Online bank Nu Holdings (NU 3.74%) released another fabulous earnings report last week, demonstrating solid growth. It's becoming a financial powerhouse, an upstart challenging the legacy banks and succeeding.mNu stock jumped after the report, and it's up 26% year to date. Is there still time to buy?
Disrupting finance in Latin America
Nu is an all-digital bank based and Brazil and serving Brazil, Mexico, and Colombia. It reports robust growth every quarter, and it has tremendous growth opportunities.
Image source: Getty Images.
Customers keep coming
Nu added 4.1 million new accounts in the 2025 second quarter, ending the period with 123 million accounts, or 17% more than last year. It has 60% of the adult population in Brazil, 13% in Mexico, and 10% in Colombia.
Revenue increased 40% year over year in the quarter, driven by new additions as well as cross-selling. Average revenue per active customer (ARPAC) rose 18% over last year to $12.20 as customers add new and more expensive products, and the longer customers are on the platform, the higher the average, with customers active for 96 months averaging $27.30.
Profits are soaring
Nu is scaling profitably, with its all-online platform leading to lower costs. It has kept its cost to serve stable at around $0.80, and the efficiency ratio is down to 28% from 32% last year. Gross profit increased 78% year over year, and net income increased from $487 million last year to $637 million this year.
Many growth drivers
Nu is still in its early stages, and it has multiple growth drivers that should keep it in growth mode for the foreseeable future.
New customers
Although a majority of the adult population in Brazil is already on the platform, Brazil is the largest country in Latin America, and it adds more new accounts there monthly than in its newer markets. However, those markets are growing faster. It's still a small presence in Mexico and Colombia, with a long growth runway. Credit card accounts increased 11% over last year, for example, but they increased 52% in Mexico and 34% in Colombia.
High-income customers
Nu's low fees attract the mass customer at high rates, but it's making inroads into the affluent population, whose large deposits and high spending are much more lucrative. It has 3 million high-income customers, a 13% increase over last year.
Boosting engagement
It's also benefiting from the cross-selling strategy, which is boosting sales and profits from existing customers. Even though it has 60% of the adult population in Brazil as customers, these customers might also engage with other banks. Management estimates that it only has about 5% of the addressable market for gross profit.
New regions
Nu is already investing in global regions and expanding into new markets in Latin America. There's a long growth runway in launching its successful models into new Latin American countries.
The price is right, in some ways
Nu is in an excellent position to keep growing in multiple ways, and it's cheap by using a P/E ratio on a forward, one-year basis, which is only 15. That's a bargain for a high-growth stock. However, banks are typically assessed with a price-to-book ratio. Nu stock trades at 5.7, which is incredibly expensive.
That's part and parcel of investing in a young stock that's still finding its footing, and it partially explains why the stock has been up and down this year despite its outstanding performance.
Nu can carry a premium valuation because it's growing so quickly. It's likely to keep growing and justify the valuation as it expands and becomes a powerhouse digital bank, and it looks like it's still a buy.
