NU Nu Paid Off Its Foreign Guaranteed Term Loans, Then Borrowed $813 Million at Home Instead

The Guarantee Stack Finally Shrank - By Being Replaced, Not Removed

Nu Holdings' second quarter of 2024 (period ended June 30, 2024) delivered another record on nearly every headline metric: $2.85 billion in total revenue (+69% FXN YoY... on a nominal basis it was +52.5%, since Q2'23's reais-denominated revenue benefited less from currency effects than Q1's comparison did), $487.3 million in net income (+134% FXN YoY, a new quarterly record), and a 28% annualized ROE - itself a new record, per management's own framing on the call. Customers crossed 105 million globally, up 60% from two years earlier, with Colombia crossing 1 million customers and Mexico surpassing $3 billion in deposits, more than tripling in two quarters since the Cuenta Nu product launched.

The quieter, more structurally interesting move this quarter is buried in the borrowings footnote: the term loan credit facilities that JPMorgan México had extended to Nu Servicios and Nu Financiera - the ones this series has tracked as parent-guaranteed subsidiary debt since nu/2022-03 - were fully repaid during the first half of 2024, leaving a zero balance on that line by June 30. In their place, Nu drew $813 million in new borrowings this quarter alone under a Brazilian "financial letter" facility (BRL-denominated, indexed to CDI + 0.7-1.8%, maturing 2025-2027) - a purely domestic funding instrument that doesn't carry the cross-border parent-guarantee structure the JPMorgan facilities did. Nu still guarantees the larger Mexico/Colombia syndicated facilities and the Colombia IFC loan, so the guarantee stack hasn't disappeared - but its composition shifted meaningfully toward domestic, non-guaranteed funding this quarter (see Beyond the Usual).

The Prescription

Risk-Adjusted NIM - net interest margin after credit costs, the single number Nu's own CFO called out as "a record high of 11.0% this quarter, reflecting a 300 basis point improvement" - is the metric Nu should keep optimizing hardest, because it's the one number that already nets out the two things that make a lending-heavy fintech's headline growth misleading on its own: funding cost and credit loss. A NIM number that's still climbing 300 basis points in a single year, even as the loan book mixes toward lower-yield secured products (explicitly, deliberately, per management's own Q&A framing this quarter), is the clearest evidence that Nu's underwriting is genuinely improving with scale rather than just growing volume. Lean further into whatever specific levers drove that 300bp move - credit-line repricing, better collections, or mix shift - rather than treating it as a byproduct of growth.

What Nu should stop doing: continuing to route new domestic borrowing through instruments (like the new $813 million Brazilian financial letter) without giving investors the same level of disclosure clarity it gives the international guaranteed facilities. The borrowings footnote lists the new facility's currency, rate, and maturity clearly enough, but nothing in the earnings release, presentation, or call remarks mentions that Nu retired its international guaranteed term loans and replaced the funding with a large new domestic facility this quarter - a capital-structure shift of this size (over $800 million of new borrowing in three months) deserves a sentence of context on the call, the same way management proactively explains ROE composition and NIM drivers every quarter.

Key Financial Metrics

Q2 2024 vs. Q2 2023, consolidated, reported in USD - Nu reports natively in US dollars, so no FX conversion is needed

Metric	Q2 2024	Q2 2023	YoY
Total revenue	$2,848.7M	$1,868.6M	✅ +52.5% nominal (management cites 69% FXN growth vs. an implied slower FXN Q2'23 base)
Gross profit	$1,359.4M	$782.0M	✅ +73.8% (margin 47.7% vs. 41.8%)
Total operating expenses	$634.0M	$458.0M	⚠️ +38.4%, slower than revenue
Profit before income taxes	$725.4M	$324.0M	✅ +123.9%
Income tax expense	$238.1M	$99.1M	⚠️ Effective rate 32.8% vs. 30.6%
Net income for the period	$487.3M	$224.9M	✅ +116.7% nominal (record quarter)

Metric	H1 2024	H1 2023	YoY
Total revenue	$5,584.6M	$3,487.3M	✅ +60.1%
Gross profit	$2,540.9M	$1,432.9M	✅ +77.3%
Net income for the period	$866.1M	$366.6M	✅ +136.3%

Balance sheet metric	Jun 2024	Dec 2023	Change
Total assets	$44,802.7M	$43,345.2M	✅ +3.4%
Total liabilities	$37,879.3M	$36,938.8M	➡️ +2.5%
Total equity	$6,923.4M	$6,406.4M	✅ +8.1%
Deposits	$25,228.6M	$23,691.1M	✅ +6.5%
Borrowings and financing	$1,735.9M	$1,136.3M	⚠️ +52.8% - see Beyond the Usual for the composition shift
Provision for lawsuits and administrative proceedings	$16.3M	$8.1M	⚠️ +102.0% since year-end (see note below)

Gross margin expanded to 47.7% - a genuinely strong sequential improvement from Q1'24's 43.2% and FY2023's 43.5%, driven by the Risk-Adjusted NIM gains discussed in Management's Key Message below rather than a mix shift away from credit risk (secured lending, which carries lower yields, actually grew as a share of originations this quarter). Other comprehensive income swung to a $(306.8) million loss for H1 2024 (from a $156.4 million gain at year-end 2023) - primarily currency-translation effects on the Brazilian real, which weakened meaningfully against the dollar over the period; this doesn't flow through net income, but it did pull total equity's growth rate below what net income alone would suggest.

Key Operational Metrics

• Customers: 104.5 million at quarter-end, +20.8 million YoY (+60% over two years, per management). Colombia crossed 1 million customers this quarter; Mexico's deposit base more than tripled in two quarters, crossing $3 billion, "a testament" (per CFO Guilherme Lago) to the Cuenta Nu yield strategy first flagged in nu/2023-12.
• ROE: Consolidated annualized ROE 28%, a new record; Adjusted annualized ROE 33%. Adjusted Net Income of $562.5 million carried an Adjusted Net Income margin of 20%, up from 16-17% in the trailing few quarters.
• Risk-Adjusted NIM: a record 11.0%, up roughly 300 basis points year-over-year - the clearest single evidence of improving underwriting economics at scale, per management's own characterization (see The Prescription).
• Lending mix: unsecured personal loan originations reached R$11.2 billion (cumulative disclosure basis per the call), still the primary growth driver; secured lending originations reached R$1.8 billion in the quarter, or 14% of total personal loan originations - continuing the secured-lending mix shift flagged in nu/2024-03.
• Colombia: launched its checking-account product this quarter (following Mexico's Cuenta Nu playbook), reaching over 1 million customers total.
• Segment reporting: still a single consolidated operating segment for interim purposes - no change from prior quarters.

Beyond the Usual

The parent-guaranteed foreign term loans were paid off - and replaced with $813 million of new domestic borrowing

Nu's term loan credit facility balance (the JPMorgan México facilities flagged as parent-guaranteed debt in both nu/2022-03 and nu/2023-12) fell to zero by June 30, 2024, down from $98.8 million at the start of the quarter - fully repaid. In the same quarter, Nu drew $813.0 million in new borrowings under a newly-established Brazilian "financial letter" facility (BRL-denominated, CDI-indexed, maturing between June 2025 and July 2027) - a domestic instrument that isn't structured as a parent-guaranteed cross-border facility the way the Mexico/Colombia term loans and syndicated facilities are. Total borrowings and financing still grew 52.8% since year-end (to $1,735.9 million), so this isn't deleveraging in aggregate - it's a shift in where Nu is borrowing from and what kind of obligation it is, away from the guarantee-heavy international structure this series has tracked since Q1 2022, toward larger-scale domestic funding. Nu Holdings remains guarantor on the Mexico/Colombia syndicated facilities (a combined $522.5 million outstanding as of June 30, per the facility-by-facility schedule) and the Colombia IFC loan ($202.6 million), so the parent-guarantee exposure itself persists - it just no longer includes the smaller JPMorgan term loans.

The provision for lawsuits and administrative proceedings kept climbing this quarter - $16.3 million at June 30, 2024, up from $13.6 million at March 31, 2024 (+20.2% quarter-over-quarter) and up 102% from $8.1 million at year-end 2023. nu/2024-03 flagged that most of the Q1'24 jump was a provisioning-methodology change rather than new litigation; this quarter's continued increase, under the same (now-settled) methodology, is a genuine trend rather than a one-time re-basing effect, and is worth continuing to monitor even though the absolute dollar amounts remain small relative to Nu's balance sheet.

Contingent (unprovisioned, "possible" rather than "probable") civil and labor claims weren't broken out with updated figures in the materials reviewed for this post to the same granularity as the Q1'24 filing - a gap worth checking again in the next quarter's footnotes, since nu/2024-03 showed those figures holding flat even as the provisioned balance grew.

Nu's other comprehensive income swung to a $(306.8) million loss for H1 2024, primarily a currency-translation effect from Brazilian real weakness rather than an operating or credit event - a genuine but non-operating drag on total equity growth that's easy to miss when reading only net income and ROE, both of which look strong this quarter on a purely IFRS-income-statement basis.

Management's Key Message from the Call

CFO Guilherme Lago led the financial narrative this quarter with Risk-Adjusted NIM specifically - "reaching a record high of 11.0% this quarter, reflecting a 300 basis point improvement" - framing future NIM expansion as coming from "the continuous deployment of our balance sheet capacity in the form of credit," while acknowledging secured lending's lower yields as a deliberate offsetting mix choice rather than a headwind to fight. That's a substantive, mechanism-level answer, consistent with the credit-quality Q&A pattern flagged as far back as nu/2022-03.

On credit philosophy, management reiterated - in response to an analyst NPL question - that Nu "optimize[s] NPV... over the lifetime of the customer relationship rather than minimizing NPL," a framing that's consistent across calls but worth flagging alongside Beyond the Usual: a lifetime-NPV underwriting philosophy is a reasonable strategy, but it also means quarter-to-quarter NPL upticks shouldn't be read in isolation from that stated strategy, since Nu is explicitly not optimizing for the lowest possible near-term delinquency number.

Neither the term-loan repayment nor the new $813 million Brazilian financial-letter facility came up in the prepared remarks or the portions of the Q&A reviewed for this post - consistent with the pattern flagged in The Prescription, where financing-structure changes get full footnote disclosure but no proactive verbal context on the call itself.

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 today's $61.7 billion market cap - the gap above even the bull case widened again this quarter, though the EV/Revenue multiple itself held flat, meaning the market isn't further re-rating, just sustaining an already-rich valuation.

Nu closed Q2 2024 at $12.89 (June 28, 2024), up 8.0% from $11.93 at the end of Q1 2024 - a far more modest move than Q1's 43% rally, even though this quarter's operating results (record net income, record ROE, record Risk-Adjusted NIM) arguably justified at least as much enthusiasm. With weighted-average basic shares outstanding of approximately 4,788.2 million for the quarter:

Market cap → enterprise value	Q2 2024
Share price (period-end)	$12.89
Shares outstanding	~4,788.2M
Market capitalization	~$61.7B
Total liabilities	n/a (net cash basis used)
Less: cash and equivalents (working estimate)	~$5.99B (unrestricted; excludes $6.66B compulsory/central-bank deposits) plus ~$1.77B combined borrowings/financing/leases netted in
Enterprise value	~$57.5B

Peer-multiple sanity check	Q1 2024	Q2 2024	Change
Revenue basis	TTM	TTM (Jul 2023-Jun 2024), ~$10,126.3M	-
Enterprise value	~$52.4B	~$57.5B	⚠️ up
EV/Revenue	~5.7x	~5.7x	- flat, a genuinely stable multiple
P/E (TTM)	~44.9x	~40.3x	✅ down slightly

Reusing the base/bear/bull DCF framework introduced in nu/2023-12: this quarter's 116.7% nominal net income growth and expanding margins sit between that post's base and bull growth glide paths, better than the base case's 50% Y1 growth assumption but not quite at the bull case's 55%.

Scenario	Growth glide path (Y1-Y5, carried from Q4 2023)	Implied equity value
Current (Q2 2024 close)	— actual market price, for reference	$61.7B
Bear	45% → 18%	~$24.8B
Base	50% → 20%	~$31.4B
Bull	55% → 25%	~$47.8B

Reverse-DCF read: at a stable EV/Revenue multiple and a slightly lower trailing P/E than last quarter despite continued record results, the market currently looks to be pricing something closer to the base-to-bull blend rather than the pure bull case implied by Q1'24's post-rally valuation - a more comfortable margin of safety than three months ago, though still requiring Mexico and Colombia to keep closing the gap toward Brazil-level profitability for the current price to be fully justified by fundamentals rather than by growth-story optimism alone.

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