Nu Holdings (NU): Lower provisions, discount valuation, higher conviction going into 2Q26

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Nu Holdings (NU): Lower provisions, discount valuation, higher conviction going into 2Q26

Goldman Sachs Nu Holdings (NU)

2Q26 can bring increased confidence in the outlook

Earnings recovery can bring higher conviction

The last two quarters generated significant uncertainty for investors, given higher

expenses and a switch to managerial reporting in 4Q25, higher provisions and seasonal

asset quality pressures in 1Q26, and finally a change in CFO in June. We think investors

(and the stock) have mostly digested this information at this point with the remaining

uncertainty mostly related to how Nu can perform in a potentially challenging credit

environment for Brazil (note). We think 2Q26 results should bring greater certainty on

the outlook for the remainder of the year. In particular, we think operating trends

should corroborate management’s message that its credit quality is under control and it

can continue to grow loans at a healthy pace. This should give investors increased

confidence to buy the stock, which remains at a discounted valuation, in our view.

Solid earnings growth and strong profitability

We expect net income to rebound 12% qoq (+53% yoy) to $975mn. This should lead to

a 50bps qoq improvement in ROE to 29.7% for the quarter (Exhibit 1), broadly in line

with the 30%+ levels seen in 3Q25-4Q25. We believe the steady climb in absolute

earnings alongside with resilient ROE underscores the company’s ability to scale

profitably as its loan book continues to expand rapidly. We expect credit portfolio

growth to remain robust at 47% yoy (39% in BRL terms) for 2Q26E, decelerating from

the 97% yoy peak in 2Q23 as the base normalizes (albeit steadier in BRL terms). We

expect net interest margin to tick up to 21.2% in 2Q26E from 21.1% in 1Q26 (Exhibit 2).