Nu Holdings: Growth, Credit, and Costs: Strong Performance, Stronger Answers

Research evidence excerpt

Nu Holdings: Growth, Credit, and Costs: Strong Performance, Stronger Answers

IdeaM

Conference Call Highlights

Credit Cards. Credit cards remained a key growth driver. Management highlighted that

Nubank’s proprietary AI foundation models are already in production for credit card

decisioning in both Brazil and Mexico, supporting faster, more granular underwriting.

Credit cards also contributed to the quarter’s mix shift toward higher-yielding, higher-

expected-loss products. This mix shift increased upfront provisioning, but management

emphasized that the underlying unit economics remain attractive.

Unsecured Loans. Management emphasized that unsecured lending carries higher

expected losses than secured products, which increases upfront provisions. However,

these products also carry higher yields and remain attractive on a risk-adjusted basis.

Nubank is using proprietary AI models for unsecured lending in Brazil, including real-time

valuation of personal loan requests based on predictive NPV, with pricing and approval

completed in under one second. In Brazil, Nubank has roughly 8% market share in

unsecured loans but is capturing approximately 25% to 30% of new monthly originations,

indicating significant ongoing share gains. Management said the portfolio’s short duration

is strategically important because it allows the company to react quickly and granularly to

changes in credit performance.

Public/INSS Payroll Loans: Management continues to see long-term potential in secured

products, supported by Nubank’s distribution, low cost structure, data advantage, and

underwriting capabilities. For instance, public payroll lending is still operationally complex,

requiring contracts and integrations with municipalities, but originations are increasing.