Shares of Nu Holdings Ltd. climbed 2.3% to $12.58 in New York trading on Wednesday, recovering from last week's post-earnings dip. The digital banking giant, which operates Nubank in Latin America, posted first-quarter revenue above $5 billion for the first time, alongside net income of $871 million. However, credit loss allowances surged 33% sequentially to $1.79 billion, raising concerns about asset quality as the company rapidly expands its loan portfolio.
Record Revenue Amid Credit Strain
Nubank's quarterly results, released last week, showed strong top-line growth driven by a customer base that surpassed 135 million by March, with over 115 million in Brazil and roughly 15 million in Mexico. Return on equity reached 29%, underscoring the bank's profitability. Yet, early-stage non-performing loans (NPLs) rose to 5.0%, up from the prior quarter, signaling potential stress in the credit cycle. The loan-to-deposit ratio also widened to 58.3% from 49.1% in Q4, reflecting faster loan growth relative to deposit accumulation.
Market Reaction and Analyst Focus
The stock touched an intraday high of $12.72 and a low of $12.32, with over 21 million shares changing hands. Nu's market capitalization stood at approximately $60 billion. While the revenue and profit figures impressed, analysts zeroed in on credit quality. Tito Labarta of Goldman Sachs highlighted Nu's relative exposure to lower-income segments, while Morgan Stanley's Jorge Kuri noted that the disclosure on delinquencies and credit losses would allow investors to better assess the risk profile. CFO Guilherme Lago defended the provisions, stating that underwriting assumes a worse future macro environment, and that no shift in the macroeconomic outlook prompted the increase.
Growth Strategy and AI Investment
CEO David Vélez emphasized the company's focus on artificial intelligence, saying, "We are not adding AI to banking, we are rebuilding banking around AI." Nu's AI Private Banker feature now reaches over 15 million monthly active users. The total credit portfolio expanded 40% year-over-year to $37.2 billion, while deposits reached $42.4 billion. The risk-adjusted net interest margin slipped to 9.5% from 10.5%, reflecting the higher credit provisions.
Broader Sector Context
Brazilian financial stocks traded higher overall, with PagSeguro, Banco Bradesco, and Itaú Unibanco ADRs also gaining in U.S. markets. Nu's rally was partly attributed to improved sector sentiment rather than company-specific buying. The company's expansion into the U.S. market adds another dimension, with management expecting upfront investments to remain under 100 basis points of the consolidated efficiency ratio in both 2026 and 2027.
Insider Activity and Outlook
Director Anita M. Sands sold 21,000 Class A shares on May 15 at a weighted average price of $12.2401, according to a U.S. filing. She now holds 162,150 shares, including unvested restricted stock units. Nu's stock remains well below its 52-week high of $18.98, and future performance will likely hinge on whether credit losses stabilize as the loan book expands, rather than on customer acquisition alone.
