Nubank: world’s cheapest growth bank or a trap before a Brazilian credit storm?

At first glance, it doesn’t make sense. Nu Holdings $NU , the parent company of Brazilian digital bank Nubank, delivered a first quarter of 2026 that practically any bank in the world would envy: revenue crossed the $5 billion mark for the first time, net income hit a record $871 million with 41% year‑on‑year growth, and return on equity held at 29%. The customer base surpassed 135 million people – more than the population of Japan.

And yet the stock has lost roughly 21% since the start of the year and trades around $13.75, about 28% below the January high of $18.98. In June it briefly dipped to $11. While US indexes are climbing higher this year, one of the world’s fastest‑growing financial firms has slumped into the role of a black sheep.

Don’t look for the reason in the earnings table – look beneath it. Loan‑loss provisions jumped 33% quarter‑on‑quarter to $1.79 billion, the early‑stage delinquency ratio rose by 89 basis points, and risk‑adjusted net interest margin fell from 10.5% to 9.5%. On top of that, CFO Guilherme Lago – the architect of the firm’s journey from losses to billion‑dollar profits – unexpectedly left in June. Bank of America $BAC responded by downgrading to Underperform and slashing its price target from $16 to $10, while Citigroup $C cut its target from $18 to $13 and warned that Nubank’s growth is increasingly driven by credit expansion into riskier segments.

So the market is grappling with a simple but fundamental question. Nubank grew up in an era when the Brazilian economy favoured its credit appetite, and it has yet to experience a real nationwide credit cycle in full force. Management argues that the rise in delinquencies is a seasonal pattern that repeats every first quarter, and that AI models allow the firm to lend profitably to riskier clients. Sceptics counter that this is exactly what banks always say right before the credit cycle catches up with them.

Who’s right? After the sell‑off, is Nubank the cheapest growth story in Latin America, or a trap for investors who underestimated what a slowing Brazilian consumer will do to the bank?