Nu (NU) Q2 2026 Earnings Call Transcript

Nu Holdings reported Q2 2026 net income of $1.1B (49% YoY growth), alongside gross revenue of $5.9B (+39% YoY). Risk-adjusted NIM rose 290bps QoQ to 12.4% and the 15–90 day delinquency ratio improved 16bps to 4.8%, while deposits increased to $45.3B (+18% YoY) and the cost of deposits held at 88% of the interbank rate. Management attributed performance to balance-sheet growth, disciplined credit quality (coverage 244% vs 90+ NPLs) and AI-driven underwriting/support via NuFormer, with guidance framing risk-adjusted NIM as sustainable “in the same region” and expansion into the U.S. capped at no more than 100bps of the efficiency ratio.

Analysis

NU is increasingly a funding-and-data compounder, not just a growth story. The underappreciated mechanism is that primary-account share creates cheaper risk selection, better repayment hierarchy, and lower servicing cost at the same time; that combination is exactly what forces incumbent retail banks in Brazil and, eventually, Mexico to defend with lower prices or lose the most profitable customers. The real competitive damage lands on legacy banks with fee-heavy, branch-led economics, because they either match NU’s pricing and compress their own margins or concede mass-affluent and SME relationships.

The risk is that the market may be extrapolating a clean structural step-up in margin from what is still partly a seasoning/mix story. If credit growth keeps shifting toward higher-yield unsecured books, headline profitability can look better right before delinquency normalization catches up; the first tell will be whether risk-adjusted margin holds once seasonal support fades and whether 90+ delinquency trends remain benign into the next couple of quarters. U.S. entry is not an earnings driver in the next 12 months; it is a 12-30 month data-building exercise with limited near-term P&L contribution and meaningful execution risk.

Contrarian view: AI is a useful cost lever, but it is not the moat. The durable edge is distribution plus deposits plus transaction history; if competitors replicate the front-end experience while deposit competition intensifies, NU’s multiple can compress even if reported ROE stays high. What would falsify the bullish case is a sustained slip in credit quality after seasonality washes out, or risk-adjusted margin reverting toward the low-double-digit area for two straight quarters.

Key Decisions for Investors

• Buy NU only on a 3-5% pullback after the post-earnings move; 6-12 month horizon. Upside is continued multiple support if share gains translate into sustained operating leverage, but the trade should be cut if delinquency trends worsen for two consecutive prints or if management guidance stops implying stable risk-adjusted margin.
• For a cleaner relative-value expression, go long NU / short ITUB or BBD over the next 1-3 months. This isolates digital share gain and deposit-cost advantage against incumbent margin compression; exit if Brazilian incumbents stabilize retail deposit share or if NU’s efficiency ratio drifts above the low-20% area.
• If you want convexity rather than outright equity, use a 6-9 month NU bull call spread instead of naked calls. The market is likely to overprice immediate upside from Mexico/U.S. optionality, so defined-risk upside is better than paying full theta for a thesis that depends on execution over several quarters.
• Watch item, not a recommendation: if risk-adjusted margin falls back below the low-double-digit range or 90+ delinquency stays elevated after seasonality should have rolled off, de-risk NU and reassess the whole 'structural credit superpower' narrative.