Nu Holdings (NYSE: NU) saw its shares slide 3.9% on Friday, closing at $14.30, as the digital banking giant reported a rise in late-stage loan delinquencies even as quarterly profit remained above the $1 billion mark. The stock's decline came despite record net income, highlighting investor concerns about credit quality in the company's expanding loan portfolio.
The company, which operates in Brazil, Mexico, and Colombia, reported that loans delinquent for 90 days or more rose to 6.9% in the second quarter of 2026, up from 6.5% in both the first quarter of 2026 and the second quarter of 2025. The increase in the bad-loan ratio was a key factor behind the market's negative reaction, even as early-stage delinquencies (15-90 days) improved sequentially to 4.8% from 5.0%.
Despite the credit deterioration, Nu's net income for the quarter reached $1.06 billion, surpassing the $1 billion threshold for the first time. Revenue, as measured by the company's managerial metric, climbed to $5.88 billion, up from $5.32 billion in the prior quarter and $3.77 billion a year earlier. The customer base expanded to 138.9 million, with average monthly revenue per active customer (ARPAC) rising to $17.10 from $15.90 in Q1.
CEO David Vélez highlighted the milestone, stating that Nu is "now generating more than a billion dollars in quarterly net income." The company's growth has been driven by increased adoption of its banking products and expansion into new markets, particularly Mexico, where it reached 15.8 million customers in June, and Colombia, which surpassed 5 million customers.
Investors, however, are weighing the profit growth against the rising credit risk. The risk-adjusted net interest margin expanded sharply to 12.4% in Q2 from 9.5% in Q1, and return on equity climbed to 33% from 29%. But the efficiency ratio, which measures operating costs as a percentage of revenue, increased to 19.5% from 17.6%, reflecting higher spending on property, marketing, and international investments.
Analysts remain largely bullish on the stock, with a consensus price target of $18.78, implying roughly 31% upside from Friday's close. Targets range from a low of $10 (Bank of America, Sell) to a high of $23 (Morgan Stanley, Buy). Recent ratings include Wolfe Research (Buy, $17), UBS (Buy, $18.20), and Susquehanna (Hold, $16).
Looking ahead, investors will be watching whether the 90+ day NPL ratio continues to climb, which could offset the benefits of higher loan yields. The company's funding position remains solid, with deposits of $45.3 billion exceeding its credit portfolio of $39.4 billion by $5.9 billion at the end of June.
Nu's next earnings report is scheduled for November 12, and analysts will be scrutinizing the balance between risk-adjusted margins, credit costs, and operational efficiency to see if the 33% ROE is sustainable. The stock is currently trading 24.7% below its 52-week high of $18.98 but remains 27.7% above its low of $11.20.
Friday's trading volume of 79.1 million shares was slightly above the three-month average of 77.2 million, suggesting active investor interest. In after-hours trading on Monday, the stock was up 1.47% at $14.51 as of 13:40 EDT, with volume reaching 59.8 million shares.
