Nu Holdings Faces Margin Squeeze as Credit Costs Rise, $1 Billion Buyback Signals Confidence
05.06.2026 - 19:13:42 | boerse-global.de
Nu Holdings is walking a tightrope between blistering growth and mounting credit risks. The digital bank's aggressive push into new markets and products has pushed its operating margin down by 760 basis points to 19.2% in the first quarter, triggering a downgrade from Susquehanna and a $1 billion share buyback aimed at calming investors.
The buyback, announced on June 4 via an SEC filing, authorizes the repurchase of up to $1 billion in Class A shares over twelve months. It came just one day after the stock touched a 52-week low of €9.66, and the timing leaves little doubt about management's intent. The company insisted the programme would not come at the expense of expansion, arguing that operating cash flow is sufficient to fund both shareholder returns and growth in Mexico and Colombia.
Yet the market's reaction has been muted. The stock now trades around €10.46, still roughly 33% below the January high of €15.70. Over the past 30 days the shares have shed more than 15%, and the relative strength index sits at 38.3 — deep in oversold territory. The gap to the 200-day moving average stands at nearly 19%.
Susquehanna pulls back on margins
Susquehanna was the first major house to formally adjust its view. On June 3 the firm downgraded Nu from "Positive" to "Neutral" and slashed its price target from $18 to $13. The rationale: a sharp reversal in margin momentum. After several quarters in which Nu had expanded its operating margin by more than 1,000 basis points, the first quarter delivered a 760-basis-point contraction.
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Analysts pointed to a combination of rising credit costs, heavy investment in the US market, and the expense of onboarding new credit card customers in Brazil. The bank's credit loss allowances jumped 33% quarter-over-quarter to roughly $1.8 billion, reflecting a portfolio-heavy shift toward unsecured lending. Credit cards and unsecured loans accounted for 98% of new origination in the quarter, with cards alone making up 65% of the total $37.2 billion portfolio. Unsecured loans added another 27%; secured loans were just 8%.
Early delinquency rates are beginning to creep up. The 15-90 day overdue ratio rose to 5.0% from 4.1% in the prior quarter, while loans more than 90 days past due stood at 6.5%. At the same time, net interest income reached $3.25 billion and the risk-adjusted net interest margin held at 9.5%, but the direction of travel has investors watching closely.
Profitability still solid, but decelerating
Despite the margin pressure, Nu remains comfortably profitable. Net income came in at $871.4 million, delivering a return on equity of 29%. On a currency-adjusted basis, earnings rose 41% year-over-year — though they slipped 5% from the previous quarter. That sequential decline is what has unsettled the market more than the absolute numbers.
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The bank's customer base continues to balloon. Total clients reached 135 million, with Brazil accounting for 115 million. Mexico, the key growth frontier, crossed 15 million customers in the first quarter and hit break-even — a milestone that gives Nu a second profitable market. Brazil alone, however, still dominates.
A new CFO and a debate that hasn't been settled
The buyback programme may absorb some selling pressure, but it does not address the structural questions weighing on the stock. Rob Livingston takes over as chief financial officer on July 13, and his first task will be to articulate a credible path that balances expansion with margin stability. The market's focus has narrowed to two variables: operating margin and credit provisioning. If the credit portfolio can keep growing without a disproportionate rise in reserves, Nu's growth story will regain credibility. If provisioning stays elevated, valuations will increasingly hinge on credit quality rather than customer acquisition.
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