.
However, the expense challenge is already evident. In the first quarter, Nu's rewards costs surged 95% year-over-year to $38.4 million, far outpacing the 30.6% increase in card revenue to $486.2 million. Rewards as a percentage of card revenue rose to 7.9% from 5.3% a year earlier, highlighting the economic pressure Croma could face.
Nu's average monthly revenue per active customer was approximately $16 in Q1, while its efficiency ratio improved to 17.6% from 19.9% in the previous quarter, providing some investment capacity. However, credit indicators showed deterioration, with early-stage delinquencies increasing by 89 basis points to 5.0% and the risk-adjusted net interest margin declining to 9.5% from 10.5%.
Despite these challenges, Nu's core business remains solid. Net income for the first quarter rose 41% to $871 million, with an annualized return on equity of 29%. CEO David Vélez emphasized that Nu would 'grow limits with resilience, not just speed,' a sentiment now applied to Croma.
Nu underperformed its Brazilian fintech peers on Wednesday. PagSeguro Digital Ltd. (NYSE:PAGS) rose 0.3%, while StoneCo Ltd. (NASDAQ:STNE) slipped 1.1%. The iShares MSCI Brazil ETF (NYSEARCA:EWZ) dropped 0.7%. Broader U.S. markets were mixed as the Federal Reserve held rates at 3.50%-3.75%, with three dissenting officials favoring a 25-basis-point hike.
Nu is scheduled to report second-quarter earnings on August 13. Investors will focus on active-customer revenue, reward expenses, card transaction volumes, and early delinquency trends. The stock's future trajectory may depend less on new account growth and more on net economics per active customer, as higher rewards could drive spending but may not yield sufficient incremental revenue.
