Invest1 publisher3 min readPublished Updated
Nubank funds three bank charters out of a $1.1B quarter, with credit cost up 60%
Net income rose 49% to $1.1 billion at a record 33% return on equity while Nubank opened its Mexican bank and pursued charters in Brazil and the US. Cost of credit is up 60% year over year.
The Investor · Invest desk
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What happened
- Nubank's net income for the second quarter was $1.1 billion, a 49% increase year over year, surpassing $1 billion for the first time in the company's history.
- Nubank recorded record quarterly income as it opened Nu Mexico as a bank, is acquiring a Brazilian digital bank for its charter, and is building a U.S. bank.
- A Nubank executive said on the earnings call: "More importantly, we delivered that result while sustaining a record 33% return on equity and continuing to invest across our three markets and in our long-term opportunities."
- A $1.1 billion quarterly net income annualised at a 33% return on equity implies an equity base of roughly $13 billion.
- Nubank has operated as a nonbank fintech in its native Brazil since its founding in 2013 even as it has pursued, and acquired, bank charters in other countries.
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Why it matters
Nubank posted $1.1 billion of net income in the second quarter, a 49% increase year over year and the first quarter above $1 billion in the company's history [1]. It did so while opening Nu Mexico as a licensed bank, moving to acquire a Brazilian digital bank for its charter, and building a US bank subsidiary [2], which puts a concrete price tag on the argument that a digital bank can buy its way into regulated status out of the income statement.
The number that matters for that argument is not the headline profit but the return on it. A Nubank executive told the earnings call the quarter delivered "a record 33% return on equity" while the company continued "to invest across our three markets and in our long-term opportunities" [3]. Annualise the quarter and that ratio implies an equity base of roughly $13 billion [4]. Charter applications, capitalisation of a new US subsidiary and an acquisition in Brazil are large line items, but they are not large relative to internal capital generation at that rate. Nubank has run as a nonbank fintech in Brazil since its founding in 2013 even as it pursued and acquired charters elsewhere [5]; the change now is that it is buying the licence in its home market too.
The caveat sits in the credit line. Cost of credit fell 9% quarter over quarter but was 60% higher than a year earlier [6], which means the expense grew about 11 points faster than net income over the same period [7]. The sell side read the sequential move as the more informative one. KeyBanc Capital Markets analysts wrote that the results "provided relief around previously mounting credit concerns," citing a healthy risk-adjusted net interest margin and nonperforming loans broadly in line with seasonal trends, with "no evidence of a broad weakening in consumer credit" [8]. That is a statement about the quarter, not about the year-over-year base effect.
Mexico is where the charter thesis gets tested first. CEO David Velez said the opening of Nu Mexico under its new bank licence "completes our transformation from a credit-first fintech into a full-scale digital bank, and it unlocks capabilities we did not have before" [9], pointing to payroll direct deposits that "strengthen primary banking relationships" and higher deposit insurance that "increases confidence in holding balances with us" [10]. Needham analysts said Mexico "is at or near an inflection point and is poised to take off in the coming quarters" [11]. Both are forecasts about deposit gathering, and deposit gathering is what makes a charter worth its compliance cost.
Watch three things. First, the US timetable: Nubank is working toward opening a US bank within the next year [12], and the OCC requires a conditionally approved bank to be capitalised within 12 months and ready to open within 18 to win final approval [13]. Second, the Brazil charter deal, which executives declined to discuss on Thursday's call [14], leaving the strategic rationale unexplained in public. Third, whether the year-over-year credit cost gap narrows in the next print, including any effect from the AI-based credit underwriting model Nubank launched in late 2025 for Brazilian credit cards [15]. Velez called artificial intelligence "the most important technology transformation in our history" and said proximity to a company like OpenAI "provides a very interesting insight" [16]. Underwriting results, not the framing, will settle that.