Nu Holdings' 2025 Success Highlights Growth, But DeepValue Report Flags Near-Term Investment and Credit Risks

What happened

Nu Holdings' recent review article touts record 2025 revenue, rising net income, and a solid ROE, framing the company as an emerging multiproduct banking powerhouse beyond its credit card roots. This aligns with the DeepValue master report's data showing FY'25 revenue of $16.3B (+45% YoY), net income of $2.9B, and a peak ROE of 33%, driven by strong customer monetization and low cost-to-serve. However, the report critically notes that these metrics are vulnerable, as management has explicitly warned that 2026 strategic investments—including over R$2.5B in office expansions and regulatory build-outs in Mexico and the US—will pressure the efficiency ratio in the short term. Additionally, credit risk remains a concern, with IFRS expected credit loss allowances sensitive to macro shifts and early delinquencies needing close monitoring as the portfolio grows. Thus, while the positive narrative reinforces growth, the underlying business faces measurable headwinds that challenge sustained profitability at current elevated valuations.

Implication

The strong 2025 performance validates Nu's growth trajectory but does not offset the embedded risks from upcoming capital expenditures, which could erode the efficiency ratio and ROE if not managed tightly. With the efficiency ratio at a record low of 19.9% but facing upward pressure from strategic investments, any sustained increase above 22% would break the operating leverage thesis and re-rate the stock. Credit quality is another critical factor, as allowance sensitivities under IFRS and potential rises in 15-90 day NPL from the current 4.1% could quickly impact profitability. At a P/E of 28.8x and P/B of 6.9x, the valuation offers no margin of safety, making it prudent to await 2-3 quarters of evidence on cost control and delinquency trends. Therefore, while the news reinforces the growth story, investors should prioritize monitoring operational discipline and regulatory execution over chasing momentum.

Thesis delta

The news article reinforces the positive growth narrative by highlighting Nu's transition to a multiproduct platform and record financials, which aligns with the DeepValue report's base case of sustained revenue growth and high ROE. However, it does not address the key risks identified in the report, such as efficiency ratio pressures from 2026 investments or credit loss sensitivities, meaning the fundamental investment thesis remains unchanged. Consequently, the WAIT rating and cautious stance are still warranted, with no shift in the thesis until clearer data on cost management and credit metrics emerges.