NU

Nu Holdings Ltd. Q3 2024 Financial Summary

Business Context and Reporting Period

Nu Holdings Ltd. (NYSE: NU) reported unaudited results for the third quarter ended September 30, 2024. As one of the world's largest digital banking platforms, Nu operates primarily in Brazil, Mexico, and Colombia. The company serves 109.7 million customers, with 91.7 million active customers (84% activity rate). Financial results are presented in U.S. dollars in accordance with International Financial Reporting Standards (IFRS).

Key Financial Metrics

Liquidity and Capital: Cash and cash equivalents totaled $7.6 billion as of September 30, 2024. The company maintains Capital Adequacy Ratios (CAR) well above regulatory minimums across Brazil, Mexico, and Colombia, excluding $2.4 billion in excess liquidity held by Nu Holdings.

Material Changes vs. Prior Period

• Customer Growth: Added 5.2 million new customers in Q3'24, reaching 109.7 million total. Brazil accounts for 98.8 million customers (56% of adult population), while Mexico added 1.2 million net customers and Colombia reached 2.0 million.
• Revenue Expansion: Revenue hit a record $2.9 billion, driven by a 62% FX-neutral increase in interest income and a 32% increase in fee and commission income.
• Cost Dynamics: Operating expenses rose 41% YoY (FXN) to $624.8 million, primarily due to a 143% increase in marketing expenses (including $40 million for Nucoins repositioning) and higher infrastructure costs. However, operating expenses as a percentage of revenue declined from 24% to 21%.
• Asset Quality: The 15-90 day Non-Performing Loan (NPL) ratio for Brazil's consumer credit portfolio improved by 10 basis points to 4.4%. The 90+ day NPL ratio increased to 7.2%, consistent with expectations and the lagged nature of the metric.
• Portfolio Mix: Lending receivables grew 97% YoY (FXN) to $5.7 billion, while credit card receivables grew 33% YoY (FXN) to $15.2 billion.

Outlook, Risks, and Management Commentary

• Strategic Focus: Management emphasizes a "flywheel" effect where customer acquisition drives engagement and revenue per user. The company is intentionally slowing the expansion of PIX Financing eligibility to monitor performance and safeguard credit quality.
• Deposit Strategy: Funding costs reached 89% of blended interbank rates. Nu continues to prioritize deposit growth in Mexico and Colombia, accepting higher funding costs temporarily to build scale.
• Operating Leverage: The efficiency ratio improved to 31.4% in Q3'24. Management expects continued leverage as the business scales and new markets (Mexico, Colombia) move toward profitability.
• Risks and Contingencies: Forward-looking statements are subject to risks including foreign exchange volatility, regulatory changes, and credit quality deterioration. The filing notes that actual results may differ materially from forecasts due to these uncertainties.
• One-off Items: Q3'24 included $8 million in one-off impairment expenses related to the discontinuation of the Nucoins liquidity pool feature and FX impacts on cloud costs reallocated to G&A.

Investor Verification Checklist

• Credit Quality Trends: Verify the trajectory of the 15-90 day NPL ratio versus the 90+ day NPL ratio to assess the lag in delinquency recognition.
• FX Sensitivity: Confirm the impact of Brazilian Real (BRL), Mexican Peso (MXN), and Colombian Peso (COP) fluctuations on reported USD revenue and balance sheet items.
• Deposit Cost Sustainability: Monitor the trend of funding costs relative to interbank rates (currently 89%) and the impact on Net Interest Margin (NIM) as deposit volumes grow.
• Marketing Efficiency: Assess the return on the significant increase in marketing spend (up 143% YoY) regarding customer acquisition costs and ARPAC growth in new geographies.
• Regulatory Capital: Review the specific Capital Adequacy Ratio (CAR) requirements and actual ratios for each operating subsidiary (Brazil, Mexico, Colombia) to ensure compliance buffers remain robust.