🚨 NU HOLDINGS: EARNINGS JUST GOT MORE INTERESTING – IS BRAZIL’S POLITICAL SHOCK A BUYING OPPORTUNITY OR A WARNING?

NYSE: $NU | Nubank | November 12 earnings watch

NU was already an interesting growth story heading into earnings. Now it has become a much more complicated investment proposition.

Brazil’s October presidential election has delivered a significant shock to financial markets, and Nubank has been caught directly in the crossfire.

The question investors should be asking isn’t simply whether NU beats earnings expectations.

It’s whether the political and economic environment has fundamentally changed the company’s growth and profitability outlook.

🇧🇷 1. The election shock is REAL – and the numbers are substantial.

Following President Lula’s re-election on October 25, Brazilian markets experienced an extraordinary repricing.

The Bovespa plunged 13.9% on October 26, while the Brazilian real suffered its sharpest daily decline in decades.

NU shares fell approximately 17% that day.

This wasn’t necessarily investors suddenly deciding Nubank was a bad business. It was investors reassessing the risk attached to Brazilian assets.

That distinction matters enormously.

However, dismissing the sell-off as temporary political noise would also be a mistake.

Brazil’s fiscal position, government spending, inflation expectations and interest-rate outlook directly affect Nubank’s operating environment.

2. Interest rates: The hidden threat to NU’s earnings.

Brazil’s central bank recently held interest rates at 13.75%, following concerns about inflation and fiscal uncertainty.

For Nubank, this creates several potential problems.

* Higher borrowing costs can make credit more expensive.

* Consumers may become more financially stretched.

* Loan defaults could increase.

* Deposit competition could pressure funding costs.

* Higher discount rates can reduce the valuation investors are willing to pay for future earnings.

There is an important nuance here: higher rates can also support lending yields and interest income.

The problem arises when the additional income from lending is outweighed by higher funding costs and credit losses.

This is where I want management to provide clarity.

3. Currency risk: The dollar investor’s problem.

NU is listed in New York, but much of its business is generated in Brazil.

A weaker Brazilian real creates a translation problem.

Even if Nubank continues growing its Brazilian business in local currency, converting those earnings into US dollars can reduce reported growth.

Investors should distinguish between:

* Underlying operational growth.

* Currency-adjusted revenue growth.

* Actual reported US-dollar earnings.

A business can perform reasonably well operationally while its US-listed shares struggle because of currency movements.

4. Credit quality: This is where the real test begins.

Political uncertainty is one thing. Deteriorating loan quality is something else entirely.

In Q2, NU reported 90+ day delinquency of approximately 6.9%.

The company has also been deliberately expanding its lending exposure.

I want to know whether the latest economic uncertainty is beginning to affect repayment behaviour.

If unemployment, inflation and borrowing costs remain elevated, the consequences may take several quarters to appear in credit losses.

This is potentially more important than a one-quarter earnings surprise.

5. Why I’m not writing off the business.

There is another side to this story.

In Q2 2026, Nubank delivered:

* Nearly $5.9 billion in gross revenue, up 39% year-on-year.

* Approximately $1.1 billion in net income, up 49%.

* Return on equity of 33%.

* A customer base approaching 139 million.

These are impressive operating numbers.

Its technology-led banking model, customer relationships and expanding Mexican operation remain important long-term advantages.

The election hasn’t suddenly erased those competitive strengths.

But the market is now demanding a higher risk premium.

6. WHAT I WANT TO SEE ON NOVEMBER 12

My earnings checklist:

Revenue: Is growth holding up despite currency volatility?

EPS: Can NU deliver against the approximately $0.22 analyst consensus?

Credit quality: Are 90+ day delinquencies stabilising?

Cost of credit: Are provisions beginning to rise?

Brazil: How is management assessing the new political and fiscal environment?

Mexico: Can international expansion increasingly offset Brazil concentration?

Guidance: Has management adjusted its expectations for 2027?

📊 MY INVESTMENT VIEW: TWO VERY DIFFERENT SCENARIOS

Bull case:

The election sell-off proves disproportionate to the deterioration in Nubank’s underlying business. Earnings remain strong, credit quality holds up, and management demonstrates that Mexico can increasingly diversify the business.

In that scenario, the political discount could eventually unwind.

Bear case:

Fiscal uncertainty keeps Brazilian interest rates elevated, the real remains weak, consumer credit deteriorates and loan-loss provisions rise.

In that scenario, the market may have been anticipating risks that have not yet appeared in the financial statements.

And a cheap-looking valuation could become cheaper.

THE BIG INVESTOR TAKEAWAY

I think the distinction investors need to understand is this:

Political risk is already being priced into NU. Fundamental credit risk may still be developing.

Those are two very different things.

I wouldn’t automatically interpret a 20% sell-off as a bargain. Equally, I wouldn’t assume that a political shock has destroyed a fundamentally strong digital banking franchise.

For me, November 12 is about separating market fear from measurable deterioration in the business.

I’d rather see NU miss EPS slightly but demonstrate stable credit quality and resilient underlying growth than beat expectations while quietly accumulating lending risk.

My question to investors: Is NU now a discounted opportunity following Brazil’s election, or is the market warning us that the next phase of its growth story could be considerably more difficult?

Sometimes the biggest opportunity in investing comes from understanding what the market is afraid of.

Sometimes the market is afraid for a very good reason.

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