Nu Holdings stock drops as margin pressure overshadows earnings beat

SÃO PAULO - Nu Holdings Ltd. (NYSE:NU) reported fourth-quarter revenue that surpassed analyst expectations, but its stock fell 7.7% as investors focused on declining net interest margins.

The Brazilian fintech giant posted revenue of $2.99 billion for the quarter, beating the consensus estimate of $2.74 billion. However, Nu’s net interest margin (NIM) contracted 70 basis points sequentially to 17.7%, primarily due to foreign exchange volatility and the company’s deposit strategy in Mexico and Colombia.

Nu added 4.5 million customers in the fourth quarter, bringing its total customer base to 114.2 million, a 22% YoY increase. The company reported net income of $552.6 million, up 85% YoY on an FX-neutral basis, with an annualized return on equity of 29%.

"2024 was a transformational year for Nu as we advanced our mission to empower millions across Latin America with accessible, transparent and low-cost financial services," said David Vélez, founder and CEO of Nubank.

Despite strong customer growth, Nu’s monthly activity rate dipped to 83.1%, as rapid expansion in Mexico and Colombia outpaced Brazil. The company’s efficiency ratio improved by 150 basis points sequentially to 29.9%.

Nu’s lending portfolio more than doubled YoY to $6.1 billion, while its credit card portfolio expanded 28% YoY to $14.6 billion. Total (EPA:TTEF) deposits increased 55% YoY to $28.9 billion.

BofA Global Research analst Mario Perry commented, "In 4Q24, net income of U$553mn remained flat with 3Q24 and was in line with BofAe, while ROE contracted 150bp QoQ to 28.9%. Results were negatively impacted by a 13% devaluation of the BRL in the quarter, which distorted growth figures. Nonetheless, the quarter reflected muted revenue generation (+2% QoQ) on further NIM contraction (-70bp QoQ to 17.7%, and -210bp in the past two quarters) mainly due to a lower yield on the loan book given a continued shift in loan mix to lower-risk products. In fact, total revenues rose 24% YoY, or at its slowest pace in several years, causing monthly ARPAC to decline for a third consecutive quarter to $10.7 from $11.4 in 1Q24. On a positive note, asset quality improved (also a function of loan mix), which led to a modest reduction in the CoR, although it was not enough to compensate for slower revenue growth, with risk adjusted NIM down 60bp QoQ, to 9.5% (and down 150bp in the last 2 quarters)." He also maintained a Neutral rating and a price target of $14.00.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.