NU Nu's 100-Millionth Customer Arrived Right After a Quarter That Grew Provisions for Lawsuits 70%

The Flywheel Crossed 100 Million Customers. The Provisions Line Moved Faster.

Nu Holdings' first quarter of 2024 (period ended March 31, 2024) is the quarter Nu crossed 100 million customers - becoming, per management's own framing, "the first digital banking platform outside of Asia" to do so, and doing it in only three countries. The headline financials back up the milestone: total revenue reached $2.74 billion, up 64% FXN year-over-year (69% nominal), while net income hit $378.8 million, up 160% FXN YoY, on top of a genuinely profitable FY2023 (see nu/2023-12). Adjusted Net Income reached $442.7 million, translating to an annualized adjusted ROE of 27% - a number CEO David Vélez again contrasted with Brazil-alone ROE "well above 40%," repeating the same consolidated-versus-Brazil framing from the prior quarter's call.

The detail that doesn't show up in any headline slide: Nu's provision for lawsuits and administrative proceedings jumped from $8.1 million to $13.6 million quarter-over-quarter - a 68% increase in just three months, on a total receivables and revenue base that grew nowhere near that fast. The filing explains why: "the Group reviewed the provision methodology during the three-month period ended on March 31, 2024," switching from case-by-case assessment to an average-of-historical-losses approach for unassessed claims. That's a legitimate accounting refinement, not a red flag on its own - but it means most of this quarter's jump in legal reserves is a measurement change, not a sudden wave of new litigation, and it's worth knowing which is which before reading the number as a trend (see Beyond the Usual).

The Prescription

Nu's own Mexico data, presented for the first time this quarter as a dedicated KPI slide (per its four stated 2024 priorities - Mexico momentum, secured lending in Brazil, the high-income segment in Brazil, and open-banking/AI/real-time-payments products), makes the case that Mexico is actually outpacing Brazil's own historical ramp on a time-to-milestone basis. Given that, and given a $2.4 billion holding-company excess-capital cushion Vélez keeps citing on every call, Nu should keep leaning into Mexico specifically rather than spreading the same investment dollar evenly across Mexico, Colombia, and Brazil's high-income push - concentrating capital behind the market showing the fastest flywheel-replication evidence is the higher-conviction bet than diversifying international risk for its own sake.

What Nu should stop doing: changing methodology on a metric that materially affects a headline liability line - civil and labor lawsuit provisions - without flagging the change anywhere outside note 24 of the financial statements. A 68% quarter-over-quarter jump in a provision balance is exactly the kind of number an analyst might reasonably ask about on the call; instead, the methodology change and its effect are disclosed only in the filed footnote, not mentioned in the earnings release, presentation, or prepared remarks. Nu doesn't need to treat every accounting refinement as a headline item, but a change that moves a balance-sheet line 68% in one quarter deserves at least a sentence of proactive context, not a footnote a reader has to go looking for.

Key Financial Metrics

Q1 2024 vs. Q1 2023, consolidated, reported in USD - Nu reports natively in US dollars, so no FX conversion is needed

Metric	Q1 2024	Q1 2023	YoY
Total revenue	$2,735.9M	$1,618.7M	✅ +69.0% nominal (+64% FXN)
Gross profit	$1,181.5M	$650.9M	✅ +81.5% (margin 43.2% vs. 40.2%)
Total operating expenses	$603.0M	$407.3M	⚠️ +48.1%, but slower than revenue
Profit before income taxes	$578.5M	$243.6M	✅ +137.5%
Income tax expense	$199.7M	$101.9M	⚠️ Effective rate 34.5% vs. 41.8%
Net income for the period	$378.8M	$141.8M	✅ +167.1% nominal (+160% FXN)
Adjusted Net Income, non-IFRS	$442.7M	$182.4M	✅ +142.7% nominal (+136% FXN)

Balance sheet metric	Mar 2024	Dec 2023	Change
Total assets	$43,839.5M	$43,345.2M	✅ +1.1%
Total liabilities	$37,036.8M	$36,938.8M	➡️ +0.3%
Total equity	$6,802.7M	$6,406.4M	✅ +6.2%
Deposits	$24,254.9M	$23,691.1M	✅ +2.4%
Cash and cash equivalents	$6,033.7M	$5,923.4M	✅ +1.9%
Provision for lawsuits and administrative proceedings	$13.6M	$8.1M	⚠️ +68.0% (methodology change - see Beyond the Usual)

Gross margin held essentially flat sequentially (43.2% vs. 43.5% in Q4'23) after management flagged on the prior call that a seasonal Q4 high would normalize - exactly what happened, and management called it correctly in advance, worth noting given how often forward guidance on this line hasn't held up across the fintech sector generally. Operating expenses grew 48.1%, slower than revenue's 69.0%, continuing the operating-leverage trend from FY2023 - though the gap is narrower than FY2023's full-year comparison (which benefited from a prior-year base inflated by the one-time CSA termination charge discussed in nu/2023-12; this quarter's comparison has no such distortion, making the 48% figure the cleaner read of underlying cost growth).

Key Operational Metrics

• Customers: 99.3 million at quarter-end (March 31, 2024), crossing 100 million shortly after quarter-close - ✅ +20.2 million YoY. Brazil reached 91.8 million (1.3 million average monthly net-adds); Mexico reached 6.6 million (nearly 1.5 million net-adds in the quarter alone, re-accelerating after a slower prior quarter); Colombia surpassed 900,000.
• Activity rate: 83%, essentially flat versus the FY2023 all-time high reported in nu/2023-12.
• ROE: Consolidated annualized ROE 23%, Adjusted ROE 27% - both roughly flat versus Q4'23's 23%/26%. Brazil-alone ROE remained "well above 40%" per management, the same gap flagged last quarter between a mature Brazilian core and two still-unprofitable international subsidiaries.
• Net interest margin (NIM): Net interest income "nearly doubled year-on-year, reaching another record high of US$1.6 billion" per the call, with NIM itself reaching a new record - though Nu didn't disclose a specific percentage NIM figure in the materials reviewed for this post.
• Lending mix: Secured personal loan originations reached R$1.7 billion in the quarter, growing faster than unsecured originations, continuing the 2H'23 shift toward secured lending that management says is deliberately expanding the collateral base as eligibility broadens.
• Geographic segment reporting: still a single consolidated operating segment for interim-filing purposes; the quarter's KPI disclosure focused specifically on Mexico (per the four-priorities framework), not a full segment P&L - a genuine increase in voluntary disclosure depth, but still short of an audited segment breakout.

Beyond the Usual

A lawsuit-provision jump this quarter is mostly a methodology change, not new litigation

Nu's provision for civil and labor lawsuits rose from $8.1 million (Dec 2023) to $13.6 million (Mar 2024), a 68% increase in one quarter. The filing discloses that "the Group reviewed the provision methodology during the three-month period ended on March 31, 2024" - moving from individually assessing each unassessed claim to applying an average of historical losses by claim characteristics (location, court instance, historical loss rate). Nu states this change "had an impact on the additions for the period." The size of that impact isn't separately quantified, so a reader can't cleanly split how much of the $5.5 million increase is the new methodology catching up on previously under-provisioned claims versus genuinely new lawsuit volume - worth watching whether the provision balance keeps climbing at this pace next quarter (a real trend) or stabilizes (confirming this was mostly a one-time re-basing).

One of the two Mexican term loan credit facilities that had counted Nu Pagamentos as an additional guarantor (alongside Nu Holdings) was "prepaid by Nu Financiera in March 2024" - a small but genuine deleveraging step in Mexico, reducing (not eliminating) the guarantee stack flagged in nu/2023-12. Nu Holdings remains guarantor on the region's other facilities (the Colombia/Mexico syndicated facility and the Colombia IFC A/B loan).

The related-parties footnote states plainly that "as of March 31, 2024 and December 31, 2023, the Company did not have any transactions with other related parties" beyond the ordinary-course credit cards, loans, deposits, and investment products issued to executives, directors, and close family members on the same terms available to unrelated customers - a clean disclosure, consistent with FY2023, and worth noting precisely because Nu's founder-controlled governance structure (David Vélez holds 75.9% of total voting power via Class B shares, per nu/2023-12) is exactly the kind of structure where related-party dealings would be worth extra scrutiny if they existed.

Contingent civil and labor claims that management and legal advisors classify as merely "possible" (not probable, and therefore unprovisioned) totaled $11.9 million and $14.5 million respectively at quarter-end - both essentially flat versus year-end 2023, suggesting the overall unprovisioned-litigation exposure isn't itself growing, even as the provisioned balance moved on the methodology change above.

Management's Key Message from the Call

Vélez opened by reframing 2023's three priorities into "four key priorities for 2024" - Mexico momentum, Brazil secured lending, Brazil's high-income segment, and open-banking/AI/real-time-payments products - and, notably, committed to a new disclosure habit: "we will present data points to demonstrate the progress of select priorities" each quarter, choosing Mexico for this one. That's a genuine increase in forward transparency compared to FY2023's more retrospective "here's how we did against last year's priorities" framing (see nu/2023-12), and it's the kind of disclosure this post's Prescription argues Nu should extend to the provision-methodology change too.

The Mexico KPI slide itself made a specific, checkable claim: "Mexico is already surpassing Brazil in terms of time to achieve different KPIs for the business," comparing quarterly figures in Mexico against Brazil's own history at the same customer-count stage. If that claim holds up across future quarters as Mexico scales further, it's a meaningfully bullish data point for the reverse-DCF question raised in nu/2023-12 - whether Mexico and Colombia can reach Brazil-like profitability fast enough to justify today's price. This quarter's disclosure doesn't yet answer that question (Mexico is still pre-profit), but it's the first quarter management has offered a specific, falsifiable claim about the pace of that ramp rather than just qualitative optimism.

Target Valuation Range

Fair-value estimate: ~$24.8B-$47.8B equity value (bear-to-bull DCF carried over from Q4'23, base case ~$31.4B) against a $56.9 billion market cap this quarter - the stock's 43% rally has pushed price above even the bull-case intrinsic value, a richer read than "the multiple didn't expand much" alone conveys.

Nu closed Q1 2024 at $11.93 (March 28, 2024), up 43.2% from $8.33 at FY2023's close. With weighted-average basic shares outstanding of approximately 4,773.3 million for the quarter:

Market cap → enterprise value	Q1 2024
Share price (period-end)	$11.93
Shares outstanding	~4,773.3M
Market capitalization	~$56.9B
Total liabilities	n/a (net cash basis used)
Less: cash and equivalents	$6.03B (vs. ~$1.44B combined borrowings/financing/leases)
Enterprise value	~$52.4B

Market cap is a large jump from the $39.7 billion calculated in nu/2023-12 three months earlier.

Peer-multiple sanity check	FY2023	Q1 2024	Change
Revenue basis	Full year 2023	TTM (Apr 2023-Mar 2024), ~$9,146.2M	-
Enterprise value	~$35.0B	~$52.4B	⚠️ up sharply
EV/Revenue	~4.4x	~5.7x	⚠️ up
P/E (TTM)	~38.5x	~44.9x	⚠️ up

A full updated DCF isn't repeated here in detail - the base/bear/bull framework and assumptions from nu/2023-12 still apply, and this quarter's 160% FXN net income growth sits comfortably inside that prior post's bull-case growth glide path (55% → 25%), not the base case:

Scenario	Growth glide path (Y1-Y5, carried from Q4 2023)	Implied equity value
Current (Q1 2024 close)	— actual market price, for reference	$56.9B
Bear	45% → 18%	~$24.8B
Base	50% → 20%	~$31.4B
Bull	55% → 25%	~$47.8B

Reverse-DCF read, updated: at $56.9 billion market cap, the implied required growth path has moved further into bull-case territory than it was three months ago - the stock's 43% rally priced in more of the bull scenario than the base scenario, even though the quarter itself delivered results consistent with (not exceeding) that bull case. That's not necessarily overvaluation - a market correctly anticipating a bull-case quarter before it's fully reported isn't irrational - but it does mean less margin for a disappointing Mexico/Colombia quarter to still leave the stock reasonably priced.

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