NU Nu Just Crossed 100 Million Customers in Brazil Alone. Is Adult-Population Saturation Actually a Problem?

From Credit Card Company to Lender

Three years after its December 2021 IPO (see nu/2021-12), Nu Holdings' third quarter of 2024 - three months ended September 30, 2024 - is less a story about growth continuing (it is: record $2,943.2 million revenue, up 37.8% year-over-year in nominal U.S. dollars, +56% FX-neutral^») and more a story about what kind of business Nu is becoming. Management disclosed on the earnings call that Brazil alone crossed 100 million customers "in the past days" before the call - a genuinely large milestone for a market of roughly 165 million adults - and that the consumer finance portfolio (credit cards plus lending) reached $20.9 billion, up 47% year-over-year FX-neutral. But inside that portfolio, the mix has shifted hard: the personal lending book grew 97% year-over-year FX-neutral to $5.7 billion (now 27% of the consumer finance portfolio, up from a smaller share a year ago), while the credit card book - the product that built Nu's brand - grew only 33% FX-neutral to $15.2 billion. On the balance sheet itself, filed loans to customers (personal loans, IFRS classification) grew 54.2% year-over-year to $4,939.4 million while credit card receivables grew just 2.2% to $12,689.2 million.

That's not a company simply adding more of the same product to more people. It's a bank whose incremental growth is now coming disproportionately from a newer, still-smaller lending line rather than the card business the market still associates with the Nu brand - and it's happening at the same time Nu is running a genuinely capital-intensive international expansion. Mexico's operation closed the quarter at $3.9 billion in deposits; Colombia's checking-account product, launched just one quarter earlier, already had $900 million in consumer deposits. Funding both of those with above-market deposit rates to win share quickly is a deliberate, disclosed strategy - CFO Guilherme Lago said explicitly on the call that deposit-rate pressure in Mexico and Colombia is "in line with our depo rates strategy" - but it's also why group-level net interest margin compression shows up even as Brazil's own core economics keep improving (see Key Financial Metrics).

The Prescription

Nu should keep leaning into the personal-lending shift, not retreat from it. A credit card business monetizes an existing relationship; a well-underwritten personal loan book monetizes the same relationship at a structurally better margin once Nu's data advantage (years of transaction history on tens of millions of already-scored customers) is doing the underwriting instead of a first-time risk model - which is exactly the 97% FX-neutral growth rate showing up this quarter. The credit card business isn't declining, it's just no longer where the marginal dollar of growth capital should go first, and a company still calling itself a "digital bank" rather than a "credit card company" should let its balance sheet mix say so.

What Nu should stop doing: running the Mexico and Colombia deposit-rate strategy as an undifferentiated blunt instrument once each market's early customer-acquisition phase ends. Paying above-market rates to win deposits fast is a legitimate land-grab tactic when a market is new and unproven (Colombia's $900 million in one quarter is real evidence it works) - but it's also the single biggest drag on group profitability disclosed this quarter, and management's own answer on the call ("we have been...reducing some of those deposit rates...sequentially") shows they already know the rate needs to come down as the deposit base matures. The risk is moving too slowly on that glide path once the land-grab phase is over, since every extra quarter of above-market rates in a market that's already won is pure margin given away for free.

Key Financial Metrics

Q3 2024 vs. Q3 2023, consolidated, reported in USD - Nu reports natively in US dollars, so no FX conversion is needed

Metric	Q3 2024	Q3 2023	YoY
Total revenue	$2,943.2M	$2,136.8M	✅ +37.8% nominal (+56% FX-neutral)
Gross profit	$1,348.6M	$914.8M	✅ +47.4% (margin: 45.8% vs. 42.8%)
Total operating expenses	$624.8M	$503.3M	⚠️ +24.2%
Profit before income taxes	$723.8M	$411.5M	✅ +75.9%
Profit for the period (Net Income)	$553.4M	$303.0M	✅ +82.6%
Adjusted Net Income, non-IFRS	$592.2M	$355.6M	✅ +66.6% nominal (+89% FX-neutral)
Adjusted Annualized ROE»	33%	n/a (not disclosed this quarter's prior-year comparative)	✅ Strong for a 12-year-old bank
Total cash and cash equivalents (quarter-end)	$7,645.8M	$3,213.6M	✅ +138.0%

Nine-month cumulative figures (Nu's 6-K discloses cash flow only cumulatively, not by standalone quarter)

Cash flow metric	9M 2024	9M 2023	Change
Net cash from (used in) operating activities	$1,028.9M	$(1,440.3)M	✅ Swung positive

Balance sheet metric	Sep 2024	Dec 2023	Change
Total assets	$48,637.9M	$43,345.2M	✅ +12.2%
Total liabilities	$40,993.5M	$36,938.8M	⚠️ +11.0%
Total equity	$7,644.3M	$6,406.4M	✅ +19.3%
Deposits	$28,319.1M	$23,691.1M	✅ +19.5%
Credit card receivables	$12,689.2M	$12,414.1M	⚠️ +2.2% - see above
Loans to customers (personal loans)	$4,939.4M	$3,202.3M	✅ +54.2%

Net Interest Income and Fee & Commission Income aren't broken out as standalone line items in the interim statements; both roll into the revenue and cost-of-services lines above.

Operational Metrics

• Total customers: 109.7 million (+23% YoY), of which 91.7 million active customers (+24% YoY, "active" meaning revenue-generating in the last 30 days) - Brazil alone crossed 100 million customers during the quarter.
• Monthly activity rate: 83.6%, essentially flat sequentially and year-over-year - a high-80s ceiling Nu has held for several quarters now.
• Monthly ARPAC^»: $11.0, down 2 cents sequentially in nominal dollars but +25% year-over-year FX-neutral, from $10.0 a year ago.
• Consumer finance portfolio (credit cards + personal lending): $20.9 billion, +47% YoY FX-neutral.
  • Credit cards: $15.2 billion, +33% YoY FX-neutral, +4% sequentially.
  • Personal lending: $5.7 billion, +97% YoY FX-neutral, +19% sequentially - now 27% of the combined portfolio.
• Mexico: $3.9 billion in deposits at quarter-end; still pre-profitability, disclosed as an investment-phase market.
• Colombia: $900 million in consumer deposits, one quarter after its checking-account product launched.

Beyond the Usual

A Rewards Program That Never Expires

Nu's credit card rewards programs ("Nubank+" and "Ultravioleta") accrue points that customers can redeem for cashback or air miles, and the footnotes disclose something a reader wouldn't get from the deck: the points do not expire, and there is no limit on how many an eligible cardholder can earn. Nu carries a $71.3 million deferred-revenue liability against future redemptions, estimated using historical redemption-rate models rather than a hard cap - a genuinely open-ended future liability whose size depends entirely on how conservative that model turns out to be as the loyalty base ages and accumulates un-redeemed points over many years.

A Director's Company on the Other Side of a Commercial Deal

A related-party footnote discloses that in Q2 2024, Nu "entered into a commercial relationship with a company where one of its Directors serves as CEO." Nu received a cash incentive under the arrangement, to be recognized as a reduction in intangible costs once certain conditions are satisfied. The filing doesn't name the counterparty, the dollar size of the incentive, or the conditions - only a $2,500 thousand net liability shows up in the related-party balances table. That's a legitimate, disclosed transaction, not an accusation of wrongdoing, but a governance detail worth tracking: a sitting director's own company transacting commercially with Nu is exactly the kind of arrangement that deserves more disclosure than a one-line footnote provides, especially if the relationship grows.

Judicial Deposits Still Tied to the Nu Invest Acquisition

Nu still carries $4.5 million in judicial deposits connected to a pre-acquisition tax dispute involving the former shareholders of Nu Invest (the brokerage Nu acquired in 2022) over withholding taxes on employee payments. Three years after the deal closed, this legacy liability is still working its way through Brazil's courts - a reminder that an acquisition's legal tail can run far longer than the headline integration story suggests.

Modest, Stable Contingent Litigation

Total possible-loss (not probable, not accrued) civil and labor lawsuits stood at roughly $21.2 million combined as of September 30, 2024 (up from about $26.5 million at year-end 2023, so actually down slightly) - a small number relative to Nu's $48.6 billion balance sheet, and stable rather than growing, which is itself useful context given how large Nu's customer base has become.

What Management Emphasized on the Call

CEO David Vélez and CFO Guilherme Lago used the call to frame Q3 2024 around three things: the Brazil customer-count milestone (100 million, crossed just before the call), the early results from Mexico and Colombia's deposit-led expansion strategy, and the launch of NuCel (Nu's debut into telecom, alongside travel products and NuMarketplace) as evidence the platform keeps adding non-financial services on top of the core banking relationship. On credit quality and funding costs - the topic analysts pushed hardest on - management's answer was consistent: deposit rates in Mexico and Colombia are elevated by design during each market's land-grab phase, and the team is already "reducing some of those deposit rates...sequentially" as the funding base matures, rather than treating the elevated rate as a permanent feature. Management didn't address the Nu Invest judicial deposit or the director-affiliated commercial arrangement flagged in Beyond the Usual on the call - neither is the kind of detail that comes up in prepared remarks or analyst Q&A unless a number moves materially.

Stock Price: Up Roughly 210% in Two Years

Nu's share price closed September 30, 2024 at $13.65, up from $4.40 two years earlier (September 30, 2022) - a roughly 210% move that comfortably clears this project's threshold for a dedicated section. Most of that gain happened in a single stretch: the stock was still around $7-8 through most of 2023, then rose steadily from $8.61 in January 2024 to a 2024 peak of $14.97 in August before easing slightly to $13.65 at quarter-end. That run tracks Nu's own operating improvement almost one-for-one - each 2024 quarter posted record revenue and accelerating net income - rather than a speculative re-rating disconnected from the numbers, which is the more encouraging read for a reader trying to separate genuine business momentum from market mood.

Target Valuation Range

Fair-value read: the current ~$65.6 billion market cap (~30x blended Brazil-plus-Mexico/Colombia run-rate earnings) is roughly justified, not cheap - reasonable if Mexico and Colombia reach profitability on management's implied timeline, but it leaves very little room for either market to disappoint.

With 4,806,594,533 total shares issued as of September 30, 2024 (3,755,127,391 Class A, 1,051,467,142 Class B) and a $13.65 closing price. Nu has never split its stock, so this and every prior Nu figure in this project's coverage are on a consistent, unadjusted share-count basis.

Market cap → enterprise value	Q3 2024
Share price (period-end)	$13.65
Shares outstanding	4,806,594,533
Market capitalization	~$65.6B
Total liabilities	n/a (net cash basis used)
Less: cash and equivalents	$7,645.8M (vs. $1,498.9M borrowings and financing)
Enterprise value	~$59.5B

Peer-multiple sanity check	Q2 2024	Q3 2024	Change
Revenue basis	TTM	Annualized Q3 run-rate	-
Enterprise value	~$57.5B	~$59.5B	⚠️ up
EV/Revenue	~5.7x (TTM)	~5.1x (annualized run-rate)	- basis differs, not directly comparable
P/E	~40.3x (TTM)	~29.6x (annualized run-rate) / ~27.7x (Adjusted Net Income)	- basis differs, not directly comparable
P/B	n/a	~8.6x	-

A full multi-year DCF is more defensible now than in nu/2022-03 - Nu has three-plus years of profitable-quarter data and a real ROE figure to anchor a cost-of-equity-based model - but the honest constraint is that Mexico and Colombia are still pre-profitability by design, so any DCF has to make an assumption about when those markets flip positive that the filed numbers themselves can't yet confirm. Using a simple reverse-DCF framing instead: at a $65.6 billion market cap and a Brazil-only run-rate of roughly $2.2 billion in annualized net income (annualizing Q3's $553.4 million), the market is pricing in Mexico and Colombia eventually contributing enough profit, plus continued double-digit growth in Brazil itself, to justify roughly 30x today's blended earnings. That's not an unreasonable price for a business growing revenue at 37.8% nominally with a 33% adjusted ROE - but it leaves very little room for Mexico/Colombia to disappoint, given they're the whole reason the multiple sits above what a mature, Brazil-only digital bank would otherwise command.

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