NU Nu Holdings Ltd

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 6-K

Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

 

For the month of August, 2023

Commission File Number 001-41129

 

 

Nu Holdings Ltd.

(Exact name of registrant as specified in its charter)

 

Nu Holdings Ltd.

(Translation of Registrant's name into English)

 

Campbells Corporate Services Limited, Floor 4, Willow House, Cricket Square, KY1-9010 Grand Cayman, Cayman Islands

+1 345 949 2648

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

 

Form 20-F (X) Form 40-F

 

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes No (X)

 

 

 

Contents

 

 

 

Unaudited Interim Condensed Consolidated Statements of Profit or Loss
Unaudited Interim Condensed Consolidated Statements of Comprehensive Income or Loss
Unaudited Interim Condensed Consolidated Statements of Financial Position
Unaudited Interim Condensed Consolidated Statements of Changes in Equity
Unaudited Interim Condensed Consolidated Statements of Cash Flows
Notes to the Unaudited Interim Condensed Consolidated Financial Statements

 

Independent Auditors' Report

 

 

 

Independent Auditors’ report on review of Interim Condensed Consolidated Financial Statements

 

To Board of Directors and Shareholders of

Nu Holdings Ltd.

Cayman Islands

 

Introduction

We have reviewed the accompanying interim condensed consolidated statement of financial position of Nu Holdings Ltd. (“Company”) as at June 30, 2023, the condensed consolidated statements of profit or loss and comprehensive income or loss for the three and six-month periods then ended, changes in equity and cash flows for the six-month period then ended, and notes to the interim condensed consolidated financial statements.

 

Management is responsible for the preparation and presentation of these unaudited interim condensed consolidated financial statements in accordance with IAS 34, ‘Interim Financial Reporting’ issued by the International Accounting Standards Board (IASB). Our responsibility is to express a conclusion on these unaudited interim condensed consolidated financial statements based on our review.

 

Scope of review

We conducted our review in accordance with Brazilian and International Standards on Review (NBC TR 2410 - Revisão de Informações Intermediárias Executada pelo Auditor da Entidade and ISRE 2410 - Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying unaudited interim condensed consolidated financial statements as of June 30, 2023, are not prepared, in all material respects, in accordance with IAS 34, ‘Interim Financial Reporting’.

 

 

São Paulo, August 15, 2023.

 

 

KPMG Auditores Independentes Ltda. CRC 2SP-027685/O-0 F SP

 

 

Rodrigo de Mattos Lia Accountant 1SP252418/O-3

 

 

 

 

 

 

Unaudited Interim Condensed Consolidated Statements of Profit or Loss

For the three and six-month periods ended June 30, 2023 and 2022

(In thousands of U.S. Dollars, except earnings (loss) per share)

 

				Three-month period ended				Six-month period ended
		Note		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Interest income and gains (losses) on financial instruments		6		1,500,225		853,013		2,755,679		1,472,456
Fee and commission income		6		368,415		304,548		731,628		562,372
Total revenue				1,868,640		1,157,561		3,487,307		2,034,828
Interest and other financial expenses		6		(453,426)		(407,500)		(893,638)		(680,503)
Transactional expenses		6		(42,797)		(48,036)		(95,575)		(82,484)
Credit loss allowance expenses		7		(590,434)		(338,492)		(1,065,229)		(614,214)
Total cost of financial and transactional services provided				(1,086,657)		(794,028)		(2,054,442)		(1,377,201)
Gross profit				781,983		363,533		1,432,865		657,627
Operating expenses
Customer support and operations		8		(113,309)		(77,703)		(221,124)		(139,274)
General and administrative expenses		8		(256,408)		(229,505)		(493,289)		(474,613)
Marketing expenses		8		(33,923)		(36,208)		(53,195)		(63,816)
Other income (expenses)		8		(54,366)		(44,729)		(97,651)		(72,187)
Total operating expenses				(458,006)		(388,145)		(865,259)		(749,890)
Profit (loss) before income taxes				323,977		(24,612)		567,606		(92,263)
Income taxes
Current taxes		29		(263,071)		(96,249)		(468,935)		(195,301)
Deferred taxes		29		163,960		91,011		267,946		212,710
Total income taxes				(99,111)		(5,238)		(200,989)		17,409
Profit (loss) for the period				224,866		(29,850)		366,617		(74,854)
Profit (loss) attributable to shareholders of the parent company				224,866		(29,697)		366,617		(74,798)
Profit (loss) attributable to non-controlling interests				-		(153)		-		(56)
Earnings (loss) per share – Basic		9		0.0475		(0.0064)		0.0777		(0.0160)
Earnings (loss) per share – Diluted		9		0.0464		(0.0064)		0.0758		(0.0160)
Weighted average number of outstanding shares – Basic (in thousands of shares)		9		4,730,272		4,670,972		4,719,948		4,665,688
Weighted average number of outstanding shares – Diluted (in thousands of shares)		9		4,843,835		4,670,972		4,833,455		4,665,688

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statements of Comprehensive Income or Loss

Loss for the three and six-month periods ended June 30, 2023 and 2022

(In thousands of U.S. Dollars)

 

				Three-month period ended					Six-month period ended
		Note		06/30/2023		06/30/2022				06/30/2023		06/30/2022
Profit (loss) for period				224,866		(29,850)				366,617		(74,854)
Other comprehensive income or loss:
Effective portion of changes in fair value				13,690		(7,193)				15,685		(26,244)
Changes in fair value reclassified to profit or loss				(12,549)		4,696				(15,423)		5,875
Deferred income taxes				2,356		(3,794)				5,382		3,268
Cash flow hedge		19		3,497		(6,291)				5,644		(17,101)
Changes in fair value				(1,820)		(19,765)				8,504		(16,557)
Deferred income taxes				(978)		1,945				(793)		(3,047)
Financial assets at fair value through other comprehensive income				(2,798)		(17,820)				7,711		(19,604)
Currency translation on foreign entities				140,710		(49,457)				251,215		14,017
Total other comprehensive income that may be reclassified to profit or loss subsequently				141,409		(73,568)				264,570		(22,688)
Changes in fair value - own credit adjustment		20		23		(228)				68		3,329
Total other comprehensive income or loss that will not be reclassified to profit or loss subsequently				23		(228)				68		3,329
Total other comprehensive income (loss), net of tax				141,432		(73,796)				264,638		(19,359)
Total comprehensive income (loss) for the period, net of tax				366,298		(103,646)				631,255		(94,213)
Total comprehensive income (loss) attributable to shareholders of the parent company				366,298		(103,493)				631,255		(94,157)
Total comprehensive income (loss) attributable to non-controlling interests				-		(153)				-		(56)

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statements of Financial Position

As of June 30, 2023 and December 31, 2022

(In thousands of U.S. Dollars)

 

		Note		06/30/2023		12/31/2022
Assets
Cash and cash equivalents		11		6,175,049		4,172,316
Financial assets at fair value through profit or loss				182,769		133,643
Securities		12		156,233		91,853
Derivative financial instruments		19		26,223		41,485
Collateral for credit card operations		22		313		305
Financial assets at fair value through other comprehensive income				7,479,797		9,947,138
Securities		12		7,479,797		9,947,138
Financial assets at amortized cost				17,135,460		13,684,484
Credit card receivables		13		10,387,713		8,233,072
Loans to customers		14		2,433,209		1,673,440
Compulsory and other deposits at central banks		15		2,826,879		2,778,019
Other receivables		16		1,346,560		521,670
Other financial assets				141,099		478,283
Other assets		17		706,514		541,903
Deferred tax assets		29		1,224,983		811,050
Right-of-use assets				16,414		18,982
Property, plant and equipment				35,246		27,482
Intangible assets		18		254,378		182,164
Goodwill		18		397,473		397,397
Total assets				33,608,083		29,916,559

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statements of Financial Position

As of June 30, 2023 and December 31, 2022

(In thousands of U.S. Dollars)

 

		Note		06/30/2023		12/31/2022
Liabilities
Financial liabilities at fair value through profit or loss				190,403		218,174
Derivative financial instruments		19		41,715		9,425
Instruments eligible as capital		20		3,766		11,507
Repurchase agreements				144,922		197,242
Financial liabilities at amortized cost				26,547,815		23,448,892
Deposits		21		18,033,728		15,808,541
Payables to network		22		7,749,565		7,054,783
Borrowings and financing		23		764,522		585,568
Salaries, allowances and social security contributions				150,033		90,587
Tax liabilities				562,206		511,017
Lease liabilities				19,171		20,353
Provision for lawsuits and administrative proceedings		24		4,653		17,947
Deferred income		25		54,882		41,688
Deferred tax liabilities		29		85,048		41,118
Other liabilities		26		349,273		636,000
Total liabilities				27,963,484		25,025,776
Equity
Share capital		30		84		83
Share premium reserve		30		4,970,786		4,963,774
Accumulated gain (losses)		30		546,742		64,577
Other comprehensive income (loss)		30		126,987		(137,651)
Equity attributable to shareholders of the parent company				5,644,599		4,890,783
Total equity				5,644,599		4,890,783
Total liabilities and equity				33,608,083		29,916,559

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statements of Changes in Equity

For the six-month period ended June 30, 2023 and 2022

(In thousands of U.S. Dollars)

 

										Other comprehensive income (loss)
		Note		Share capital		Share premium reserve		Accumulated gains (losses)		Translation reserve		Cash flow hedge reserve		Financial Assets at FVTOCI		Own credit revaluation reserve		Total equity
Balances as of December 31, 2022				83		4,963,774		64,577		(108,356)		(7,486)		(22,298)		489		4,890,783
Profit for the six-month period				-		-		366,617		-		-		-		-		366,617
Share-based compensation, net of shares withheld for employee taxes		10		-		-		94,015		-		-		-		-		94,015
Shares issued to service providers		30 / 34		-		-		21,533		-		-		-		-		21,533
Shares issued		30		1		(1)		-		-		-		-		-		-
Stock options exercised				-		7,013		-		-		-		-		-		7,013
Other comprehensive income or loss, net of tax		30
Cash flow hedge				-		-		-		-		5,644		-		-		5,644
Fair value changes - financial assets at FVTOCI				-		-		-		-		-		7,711		-		7,711
Currency translation on foreign entities				-		-		-		251,215		-		-		-		251,215
Own credit adjustment				-		-		-		-		-		-		68		68
Balances as of June 30, 2023				84		4,970,786		546,742		142,859		(1,842)		(14,587)		557		5,644,599

 

				Attributable to shareholders of the parent company
										Other comprehensive income (loss)
		Note		Share capital		Share premium reserve		Accumulated gains (losses)		Translation reserve		Cash flow hedge reserve		Financial Assets at FVTOCI		Own credit revaluation reserve		Total		Total non- controlling interests		Total equity
Balances as of December 31, 2021				83		4,678,585		(128,409)		(110,936)		1,487		1,741		(1,519)		4,441,032		1,509		4,442,541
Loss for the six-month period				-		-		(74,798)		-		-		-		-		(74,798)		(56)		(74,854)
Share-based compensation, net of shares withheld for employee taxes		10		-		-		107,296		-		-		-		-		107,296		-		107,296
Stock options exercised				-		3,304		-		-		-		-		-		3,304		-		3,304
Shares issued on business acquisition		34		-		36,671		-		-		-		-		-		36,671		-		36,671
Shares issued on IPO over-allotment		30		-		247,998		-		-		-		-		-		247,998		-		247,998
Transactions costs from IPO over-allotment				-		(3,985)		-		-		-		-		-		(3,985)		-		(3,985)
Loss of control of subsidiary				-		-		-		-		-		-		-		-		(1,453)		(1,453)
Other comprehensive income or loss, net of tax
Cash flow hedge				-		-		-		-		(17,101)		-		-		(17,101)		-		(17,101)
Fair value changes - financial assets at FVTOCI				-		-		-		-		-		(19,604)		-		(19,604)		-		(19,604)
Currency translation on foreign entities				-		-		-		14,017		-		-		-		14,017		-		14,017
Own credit adjustment				-		-		-		-		-		-		3,329		3,329		-		3,329
Balances as of June 30, 2022				83		4,962,573		(95,911)		(96,919)		(15,614)		(17,863)		1,810		4,738,159		-		4,738,159

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Unaudited Interim Condensed Consolidated Statements of Cash Flows

For the six-month period ended June 30, 2023 and 2022

(In thousands of U.S. Dollars)

 

		Note		06/30/2023		06/30/2022
Cash flows from operating activities
Reconciliation of profit (loss) to net cash flows from operating activities:
Profit (loss) for the six-month period				366,617		(74,854)
Adjustments:
Depreciation and amortization		8		27,156		18,088
Credit loss allowance expenses		7		1,106,800		625,185
Deferred income taxes		29		(267,946)		(212,710)
Provision for lawsuits and administrative proceedings				2,502		(1,958)
Unrealized losses (gains) on other investments				21,720		(5,067)
Unrealized losses (gains) on financial instruments				51,705		38,458
Interest accrued				40,139		8,907
Share-based payments				116,850		135,656
				1,465,543		531,705
Changes in operating assets and liabilities:
Securities				2,221,786		(773,539)
Compulsory deposits and others at central banks				(46,123)		(635,319)
Credit card receivables				(3,246,823)		(2,459,157)
Loans to customers				(1,245,332)		(1,145,997)
Other receivables				(778,678)		(335,367)
Other assets				163,262		(145,172)
Deposits				2,100,527		3,755,012
Payables to network				655,859		1,086,143
Deferred income				12,455		6,149
Other liabilities				197,455		230,430
Interest paid				(36,152)		(8,274)
Income tax paid				(410,151)		(234,444)
Interest received				740,431		670,462
Cash flows (used in) generated from operating activities				1,794,059		542,632

 

		Note		06/30/2023		06/30/2022
Cash flows from investing activities
Acquisition of property, plant and equipment				(11,403)		(7,425)
Acquisition of intangible assets				(87,257)		(45,611)
Acquisition of subsidiary, net of cash acquired				-		(10,346)
Acquisition of securities - equity instruments				-		(2,500)
Cash flow (used in) generated from investing activities				(98,660)		(65,882)
Cash flows from financing activities
Issuance of shares for over-allotment in IPO				-		247,998
Transactions costs for over-allotment in IPO				-		(3,985)
Payments of securitized borrowings				-		(10,633)
Proceeds from borrowings and financing		23		95,419		353,878
Payments of borrowings and financing		23		(10,546)		(38,305)
Lease payments				(3,803)		(2,416)
Exercise of stock options		30		7,013		3,304
Cash flows (used in) generated from financing activities				88,083		549,841
Change in cash and cash equivalents				1,783,482		1,026,591
Cash and cash equivalents
Cash and cash equivalents - beginning of the period		11		4,172,316		2,705,675
Foreign exchange rate changes on cash and cash equivalents				219,251		(31,246)
Cash and cash equivalents - end of the period		11		6,175,049		3,701,020
Increase (decrease) in cash and cash equivalents				1,783,482		1,026,591

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

(In thousands of U.S. Dollars, unless otherwise stated)

 

1. OPERATIONS

 

Nu Holdings Ltd. ("Company" or "Nu Holdings") was incorporated as an exempted Company under the Companies Law of the Cayman Islands on February 26, 2016. The address of the Company's registered office is Willow House, 4^th floor, Cricket Square, Grand Cayman - Cayman Islands. Nu Holdings has no operating activities with clients.

The Company’s shares are publicly traded on the New York Stock Exchange ("NYSE") under the symbol “NU” and its Brazilian Depositary Receipts ("BDRs") are traded on B3 - Brasil, Bolsa, Balcão ("B3"), the Brazilian stock exchange, under the symbol "NUBR33". The Company holds investments in several operating entities and, as of June 30, 2023, its significant operating subsidiaries were:

●

Nu Pagamentos S.A. - Instituição de Pagamento (“Nu Pagamentos”) is an indirect subsidiary domiciled in Brazil. Nu Pagamentos is engaged in the issuance and administration of credit cards and payment transfers through a prepaid account, and participation in other companies as partner or shareholder. Nu Pagamentos has as its primary products: (i) a Mastercard international credit card (issued in Brazil which allows payments for purchases to be made in monthly installments), fully managed through a smartphone app, and (ii) "Conta do Nubank", a 100% digital smartphone app, maintenance-free prepaid account, which also includes features of a traditional bank account, such as electronic and peer-to-peer transfers, bill payments, withdrawals through the 24 Hours ATM network, instant payments, prepaid credit for mobile top ups and prepaid cards similar in functionality to debit cards.

●

Nu Financeira S.A. – SCFI (“Nu Financeira”) is an indirect subsidiary also domiciled in Brazil, with personal loans and retail deposits as its main products. Nu Financeira offers customers in Brazil the possibility to obtain loans that can be customized in relation to amounts, terms and conditions, number of installments, and transparent disclosure of any charges involved in the transaction, fully managed through the above-mentioned smartphone app. Loan issuance, repayment, and prepayments are available 24/7 through "Conta do Nubank", directly in the app. Nu Financeira also grants credit to Nu Pagamentos credit card holders, due to overdue invoices, bill installments and revolving credit, and accepts on-demand and fixed term deposits from customers.

●

Nu Invest Corretora de Valores S.A. ("Nu Invest") is an indirect subsidiary acquired in June 2021, domiciled in Brazil, and is a digital investment broker dealer.

●

Nu Distribuidora de Titulos e Valores Mobiliarios Ltda. ("Nu DTVM") is an indirect subsidiary that executes securities brokerage activities in Brazil.

●

Nu México Financiera, S.A. de C.V., S.F.P. ("Nu Financiera") is an indirect subsidiary domiciled in Mexico. Nu Financiera is engaged in the issuance and administration of credit cards and payment transfers through a prepaid account, in addition to offering "Nu Cuenta", a 100% digital account. It commenced operations in the Mexican market in November 2022 and officially launched in December 2022. The credit card and "Nu Cuenta" have similar characteristics to the Brazilian operation: (i) an international credit card, with no annual fee, under the Mastercard banner, 100% managed by a digital app on a smartphone and (ii) a maintenance-free prepaid account, which also includes features of a traditional bank account, such as electronic and peer-to-peer transfers, bill payments, withdrawals through the 24 Hours ATM.

●

Nu Colombia S.A. (“Nu Colombia”) is an indirect subsidiary domiciled in Colombia, with operations related to credit cards, which was launched in September 2020. On August 10, 2022, the Financial Superintendence of Colombia ("SFC") approved the Group's request to incorporate a financing company in Colombia, Nu Colombia Compañía de Financiamiento S.A ("Nu Colombia Financiamiento") ("Incorporation License"). Nu Colombia Financiamiento requested the license to operate as a financial company, which is still pending approval. If the request is approved, it will enable Nu Colombia to offer deposit products in the future, amongst other financial products.

 

The Company and its consolidated subsidiaries are referred to in these unaudited interim condensed consolidated financial statements as the “Group” or "Nu”.

The business plan of Nu provides for the continued growth of its Brazilian, Mexican, and Colombian operations, not only related to existing businesses, such as credit cards, personal loans, investments, and insurance, but also complemented by the launch of new products. Accordingly, these unaudited interim condensed consolidated financial statements were prepared based on the assumption of the Group continuing as a going concern.

The business is affected by customer behavior throughout the year and demonstrates seasonality effects. Historically, the Group benefited from a higher volume of transactions and related revenue in the fourth quarter of the year due to the holiday season. However, the growth has masked this seasonality in the past, and this may become more pronounced in the future.

The Company’s Board authorized the issuance of these unaudited interim condensed consolidated financial statements on August 15, 2023.

a) Level III BDR Program discontinuation

On June 28, 2023 the CVM Collegiate approved the plan for the discontinuance of the Company's Level III BDRs Program and the cancellation of the Company's registration with the CVM as a foreign public issuer of category "A" securities. The plan provides that the current holders of the BDRs must decide during a 30-day period, from July 13, 2023 to August 11, 2023 ("Choice Period"), between: (i) remaining as the Company’s shareholder through the receipt of class A ordinary shares traded on the NYSE; (ii) remaining as holders of the Company's BDRs through the receipt of Unsponsored Level I BDRs; or (iii) if no declaration is made, the Company will sell the underlying shares on NYSE and former holders will receive the equivalent amount.

b) Nucoin

In February 2023, Nu initiated the distribution of Nucoin, which is the native crypto token issued from Nu that enables the loyalty network ("Nucoin Network") between Nu and its customers. Over time, Nu aims to have other sponsoring companies (“Sponsors”) that commit to use Nucoin as their loyalty program. These Sponsors will be entitled to a certain number of Nucoins to distribute to their customers, and will be required to offer benefits to Nucoins’ holders to incentivize the network adoption and increase the overall utility to the community.

 

 

2. STATEMENT OF COMPLIANCE

 

These unaudited interim condensed consolidated financial statements do not include all the information required for a complete set of financial statements prepared in accordance with International Financial Reporting Standards ("IFRS”) as issued by the International Accounting Standard Board (“IASB”). However, selected condensed explanatory notes are included to explain events and transactions that are significant to understanding the changes in the Company’s financial position and performance since the issuance of its last annual financial statements.

The Group’s unaudited interim condensed consolidated financial statements have been prepared in accordance with IAS 34 - Interim Financial Reporting issued by IASB. Accordingly, this report is to be read in conjunction with the annual consolidated financial statements for the year ended December 31, 2022 (the "Annual Financial Statements”).

a) Functional currency and foreign currency translation

The presentation of the functional currency and foreign currency translation disclosed in note 2a. of the Annual Financial Statements remain valid for these unaudited interim condensed consolidated financial statements.

The functional currency for Nu Holdings and the presentation currency of these unaudited interim condensed consolidated financial statements is the U.S. Dollars (“US$”). The functional currency of the Brazilian operating entities is the Brazilian real, for the Mexican entities, Mexican peso and for the Colombian entity, the Colombian peso.

The financial statements of the foreign subsidiaries held in functional currencies that are not US$ are translated into US$, and the exchange differences arising from the translation to US$ of the financial statements denominated in functional currencies other than the US$ are recognized in the consolidated statements of comprehensive income or loss (OCI) as an item that may be reclassified to profit or loss within “currency translation on foreign entities”.

b) New or revised accounting pronouncements adopted in 2023

The following new or revised standards have been issued by IASB, were effective for the period covered by these unaudited interim condensed consolidated financial statements, and had no significant impact.

●

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

●

Definition of Accounting Estimates (Amendments to IAS 8); and

●

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).

c) Other new standards and interpretations not yet effective

●

Non-current Liabilities with Covenants (Amendments to IAS 1).

Management does not expect the adoption of the amendments described above to have a significant impact, other than additional disclosures, on the consolidated financial statements.

 

3. BASIS OF CONSOLIDATION

 

These unaudited interim condensed consolidated financial statements include the accounting balances of Nu Holdings and all those subsidiaries over which the Company exercises control, directly or indirectly. Control is achieved where the Company has (i) power over the investee; (ii) is exposed, or has rights, to variable returns from its involvement with the investee; and (iii) can use its power to affect its profits.

The Company re-assesses whether it maintains control of an investee if facts and circumstances indicate that there are changes to one or more of the three above mentioned elements of control.

The consolidation of a subsidiary begins when the Company obtains control over it and ceases when the Company loses control over it. Assets, liabilities, income, and expenses of a subsidiary acquired or disposed of during the reporting period are included in the unaudited interim condensed consolidated statements of profit or loss from the date the Company gains control until the date the Company ceases to control the subsidiary.

The financial information of the subsidiaries was prepared in the same period as the Company and consistent accounting policies were applied. The financial statements of the subsidiaries are fully consolidated with those of the Company. Accordingly, all balances, transactions and any unrealized income and expenses arising between consolidated entities are eliminated in the consolidation, except for foreign-currency gain and losses on translation of intercompany loans. Profit or loss and each component of other comprehensive income or loss are attributed to the shareholders of the parent and to the non-controlling interests, when applicable.

The subsidiaries below are the most relevant entities included in these unaudited interim condensed consolidated financial statements:

Entity

Control

Principal activities

Functional currency

Country

06/30/2023

12/31/2022

Nu Colombia S.A. (“Nu Colombia”)

Indirect

Credit card operations

COP

Colombia

100%

100%

Nu Pagamentos S.A. - Instituição de Pagamentos (“Nu Pagamentos”)

Indirect

Credit card and prepaid account operations

BRL

Brazil

100%

100%

Nu Financeira S.A. – SCFI (“Nu Financeira”)

Indirect

Loan operations

BRL

Brazil

100%

100%

Nu Distribuidora de Titulos e Valores Mobiliarios Ltda. ("Nu DTVM")

Indirect

Securities distribution

BRL

Brazil

100%

100%

Nu Invest Corretora de Valores S.A ("Nu Invest")

Indirect

Investment platform

BRL

Brazil

100%

100%

Nu México Financiera, S.A. de C.V., S.F.P. ("Nu Financiera")

Indirect

Multiple purpose financial company

MXN

Mexico

100%

100%

In addition, the Company consolidated the following investment fund for June 30, 2023 and December 31, 2022, in which the Group’s companies hold a substantial interest or the entirety of the interests and are therefore exposed, or have rights, to variable returns and have the ability to affect those returns through power over the entity:

 

Name of the entity		Country
Fundo de Investimento Ostrum Soberano Renda Fixa Referenciado DI (“Fundo Ostrum”)		Brazil

Nu Pagamentos, Nu Financeira, Nu DTVM and Nu Invest, Brazilian subsidiaries, are regulated by the Brazilian Central Bank (“BACEN”), Nu México Financiera, S.A. de C.V., S.F.P. ("Nu Financiera"), a Mexican subsidiary, is regulated by both the Mexican Central Bank ("BANXICO") and Mexican National Banking and Stock Commission (“CNBV”) and Nu Colombia, a Colombian subsidiary, is regulated by Industry and Commerce Superintendency, and as such, there are some regulatory requirements that restrict the ability of the Group to access and transfer assets freely to or from these entities within the Group and to settle liabilities of the Group.

 

4. SIGNIFICANT ACCOUNTING POLICIES

 

The significant accounting policies adopted by the Group in the preparation of these unaudited interim condensed consolidated financial statements are consistent with those adopted and disclosed in the Annual Financial Statements and therefore should be read in conjunction.

 

5. SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS

 

Use of estimates and judgments

The preparation of financial statements requires judgments, estimates, and assumptions from management that affect the application of accounting policies, and reported amounts of assets, liabilities, revenues, and expenses. Actual results may differ from these estimates, and estimates and assumptions are reviewed on a periodic basis. Revisions to the estimates are recognized prospectively.

The significant assumptions and estimates used in the preparation of these unaudited interim condensed consolidated financial statements for the three and six-month periods ended June 30, 2023 were the same as those adopted in the Annual Financial Statements.

Credit losses on financial instruments

The Group recognizes a loss allowance for expected credit losses on credit cards and loans receivables that represents management’s best estimate of allowance as of each reporting date.

Management performs an analysis of the credit card and loan amounts to determine if credit losses have occurred and to assess the adequacy of the allowance based on historical and current trends as well as other factors affecting credit losses.

Key areas of judgment

The critical judgments made by management in applying the expected credit losses ("ECL") allowance methodology are:

a)

Definition of default;

b)

Forward-looking information used for the projection of macroeconomic scenarios;

c)

Probability weights of future scenarios;

d)

Definition of significant increase in credit risk and lifetime; and

e)

Look-back period, used for parameters estimation (probability of default - PD, exposure at default - EAD and loss given default - LGD).

Sensitivity analysis

On June 30, 2023, the probability weighted ECL allowance totaled US$2,032,872 of which US$1,674,271 related to credit card operations and US$358,601 to loans. The ECL allowance is sensitive to the methodology, assumptions and estimations underlying its calculation. One key assumption is the probability weighting of the macroeconomic scenarios between upside, base and downside as the carrying amount of the credit loss allowance is determined based on the weighted average of these scenarios. The table below illustrates the ECL that would have arisen if management had applied a 100% weighting to each macroeconomic scenario.

		Weighted average		Upside		Base case		Downside
Credit card and lending ECL		2,032,872		1,896,834		2,004,368		2,200,655

 

 

6. INCOME AND RELATED EXPENSES

 

a) Interest income and gains (losses) on financial instruments

 

		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Interest income – credit card		593,855		243,916		1,041,551		410,056
Interest income - lending		353,082		228,035		640,025		422,182
Interest income – other assets at amortized cost		191,446		95,449		345,609		136,395
Interest income – other receivables		96,609		32,108		183,580		55,488
Interest income and gains (losses) on financial instruments at fair value		265,233		253,505		544,914		448,335
Financial assets at fair value		245,759		264,464		516,953		459,364
Other		19,474		(10,959)		27,961		(11,029)
Total interest income and gains (losses) on financial instruments		1,500,225		853,013		2,755,679		1,472,456

The interest income presented above from credit card, lending, other assets at amortized cost and other receivables represents interest revenue calculated using the effective interest method. Financial assets at fair value comprises interest and the fair value changes on financial assets at fair value.

b) Fee and commission income

		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Interchange fees		277,805		224,437		543,185		413,943
Late fees		42,866		25,515		79,225		46,216
Recharge fees		7,703		19,244		32,753		35,189
Rewards revenue		5,654		6,022		11,201		12,354
Other fee and commission income		34,387		29,330		65,264		54,670
Total fee and commission income		368,415		304,548		731,628		562,372

Fee and commission income are presented by fee types that reflect the nature of the services offered by the Group. Recharge fees comprise the selling price of telecom prepaid credits to customers, net of acquisition costs.

 

c) Interest and other financial expenses

		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Interest expense on deposits		401,073		362,842		796,189		610,059
Other interest and similar expenses		52,353		44,658		97,449		70,444
Interest and other financial expenses		453,426		407,500		893,638		680,503

d) Transactional expenses

		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Bank slip costs		5,978		8,942		12,284		16,455
Rewards expenses		13,717		10,932		25,833		21,039
Credit and debit card network costs		7,911		15,879		26,851		22,909
Other transactional expenses		15,191		12,283		30,607		22,081
Total transactional expenses		42,797		48,036		95,575		82,484

 

 

7. CREDIT LOSS ALLOWANCE EXPENSES

 

		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Net increase of loss allowance (note 13)		483,652		222,624		866,259		392,680
Recovery		(18,691)		(6,209)		(32,077)		(9,754)
Credit card receivables		464,961		216,415		834,182		382,926
Net increase of loss allowance (note 14)		131,211		123,072		240,541		232,505
Recovery		(5,738)		(995)		(9,494)		(1,217)
Loans to customers		125,473		122,077		231,047		231,288
Total		590,434		338,492		1,065,229		614,214

 

 

 

8. OPERATING EXPENSES

 

		Three-month period ended 06/30/2023
		Customer support and operations		General and administrative expenses		Marketing expenses		Other income (expenses)		Total
Infrastructure and data processing costs		45,770		41,871		-		-		87,641
Credit analysis and collection costs		20,773		8,643		-		-		29,416
Customer services		17,147		1,922		-		-		19,069
Salaries and associated benefits		18,765		71,356		4,864		-		94,985
Credit and debit card issuance costs		4,032		12,380		-		-		16,412
Share-based compensation (note 10)		-		66,587		-		-		66,587
Specialized services expenses		-		12,683		-		-		12,683
Other personnel costs		4,012		9,965		621		-		14,598
Depreciation and amortization		2,777		11,200		-		-		13,977
Marketing expenses		-		-		28,438		-		28,438
Others (i)		33		19,801		-		54,366		74,200
Total		113,309		256,408		33,923		54,366		458,006

(i) "Others" mainly includes federal taxes on financial income, taxes related to international transactions and foreign exchange rate variation.

		Three-month period ended 06/30/2022
		Customer support and operations		General and administrative expenses		Marketing expenses		Other income (expenses)		Total
Infrastructure and data processing costs		29,462		34,496		-		-		63,958
Credit analysis and collection costs		12,371		10,902		-		-		23,273
Customer services		19,074		2,708		-		-		21,782
Salaries and associated benefits		11,399		70,414		3,781		-		85,594
Credit and debit card issuance costs		2,795		12,953		-		-		15,748
Share-based compensation (note 10)		-		61,076		-		-		61,076
Specialized services expenses		-		9,529		-		-		9,529
Other personnel costs		1,693		8,717		254		-		10,664
Depreciation and amortization		815		9,618		-		-		10,433
Marketing expenses		-		-		32,173		-		32,173
Others (i)		94		9,092		-		44,729		53,915
Total		77,703		229,505		36,208		44,729		388,145

(i) "Others" mainly includes federal taxes on financial income, taxes related to international transactions and foreign exchange rate variation.

 

		Six-month period ended 06/30/2023
		Customer support and operations		General and administrative expenses		Marketing expenses		Other income (expenses)		Total
Infrastructure and data processing costs		85,937		87,820		-		-		173,757
Credit analysis and collection costs		38,440		18,349		-		-		56,789
Customer services		39,404		3,848		-		-		43,252
Salaries and associated benefits		35,980		135,452		10,136		-		181,568
Credit and debit card issuance costs		8,930		26,817		-		-		35,747
Share-based compensation (note 10)		-		126,092		-		-		126,092
Specialized services expenses		-		15,931		-		-		15,931
Other personnel costs		7,610		21,556		1,121		-		30,287
Depreciation and amortization		4,755		22,401		-		-		27,156
Marketing expenses		-		-		41,938		-		41,938
Others (i)		68		35,023		-		97,651		132,742
Total		221,124		493,289		53,195		97,651		865,259

(i) "Others" mainly includes federal taxes on financial income, taxes related to international transactions and foreign exchange rate variation.

		Six-month period ended 06/30/2022
		Customer support and operations		General and administrative expenses		Marketing expenses		Other income (expenses)		Total
Infrastructure and data processing costs		48,856		63,083		-		-		111,939
Credit analysis and collection costs		20,408		19,722		-		-		40,130
Customer services		39,067		4,721		-		-		43,788
Salaries and associated benefits		20,356		141,417		6,939		-		168,712
Credit and debit card issuance costs		6,394		22,202		-		-		28,596
Share-based compensation (note 10)		-		138,793		-		-		138,793
Specialized services expenses		-		19,162		-		-		19,162
Other personnel costs		2,718		17,175		533		-		20,426
Depreciation and amortization		1,381		16,707		-		-		18,088
Marketing expenses		-		-		56,344		-		56,344
Others (i)		94		31,631		-		72,187		103,912
Total		139,274		474,613		63,816		72,187		749,890

(i) "Others" mainly includes federal taxes on financial income, taxes related to international transactions and foreign exchange rate variation.

 

 

 

 

 

 

9. EARNINGS (LOSS) PER SHARE

		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Earnings (loss) attributable to shareholders of the parent company		224,866		(29,697)		366,617		(74,798)
Weighted average outstanding shares - ordinary shares - basic (thousands)		4,730,236		4,670,972		4,719,912		4,665,688
Adjustment for the basic earnings per shares:
Deferred M&A shares that will be issued solely based on the passage of time		36		-		36		-
Weighted average outstanding shares - ordinary shares - basic (thousands)		4,730,272		4,670,972		4,719,948		4,665,688
Adjustment for the diluted earnings per share :
Share based payment		110,144		-		107,755		-
Business acquisition		3,419		-		5,752		-
Total weighted average of ordinary outstanding shares for diluted EPS (in thousands of shares)		4,843,835		4,670,972		4,833,455		4,665,688
Earnings (loss) per share – basic (US$)		0.0475		(0.0064)		0.0777		(0.0160)
Earnings (loss) per share – diluted (US$)		0.0464		(0.0064)		0.0758		(0.0160)
Antidilutive instruments not considered in the weighted number of shares (in thousands of shares)		769		309,679		29,524		309,679

 

The Company has instruments that will become common shares upon exercise, acquisition, conversion (SOPs and RSUs described in note 10), or satisfaction of specific business combinations conditions. The effects of the potential antidilutive instruments were calculated using the treasury stock method and they are included in the total weighted average of ordinary outstanding shares for diluted EPS if the effects are considered dilutive. The antidilutive instruments not considered in the weighted number of shares, for the periods presenting negative results, correspond to the total number of shares that could be converted into ordinary shares.

 

 

10. SHARE-BASED PAYMENTS

 

Share settled awards

The Group’s employee incentives include share settled awards in the form of stock, offering them the opportunity to purchase ordinary shares by exercising options (Stock Options – “SOPs”), receiving ordinary shares (Restricted Stock Units – “RSUs”) upon vesting, and receiving shares upon the achievement of market conditions and passage of time ("Awards").

The cost of the employee services received with respect to the SOPs and RSUs granted is recognized in the statement of profit or loss over the period that the employee provides services and according to the vesting conditions. The Group also issued Awards in 2020 that grant shares upon the achievement of market conditions related to the valuation of the Company, the Awards issued in 2021 were canceled at the end of 2022. RSUs incentive was implemented in 2020 and is the main incentive since then.

There were no changes to the terms and conditions of the SOPs and RSUs after the grant date. The changes in the number of SOPs and RSUs are as follows. WAEP is the weighted average exercise price and WAGDFV is the weighted average fair value at the grant date.

	Six-month period ended
SOPs	06/30/2023		WAEP (US$)		06/30/2022		WAEP (US$)
Outstanding on January 1	101,276,327		0.72		143,889,439		0.50
Exercised during the period	(28,359,725)		0.16		(31,617,827)		0.10
Forfeited during the period	(1,505,673)				(4,505,483)
Outstanding on June 30 2023 / June 30 2022	71,410,929		0.93		107,766,129		0.69
Exercisable on June 30 2023 / June 30 2022	59,490,297		0.80		79,186,733		0.48
	Six-month period ended
RSUs	06/30/2023		WAGDFV (US$)		06/30/2022		WAGDFV (US$)
Outstanding on January 1	72,401,895		5.46		80,924,937		4.82
Granted during the period	31,919,306		4.58		20,608,194		6.03
Vested during the period	(14,291,816)		4.40		(10,486,188)		3.41
Forfeited during the period	(9,146,169)				(5,472,887)
Outstanding on June 30 2023 / June 30 2022	80,883,216		5.31		85,574,056		5.29

The following tables present the total amount of share-based compensation expense for the three and six-month periods ended June 30, 2023 and 2022, and the provision for taxes as of June 30, 2023 and December 31, 2022.

	Three-month period ended				Six-month period ended
	06/30/2023		06/30/2022		06/30/2023		06/30/2022
SOP and RSU expenses and related corporate and social security taxes expenses	52,417		15,922		105,206		59,677
RSUs and SOPs grant - business combination	29,621		4,612		37,081		16,223
Awards expenses and related taxes	4,961		39,252		9,892		61,603
Fair value adjustment - hedge of corporate and social security taxes (note 19)	(20,412)		1,290		(26,087)		1,290
Total share-based compensation expenses (note 8)	66,587		61,076		126,092		138,793
Equity Share-based compensation, net of shares withheld for employee taxes	43,253		50,591		94,015		107,296

 

	06/30/2023		12/31/2022
Liability provision for taxes presented as salaries, allowances and social security contributions	63,702		32,554

 

 

 

11. CASH AND CASH EQUIVALENTS

 

	06/30/2023		12/31/2022
Reverse repurchase agreement in foreign currency	431,476		59,519
Short-term investments	510,087		153,743
Voluntary deposits at central banks	3,816,410		2,451,150
Bank balances	1,417,072		1,506,727
Other cash and cash equivalents	4		1,177
Total	6,175,049		4,172,316

Cash and cash equivalents are held to meet short-term cash needs and include deposits with banks and other short-term highly liquid investments with original maturities of three-months or less and with an immaterial risk of change in value.

The reverse repurchase agreements and short-term investments are mainly in Brazilian Reais, and the average rate of remuneration as of June 30, 2023 and December 31, 2022, was 99% of the Brazilian CDI rate, which is set daily and represents the average rate at which Brazilian banks were willing to borrow/lend to each other for one day.

Voluntary deposits at central banks are deposits made by the subsidiary Nu Financeira at the Brazilian Central Bank, the average rate of remuneration as of June 30, 2023 and December 31, 2022, was 100% of the Brazilian CDI rate, with daily maturity.

 

 

 

12. SECURITIES

 

a) Financial instruments at fair value through profit and loss ("FVTPL")

 

		06/30/2023										12/31/2022
						Maturities
Financial instruments at FVTPL		Amortized Cost		Fair Value		No maturity		Up to 12 months		Over 12 months		Fair Value
Government bonds
Brazil		188		188		-		188		-		163
Total government bonds		188		188		-		188		-		163
Corporate bonds and other instruments
Bill of credit (LC)		1		1		-		1		-		138
Certificate of bank deposits (CDB)		1,573		1,571		-		928		643		3,712
Real estate and agribusiness letter of credit		128		127		-		43		84		1,197
Corporate bonds and debentures		53,501		55,654		-		-		55,654		46,680
Equity instrument (i)		12,568		22,249		22,249		-		-		22,082
Investment funds		26,279		26,279		26,279		-		-		-
Time deposit		50,192		50,063		-		50,063		-		905
Real estate and agribusiness certificate of receivables		113		101		-		-		101		16,976
Total corporate bonds and other instruments		144,355		156,045		48,528		51,035		56,482		91,690
Total financial instruments at FVTPL		144,543		156,233		48,528		51,223		56,482		91,853

 

		06/30/2023				12/31/2022
		Amounts in				Amounts in
Financial instruments at FVTPL		Original Currency		US$		Original Currency		US$
Currency:
Brazilian Reais		370,376		77,397		334,783		63,401
U.S. Dollars		56,577		56,577		6,370		6,370
Others		6,783,719		22,259		1,826,954		22,082
Total				156,233				91,853

 

(i) Refers to an investment in Jupiter, a neobank for consumers in India, and an investment in Din Global ("dBank"), a Pakistani fintech company. As of June 30, 2023, the total fair value of these investments corresponded to US$22,249 (US$22,082 on December 31, 2022), classified as level 3 in the fair value hierarchy, as described in note 28.

 

b) Financial instruments at fair value to other comprehensive income ("FVTOCI")

		06/30/2023										12/31/2022
						Maturities
Financial instruments at FVTOCI		Amortized Cost		Fair Value		No maturity		Up to 12 months		Over 12 months		Fair Value
Government bonds (i)
Brazil		5,973,511		5,985,047		-		1,832,611		4,152,436		8,222,115
United States of America		160,201		157,199		-		-		157,199		171,184
Mexico		1,509		1,392		-		-		1,392		1,382
Total government bonds		6,135,221		6,143,638		-		1,832,611		4,311,027		8,394,681
Corporate bonds and other instruments
Corporate bonds and debentures		1,014,478		995,027		-		124,340		870,687		788,948
Investment funds		107,685		107,685		6,193		-		101,492		302,779
Time deposit		210,868		212,004		-		140,021		71,983		445,531
Real estate and agribusiness certificate of receivables		21,442		21,443		-		-		21,443		15,199
Total corporate bonds and other instruments		1,354,473		1,336,159		6,193		264,361		1,065,605		1,552,457
Total financial instruments at FVTOCI		7,489,694		7,479,797		6,193		2,096,972		5,376,632		9,947,138

 

		06/30/2023				12/31/2022
		Amounts in				Amounts in
Financial instruments at FVTOCI		Original Currency		US$		Original Currency		US$
Currency:
Brazilian Reais		30,522,966		6,378,352		45,527,868		8,622,049
U.S. Dollars		1,100,053		1,100,053		1,323,707		1,323,707
Others		23,838		1,392		26,949		1,382
Total				7,479,797				9,947,138

(i) Includes US$1,734,114 (US$2,252,464 on December 31, 2022) held by the subsidiaries for regulatory purposes, as required by the Brazilian Central Bank. It also includes Brazilian government securities margins pledged by the Group for transactions on the Brazilian stock exchange in the amount of US$144,748 (US$160,485 on December 31, 2022). Government bonds are classified as Level 1 in the fair value hierarchy, as described in note 28.

 

 

 

 

13. CREDIT CARD RECEIVABLES

 

Composition of receivables

		06/30/2023		12/31/2022
Receivables - current (i)		5,149,092		4,236,235
Receivables - installments (i)		5,881,659		4,259,979
Receivables - revolving (ii)		1,005,367		770,011
Total receivables		12,036,118		9,266,225
Fair value adjustment - portfolio hedge (note 19)		10		(51)
Total		12,036,128		9,266,174
Credit card ECL allowance
Presented as deduction of receivables		(1,648,415)		(1,033,102)
Presented as "Other liabilities" (note 26)		(25,856)		(17,566)
Total credit card ECL allowance		(1,674,271)		(1,050,668)
Receivables, net		10,361,857		8,215,506
Total receivables presented as assets		10,387,713		8,233,072

(i) "Receivables - current" is related to purchases, withdrawals, payment slips ("boleto") and PIX (BACEN instant payments) financing made by customers in a single installment and due on the next credit card billing date. Receivables - installments” is related to purchases in installments. Credit card receivables can be paid by our clients in up to 12, 24 and 36 monthly installments in Brazil, Mexico and Colombia, respectively. The cardholder’s credit limit is initially reduced by the total amount and the installments become due and payable on the cardholder's subsequent monthly credit card statement. Brazil makes the corresponding payments to the credit card network (see note 22) following a similar schedule. As receipts and payments are aligned, the Group does not incur significant financing costs with this product, however it is exposed to the credit risk of the cardholder as it is obliged to make the payments to the credit card network even if the cardholder does not pay. “Receivables - installments” also includes the amounts of credit card bills not fully paid by the customers and that have been converted into payments in installments with a fixed interest rate ("fatura parcelada"), in addition to bill financing, which comprise bills paid in installments through the credit card, banking payment slips ("boleto") and PIX financing in more than one installment.

(ii) "Receivables - revolving" is related to the amounts due from customers that have not paid in full their credit card bill. Customers may request to convert these receivables into loans to be paid in installments. In accordance with Brazilian regulation, revolving balances that are outstanding for more than 2 months are mandatorily converted into fatura parcelada - a type of installment loan which is settled through the customer’s monthly credit card bills.

 

 

a) Breakdown by maturity

		06/30/2023				12/31/2022
		Amount		%		Amount		%
Receivables not overdue due in:
<= 30 days		5,211,928		43.4%		4,036,414		43.5%
30 < 60 days		2,047,757		17.0%		1,604,056		17.3%
> 60 days		3,543,654		29.4%		2,823,966		30.5%
Total receivables not overdue		10,803,339		89.8%		8,464,436		91.3%
Receivables overdue by:
<= 30 days		361,570		3.0%		237,531		2.6%
30 < 60 days		137,978		1.1%		91,604		1.0%
60 < 90 days		117,026		1.0%		74,917		0.8%
> 90 days		616,205		5.1%		397,737		4.3%
Total receivables overdue		1,232,779		10.2%		801,789		8.7%
Total		12,036,118		100.0%		9,266,225		100.0%

Overdue installments consist mainly of revolving balances, and not overdue installments which consist mainly of current receivables and future bill installments ("parcelado").

b) Credit loss allowance - by stages

As of June 30, 2023, the credit card ECL allowance totaled US$1,674,271 (US$1,050,668 as of December 31, 2022). The provision is estimated using modeling techniques, consistently applied, and is sensitive to the methods, assumptions, and risk parameters underlying its calculation.

The amount that the credit loss allowance represents in comparison to the Group’s gross receivables (the coverage ratio) is also monitored, to anticipate trends that could indicate credit risk increases. This metric is considered a key risk indicator and it is monitored across multiple committees, supporting the decision-making process and is discussed in the credit forums.

All receivables are classified through stages, where: (i) stage 1 include all receivables not classified in stages 2 and 3; (ii) stage 2 is primarily related to all receivables more than 30 (thirty), but less than 90 (ninety), days in arrears, or with an increase in client's behavior risk score compared to the time of the origination; and (iii) stage 3 when receivables are more than 90 (ninety) days in arrears, or there are indications that the financial asset will not be fully paid without a collateral or financial guarantee.

The majority of the Group's credit card portfolio was classified as stage 1, followed by stages 2 and 3, respectively as of June 30, 2023 and December 31, 2022. The proportion of stage 3 exposures increased to 7.7% on June 30, 2023 from 6.5% on December 31, 2022. The stage 3 movement is primarily due to credit expansions done in the past which are maturing in the portfolio, as well as increases in early delinquency observed in the previous quarters.

 

		06/30/2023
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio (%)
Stage 1		9,867,386		81.9%		485,957		29.0%		4.9%
Stage 2		1,246,107		10.4%		385,066		23.0%		30.9%
Absolute Trigger (Days Late)		319,913		25.7%		226,045		58.7%		70.7%
Relative Trigger (PD deterioration)		926,194		74.3%		159,021		41.3%		17.2%
Stage 3		922,625		7.7%		803,248		48.0%		87.1%
Total		12,036,118		100.0%		1,674,271		100.0%		13.9%

 

		12/31/2022
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio (%)
Stage 1		7,750,270		83.6%		322,970		30.7%		4.2%
Stage 2		917,178		9.9%		254,181		24.2%		27.7%
Absolute Trigger (Days Late)		215,209		23.5%		140,167		55.1%		65.1%
Relative Trigger (PD deterioration)		701,969		76.5%		114,014		44.9%		16.2%
Stage 3		598,777		6.5%		473,517		45.1%		79.1%
Total		9,266,225		100.0%		1,050,668		100.0%		11.3%

 

 

c) Credit loss allowance - by credit quality vs. stages

		06/30/2023
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio (%)
Strong (PD < 5%)		7,612,446		63.2%		164,107		9.8%		2.2%
Stage 1		7,591,468		99.7%		163,729		99.8%		2.2%
Stage 2		20,978		0.3%		378		0.2%		1.8%
Satisfactory (5% <= PD <= 20%)		1,995,058		16.6%		176,029		10.4%		8.8%
Stage 1		1,656,594		83.0%		147,300		83.7%		8.9%
Stage 2		338,464		17.0%		28,729		16.3%		8.5%
Higher Risk (PD > 20%)		2,428,614		20.2%		1,334,135		79.8%		54.9%
Stage 1		619,324		25.5%		174,928		13.1%		28.2%
Stage 2		886,665		36.5%		355,959		26.7%		40.1%
Stage 3		922,625		38.0%		803,248		60.2%		87.1%
Total		12,036,118		100.0%		1,674,271		100.0%		13.9%

 

 

		12/31/2022
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio (%)
Strong (PD < 5%)		6,097,909		65.8%		113,780		10.8%		1.9%
Stage 1		6,081,551		99.7%		113,525		99.8%		1.9%
Stage 2		16,358		0.3%		255		0.2%		1.6%
Satisfactory (5% <= PD <= 20%)		1,477,414		15.9%		118,825		11.2%		8.0%
Stage 1		1,227,610		83.1%		100,190		84.3%		8.2%
Stage 2		249,804		16.9%		18,635		15.7%		7.5%
Higher Risk (PD > 20%)		1,690,902		18.3%		818,063		78.0%		48.4%
Stage 1		441,109		26.1%		109,255		13.4%		24.8%
Stage 2		651,016		38.5%		235,291		28.8%		36.1%
Stage 3		598,777		35.4%		473,517		57.9%		79.1%
Total		9,266,225		100.0%		1,050,668		100.0%		11.3%

 

When compared to December 31, 2022, a change in the credit quality distribution is observed, with relative exposure moving to higher PD stages. This movement is explained below in item d) Credit loss allowance - changes. There is still a significant concentration of receivables at stage 1 based on credit quality. Receivables with satisfactory risk are distributed between stages 1 and 2, but primarily stage 1.

Defaulted assets at stage 3 are classified as higher risk. There is also a large proportion of stage 2 exposures classified as higher risk. Stage 1 receivables classified as higher risk are those customers with low credit risk scores.

d) Credit loss allowance - changes

The following tables show the reconciliations from the opening to the closing balance of the credit loss allowance by stages of the financial instruments.

		06/30/2023
		Stage 1		Stage 2		Stage 3		Total
Credit loss allowance at beginning of period		322,970		254,181		473,517		1,050,668
Transfers from Stage 1 to Stage 2		(39,463)		39,463		-		-
Transfers from Stage 2 to Stage 1		43,187		(43,187)		-		-
Transfers to Stage 3		(36,038)		(159,499)		195,537		-
Transfers from Stage 3		10,781		5,390		(16,171)		-
Write-offs		-		-		(385,835)		(385,835)
Net increase of loss allowance (note 7)		140,953		254,961		470,345		866,259
New originations (a)		52,501		4,055		1,112		57,668
Changes in exposure of preexisting accounts (b)		117,702		2,912		(27)		120,587
Net drawdowns, repayments, net remeasurement and movements due to risk changes		(85,275)		211,100		461,952		587,777
Changes to models used in calculation (c)		56,025		36,894		7,308		100,227
Effect of changes in exchange rates (OCI)		43,567		33,757		65,855		143,179
Credit loss allowance at end of the period		485,957		385,066		803,248		1,674,271

 

		06/30/2022
		Stage 1		Stage 2		Stage 3		Total
Credit loss allowance at beginning of period		127,358		126,392		136,929		390,679
Transfers from Stage 1 to Stage 2		(18,388)		18,388		-		-
Transfers from Stage 2 to Stage 1		25,161		(25,161)		-		-
Transfers to Stage 3		(11,112)		(68,384)		79,496		-
Transfers from Stage 3		1,069		569		(1,638)		-
Write-offs		-		-		(100,089)		(100,089)
Net increase of loss allowance (note 7)		82,709		166,535		143,436		392,680
New originations (a)		72,306		5,156		1,571		79,033
Changes in exposure of preexisting accounts (b)		84,647		2,025		137		86,809
Net drawdowns, repayments, net remeasurement and movements due to risk changes		(74,244)		159,354		141,728		226,838
Changes to models used in calculation (c)		-		-		-		-
Effect of changes in exchange rates (OCI)		4,936		4,737		4,404		14,077
Credit loss allowance at end of the period		211,733		223,076		262,538		697,347

(a) Considers all accounts originated from the beginning to the end of the period. ECL effects presented in the table were calculated as if risk parameters at the beginning of the period were applied.

(b) Reflects the movements in exposure of accounts that already existed in the beginning of the period, as increase in credit limits. ECL effects were calculated as if risk parameters of the exposures at the beginning of the period were applied.

(c) Relates to methodology changes that occurred during the period, according to the Group’s processes of model monitoring.

The following tables present changes in the gross carrying amount of the credit card portfolio to demonstrate the effects of the changes in the loss allowance for the same portfolio as presented above. “Net change of gross carrying amount” includes acquisitions, payments, and interest accruals.

 

 

		06/30/2023
		Stage 1		Stage 2		Stage 3		Total
Gross carrying amount at beginning of period		7,750,270		917,178		598,777		9,266,225
Transfers from Stage 1 to Stage 2		(550,362)		550,362		-		-
Transfers from Stage 2 to Stage 1		244,336		(244,336)		-		-
Transfers to Stage 3		(232,938)		(314,098)		547,036		-
Transfers from Stage 3		14,138		7,160		(21,298)		-
Write-offs		-		-		(385,835)		(385,835)
Net change of gross carrying amount		1,737,480		218,509		104,268		2,060,257
Effect of changes in exchange rates (OCI)		904,462		111,332		79,677		1,095,471
Gross carrying amount at end of the period		9,867,386		1,246,107		922,625		12,036,118

 

		06/30/2022
		Stage 1		Stage 2		Stage 3		Total
Gross carrying amount at beginning of period		4,525,689		440,105		196,359		5,162,153
Transfers from Stage 1 to Stage 2		(321,566)		321,566		-		-
Transfers from Stage 2 to Stage 1		132,966		(132,966)		-		-
Transfers to Stage 3		(77,329)		(151,583)		228,912		-
Transfers from Stage 3		1,356		754		(2,110)		-
Write-offs		-		-		(100,089)		(100,089)
Net change of gross carrying amount		1,613,610		206,278		29,239		1,849,127
Effect of changes in exchange rates (OCI)		227,163		18,607		6,240		252,010
Gross carrying amount at end of the period		6,101,889		702,761		358,551		7,163,201

 

 

14. LOANS TO CUSTOMERS

		06/30/2023		12/31/2022
Lending to individuals		2,791,818		1,976,499
Loan ECL allowance		(358,601)		(300,223)
Total receivables		2,433,217		1,676,276
Fair value adjustment - portfolio hedge (note 19)		(8)		(2,836)
Total		2,433,209		1,673,440

 

a) Breakdown by maturity

The following table shows loans to customers by maturity on June 30, 2023, and December 31 2022, considering each installment individually.

 

 

		06/30/2023				12/31/2022
		Amount		%		Amount		%
Installments not overdue due in:
Less than 1 year		2,418,569		86.6%		1,697,288		85.9%
Between 1 and 5 years		260,755		9.3%		198,533		10.0%
Total not overdue installments		2,679,324		95.9%		1,895,821		95.9%
Installments overdue by:
<= 30 days		42,564		1.5%		30,509		1.5%
30 < 60 days		24,474		0.9%		18,191		1.0%
60 < 90 days		15,376		0.6%		13,315		0.7%
> 90 days		30,080		1.1%		18,663		0.9%
Total overdue installments		112,494		4.1%		80,678		4.1%
Total		2,791,818		100.0%		1,976,499		100.0%

b) Credit loss allowance - by stages

As of June 30, 2023, the loans to customers ECL allowance totaled US$358,601 (US$300,223 as of December 31, 2022). The provision is estimated using modeling techniques, consistently applied, which is sensitive to the methods, assumptions, and risk parameters underlying its calculation.

The amount that the credit loss allowance represents in comparison to the Group’s gross receivables (the coverage ratio) is also monitored, to anticipate trends that could indicate credit risk increases. This metric is considered a key risk indicator and it is monitored across multiple committees, supporting the decision-making process and is discussed in the credit forums.

All receivables are classified through stages. The explanation of each stage is set out in the Company’s accounting policies, as disclosed in the annual consolidated financial statements as of December 31, 2022.

The majority of the Group's loans to customers’ portfolio was classified as stage 1, followed by stages 2 and 3, respectively as of June 30, 2023 and December 31, 2022. The proportion of stage 1 exposures remained stable, at 76.4% on June 30, 2023 compared to 77.0% on December 31, 2022. The stage 1 coverage ratio movement is primarily due to the growth of the portfolio due to origination into lower risk segments.

		06/30/2023
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio
Stage 1		2,131,969		76.4%		80,338		22.4%		3.8%
Stage 2		512,046		18.3%		176,052		49.1%		34.4%
Absolute Trigger (Days Late)		99,358		19.4%		82,826		47.0%		83.4%
Relative Trigger (PD deterioration)		412,688		80.6%		93,226		53.0%		22.6%
Stage 3		147,803		5.3%		102,211		28.5%		69.1%
Total		2,791,818		100.0%		358,601		100.0%		12.8%

 

		12/31/2022
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio
Stage 1		1,521,040		77.0%		76,454		25.5%		5.0%
Stage 2		351,166		17.8%		148,233		49.3%		42.2%
Absolute Trigger (Days Late)		87,841		25.0%		75,612		51.0%		86.1%
Relative Trigger (PD deterioration)		263,325		75.0%		72,621		49.0%		27.6%
Stage 3		104,293		5.2%		75,536		25.2%		72.4%
Total		1,976,499		100.0%		300,223		100.0%		15.2%

 

c) Credit loss allowance - by credit quality vs stages

		06/30/2023
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio
Strong (PD < 5%)		1,332,891		47.8%		14,196		3.9%		1.1%
Stage 1		1,305,984		98.0%		13,697		96.5%		1.0%
Stage 2		26,907		2.0%		499		3.5%		1.9%
Satisfactory (5% <= PD <= 20%)		857,923		30.7%		49,709		13.9%		5.8%
Stage 1		731,642		85.3%		40,592		81.7%		5.5%
Stage 2		126,281		14.7%		9,117		18.3%		7.2%
Higher Risk (PD > 20%)		601,004		21.5%		294,696		82.2%		49.0%
Stage 1		94,343		15.7%		26,049		7.3%		27.6%
Stage 2		358,858		59.7%		166,436		46.4%		46.4%
Stage 3		147,803		24.6%		102,211		28.5%		69.1%
Total		2,791,818		100.0%		358,601		100.0%		12.8%

 

 

		12/31/2022
		Gross Exposures		%		Credit Loss Allowance		%		Coverage Ratio
Strong (PD < 5%)		832,448		42.1%		9,344		3.1%		1.1%
Stage 1		819,605		98.5%		9,093		97.3%		1.1%
Stage 2		12,843		1.5%		251		2.7%		2.0%
Satisfactory (5% <= PD <= 20%)		642,099		32.5%		40,852		13.6%		6.4%
Stage 1		583,925		90.9%		36,228		88.7%		6.2%
Stage 2		58,174		9.1%		4,624		11.3%		7.9%
Higher Risk (PD > 20%)		501,952		25.4%		250,027		83.3%		49.8%
Stage 1		117,510		23.4%		31,133		10.4%		26.5%
Stage 2		280,149		55.8%		143,358		47.8%		51.2%
Stage 3		104,293		20.8%		75,536		25.2%		72.4%
Total		1,976,499		100.0%		300,223		100.0%		15.2%

 

Most of the credit quality of this portfolio is classified as strong, followed by satisfactory and higher risk loans. Receivables with satisfactory and strong risk have a high distribution of stage 1. As of June 30, 2023, the total gross carrying amount of the portfolio increased by 41.3%, or US$815,319, in comparison to December 31, 2022.

d) Credit loss allowance - changes

The following tables show reconciliations from the opening to the closing balance of the provision for credit losses by the stages of the financial instruments. The explanation of each stage and the basis for determining transfers due to changes in credit risk is set out in the Company’s accounting policies, as disclosed in the annual consolidated financial statements as of December 31, 2022.

		06/30/2023
		Stage 1		Stage 2		Stage 3		Total
Credit loss allowance at beginning of period		76,454		148,233		75,536		300,223
Transfers from Stage 1 to Stage 2		(18,120)		18,120		-		-
Transfers from Stage 2 to Stage 1		14,915		(14,915)		-		-
Transfers to Stage 3		(12,889)		(104,086)		116,975		-
Transfers from Stage 3		2,315		3,628		(5,943)		-
Write-offs		-		-		(214,477)		(214,477)
Net increase of loss allowance (note 7)		10,042		109,173		121,326		240,541
New originations (a)		230,835		37,739		2,926		271,500
Net drawdowns, repayments, net remeasurement and movements due to exposure and risk changes		(219,177)		74,567		119,936		(24,674)
Changes to models used in calculation (b)		(1,616)		(3,133)		(1,536)		(6,285)
Effect of changes in exchange rates (OCI)		7,621		15,899		8,794		32,314
Credit loss allowance at end of the period		80,338		176,052		102,211		358,601

 

		06/30/2022
		Stage 1		Stage 2		Stage 3		Total
Credit loss allowance at beginning of period		68,926		72,935		55,675		197,536
Transfers from Stage 1 to Stage 2		(16,151)		16,151		-		-
Transfers from Stage 2 to Stage 1		6,410		(6,410)		-		-
Transfers to Stage 3		(9,810)		(54,785)		64,595		-
Transfers from Stage 3		123		1,024		(1,147)		-
Write-offs		-		-		(169,452)		(169,452)
Net increase of loss allowance (note 7)		16,567		111,484		104,454		232,505
New originations (a)		159,362		26,684		2,792		188,838
Net drawdowns, repayments, net remeasurement and movements due to exposure and risk changes		(142,795)		84,800		101,662		43,667
Changes to models used in calculation (b)		-		-		-		-
Effect of changes in exchange rates (OCI)		4,246		2,037		3,405		9,688
Credit loss allowance at end of the period		70,311		142,436		57,530		270,277

(a) Considers all accounts originated from the beginning to the end of the period. ECL effects presented in the table were calculated as if risk parameters at the beginning of the period were applied.

(b) Relates to methodology changes that occurred during the period, according to the Group’s processes of model monitoring.

The following tables present changes in the gross carrying amount of the lending portfolio to demonstrate the effects of the changes in the loss allowance for the same portfolio as discussed above. “Net change of gross carrying amount” includes acquisitions, payments, and interest accruals.

 

		06/30/2023
		Stage 1		Stage 2		Stage 3		Total
Gross carrying amount at beginning of period		1,521,040		351,166		104,293		1,976,499
Transfers from Stage 1 to Stage 2		(198,062)		198,062		-		-
Transfers from Stage 2 to Stage 1		78,114		(78,114)		-		-
Transfers to Stage 3		(69,678)		(156,386)		226,064		-
Transfers from Stage 3		2,508		3,970		(6,478)		-
Write-offs		-		-		(214,477)		(214,477)
Net increase of gross carrying amount		615,278		150,041		25,778		791,097
Effect of changes in exchange rates (OCI)		182,769		43,307		12,623		238,699
Gross carrying amount at end of the period		2,131,969		512,046		147,803		2,791,818

 

 

		06/30/2022
		Stage 1		Stage 2		Stage 3		Total
Gross carrying amount at beginning of period		1,129,522		200,040		62,788		1,392,350
Transfers from Stage 1 to Stage 2		(175,185)		175,185		-		-
Transfers from Stage 2 to Stage 1		42,861		(42,861)		-		-
Transfers to Stage 3		(66,348)		(91,432)		157,780		-
Transfers from Stage 3		140		1,165		(1,305)		-
Write-offs		-		-		(169,452)		(169,452)
Net increase of gross carrying amount		504,392		128,306		29,355		662,053
Effect of changes in exchange rates (OCI)		58,029		6,283		3,248		67,560
Gross carrying amount at end of the period		1,493,411		376,686		82,414		1,952,511

 

 

15. COMPULSORY AND OTHER DEPOSITS AT CENTRAL BANKS

 

		06/30/2023		12/31/2022
Compulsory deposits		2,486,301		2,026,516
Reserve at BACEN		340,578		751,503
Total		2,826,879		2,778,019

 

 

Compulsory deposits are required by BACEN based on the amount of RDB held by Nu Financeira.

 

Reserve at BACEN relates to cash maintained in the Instant Payments Account, which is required by BACEN to support instant payment operations (PIX), and it is based on the average of PIX transactions per day based on the last month along with including additional funds as a safety margin.

 

 

16. OTHER RECEIVABLES

 

		06/30/2023		12/31/2022
Other receivables		1,349,226		522,734
ECL Allowance - Other receivables		(2,666)		(1,064)
Total		1,346,560		521,670

 

Other receivables in the amount of US$1,349,226 (US$522,734 as of December 31, 2022), with an ECL allowance of US$2,666 (US$1,064 as of December 31, 2022), are related to the acquisition of credit card receivables from acquirers at fair value. As of June 30, 2023 and December 31, 2022, the total amount of the Group's exposure was classified as stage 1 Strong (PD <5%) and there was no transfer between stages for the six-month period ended June 30, 2023 and 2022.

 

 

17. OTHER ASSETS

 

		06/30/2023		12/31/2022
Deferred expenses (i)		198,621		157,439
Taxes recoverable		253,799		245,967
Advances to suppliers and employees (ii)		129,400		22,662
Prepaid expenses		73,995		61,744
Judicial deposits (note 24)		3,288		18,864
Other assets		47,411		35,227
Total		706,514		541,903

(i) Refers to credit card issuance costs, including printing, packing, and shipping costs, among others. The expenses are amortized based on the card’s useful life, adjusted for any cancellations.

(ii) As of June 30, 2023, it includes cash deposited with new partners that operate automated teller machines (ATMs). There were no transactions with these partners during 2022.

 

 

18. INTANGIBLES ASSETS AND GOODWILL

 

a)

Composition of intangible assets and goodwill

 

		06/30/2023						12/31/2022
		Cost		Accumulated amortization		Net value		Cost		Accumulated amortization		Net value
Intangibles related to acquisitions		107,181		(33,871)		73,310		107,179		(24,802)		82,377
Other Intangibles		211,000		(29,932)		181,068		118,952		(19,165)		99,787
Total		318,181		(63,803)		254,378		226,131		(43,967)		182,164

 

 

		06/30/2023		12/31/2022
		Goodwill
Easynvest's acquisition		381,201		381,125
Cognitect's acquisition		831		831
Spin Pay's acquisition		5,060		5,060
Olivia's acquisition		10,381		10,381
Total		397,473		397,397

 

 

b)

Changes on intangible assets and goodwill

		06/30/2023
		Goodwill		Intangible assets
				Intangibles related to acquisitions		Other Intangibles		Total Intangibles
Balance at beginning of the period		397,397		82,379		99,785		182,164
Additions/ (reductions)				-		92,050		92,050
Amortization		-		(9,069)		(10,767)		(19,836)
Exchange rate variation		76		-		-		-
Balance at end of the period		397,473		73,310		181,068		254,378

 

 

		06/30/2022
		Goodwill		Intangible assets
				Intangibles related to acquisitions		Other Intangibles		Total Intangibles
Balance at beginning of the period		401,872		57,998		14,339		72,337
Additions/ (reductions)		7,654		40,937		46,599		87,536
Amortization		-		(8,691)		(3,750)		(12,441)
Exchange rate variation		78		-		-		-
Balance at end of the period		409,604		90,244		57,188		147,432

 

 

 

 

19. DERIVATIVE FINANCIAL INSTRUMENTS

 

The Group executes transactions with derivative financial instruments, which are intended to meet its own needs to reduce its exposure to market, currency and interest-rate risks. The derivatives are classified at fair value through profit or loss, except those in cash flow hedge accounting strategies, for which the effective portion of gains or losses on derivatives is recognized directly in other comprehensive income (loss). The management of these risks is conducted through determining limits, and the establishment of operating strategies. The derivative contracts are considered level 1, 2 or 3 in the fair value hierarchy and are used to hedge exposures, but hedge accounting is adopted only for forecasted transactions related to the cloud infrastructure and certain software licenses used by Nu (hedge of foreign currency risk), to hedge interest of the fixed rate credit portfolio (hedge of interest rate risk of portfolio) and to hedge the future cash disbursement related to highly probable future transactions and accrued liabilities for corporate and social security taxes at RSU vesting or SOP exercise, as shown below.

 

		06/30/2023
				Fair values
		Notional amount		Assets		Liabilities
Derivatives classified as fair value through profit or loss
Interest rate contracts - Futures		752,349		37		278
Foreign currency exchange rate contracts - Futures		162,484		107		2,372
Interest rate contracts - Swaps		11,096		147		-
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		200,100		2,089		35,280
Warrants (i)		100,000		6,188		-
Derivatives held for hedging
Designated as cash flow hedge
Foreign currency exchange rate contracts - Futures		225,207		196		3,509
Equity - Total Return Swap (TRS)		106,402		17,459		-
Designated as portfolio hedge
DI - Future - notes 13 and 14		650,787		-		276
Total		2,208,425		26,223		41,715

 

		12/31/2022
				Fair values
		Notional amount		Assets		Liabilities
Derivatives classified as fair value through profit or loss
Interest rate contracts - Futures		792,559		27		105
Foreign currency exchange rate contracts - Futures		111,634		917		51
Interest rate contracts - Swaps		10,056		50		-
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		113,682		11,228		24
Warrants (i)		100,000		27,908		-
Derivatives held for hedging
Designated as cash flow hedge
Foreign currency exchange rate contracts - Futures		129,459		1,209		182
Equity - Total Return Swap (TRS)		89,726		145		9,017
Designated as portfolio hedge
DI - Future - notes 13 and 14		1,551,521		1		46
Total		2,898,637		41,485		9,425

Futures contracts are traded on the B3, having B3 as the counterparty. The total value of margins pledged by the Group in transactions on the stock exchange is presented in note 12.

Swaps of interest risk contracts are settled on a daily basis and are traded over the counter with financial institutions as counterparties.

Nu Holdings entered into non-deliverable forward contracts to hedge intercompany loans with Nu Colombia in U.S. Dollars with a settlement in December 2023.

Swap TRS contracts are settled only at maturity and are traded over the counter with financial institutions as counterparties.

(i) Warrants

In September 2021, Nu entered into an agreement with Creditas Financial Solutions Ltd. (and/or its affiliates in Latin America, or together, “Creditas”) through which Nu will distribute certain financial products offered by Creditas to its customers in Latin America. These include affordable retail collateralized loans, such as home and auto equity loans, auto financing, motorcycle financing and payroll loans.

The agreement also provided that Nu would invest in Creditas’ securitization vehicles, becoming the holder of the senior quotas of the fund. As of June 30, 2023 the Company had a total of US$78,229 (US$248,181 as of December 31, 2022) invested in Creditas’ securitization vehicles presented as FVTOCI.

In addition, Nu was granted warrants that provide the right to acquire an equity interest equivalent to up to 7.7% of Creditas, on a fully diluted basis, under a pre-agreed valuation, proportional to fifty percent of the amount invested in the securitization vehicles and products distributed. The notional amount of the warrants is US$100,000 and is presented in the table above. Nu can exercise the warrants at any time, but the expiration date is 2 years after the issuance date.

As of June 30, 2023, the warrants' fair value was US$6,188 (US$27,908 as of December 31, 2022) calculated using a Black Scholes model, classified as level 3 on the fair value hierarchy, as shown in note 28. The Company recognized a fair value loss of US$21,710 during the six-month period ended June 30, 2023. The reduction in the warrant’s fair value resulted from updates in the assumptions used in the related option pricing model, including the reduction in the remaining exercise period of the warrants, which expire in September 2023.

 

 

Breakdown by maturity

The table below shows the breakdown by maturity of the notional amounts:

		06/30/2023
		Up to 3 months		3 to 12 months		Over 12 months		Total
Assets
Interest rate contracts - Futures		620,323		67,775		5,234		693,332
Foreign currency exchange rate contracts - Futures		387,691		-		-		387,691
Interest rate contracts - Swaps		-		-		11,096		11,096
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		-		190,100		-		190,100
Warrants		-		100,000		-		100,000
Total assets		1,008,014		357,875		16,330		1,382,219
Liabilities
Equity - Total Return Swap (TRS)		9,564		26,382		70,456		106,402
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		-		10,000		-		10,000
Interest rate contracts - Futures		-		-		59,017		59,017
DI - Future - notes 13 and 14		304,773		147,679		198,335		650,787
Total liabilities		314,337		184,061		327,808		826,206
Total		1,322,351		541,936		344,138		2,208,425

 

		12/31/2022
		Up to 3 months		3 to 12 months		Over 12 months		Total
Assets
Interest rate contracts - Futures		332,497		73,286		348		406,131
Foreign currency exchange rate contracts - Futures		241,093		-		-		241,093
Interest rate contracts - Swaps		-		-		10,056		10,056
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		113,682		-		-		113,682
Warrants		-		100,000		-		100,000
Total assets		687,272		173,286		10,404		870,962
Liabilities
Equity - Total Return Swap (TRS)		-		89,726		-		89,726
Interest rate contracts - Futures		27,776		256,240		102,412		386,428
DI - Future - notes 13 and 14		590,015		858,278		103,228		1,551,521
Total liabilities		617,791		1,204,244		205,640		2,027,675
Total		1,305,063		1,377,530		216,044		2,898,637

The table below shows the breakdown by maturity of the fair value amounts:

 

		06/30/2023
		Up to 12 months		Over 12 months		Total
Assets
Equity - Total Return Swap (TRS)		6,112		11,347		17,459
Interest rate contracts - Swaps		-		147		147
Interest rate contracts - Futures		5		32		37
Foreign currency exchange rate contracts - Futures		303		-		303
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		2,089		-		2,089
Warrants		6,188		-		6,188
Total assets		14,697		11,526		26,223
Liabilities
Interest rate contracts - Futures		4		274		278
Foreign currency exchange rate contracts - Futures		5,881		-		5,881
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		35,280		-		35,280
DI - Future - notes 13 and 14		76		200		276
Total liabilities		41,241		474		41,715

 

		12/31/2022
		Up to 12 months		Over 12 months		Total
Assets
Equity - Total Return Swap (TRS)		145		-		145
Interest rate contracts - Swaps		-		50		50
Interest rate contracts - Futures		27		-		27
Foreign currency exchange rate contracts - Futures		2,126		-		2,126
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		11,228		-		11,228
Warrants		27,908		-		27,908
Interest rate contracts - Future - portfolio hedge		1		-		1
Total assets		41,435		50		41,485
Liabilities
Equity - Total Return Swap (TRS)		9,017		-		9,017
Interest rate contracts - Futures		17		88		105
Foreign currency exchange rate contracts - Futures		233		-		233
Foreign currency exchange rate contracts - Non-deliverable forwards (NDF)		24		-		24
DI - Future - notes 13 and 14		46		-		46
Total liabilities		9,337		88		9,425

 

Analysis of derivatives designated as hedges

a) Hedge of foreign currency risk

The Group is exposed to foreign currency risk on forecast transaction expenses, primarily related to the cloud infrastructure and certain software licenses used by Nu. The Group managed its exposures to the variability in cash flows of foreign currency forecasted transactions to movements in foreign exchange rates by entering into foreign exchange contracts (exchange futures). These instruments are entered into to match the cash flow profile of the estimated forecast transactions, and are exchange-traded and fair value movements are settled on a daily basis.

The Group applies hedge accounting to the forecasted transactions related to its main cloud infrastructure contract and other expenses in foreign currency. The effectiveness is assessed monthly by analyzing the critical terms. The critical terms of the hedging instrument and the amount of the forecasted hedged transactions are significantly the same. Derivatives are generally rolled over monthly. They are expected to occur in the same fiscal month as the maturity date of the hedging instrument. Therefore, the hedge is expected to be effective. Subsequent assessments of effectiveness are performed by verifying and documenting whether the critical terms of the hedging instrument and forecasted hedged transaction have changed during the period in review and whether it remains probable. If there are no such changes in critical terms, the Group will continue to conclude that the hedging relationship is effective. Sources of ineffectiveness are differences in the amount and timing of forecast and actual payment of expenses.

		Six-month period ended
		06/30/2023		06/30/2022
Balance at beginning of the period		(2,610)		1,487
Fair value change recognized in OCI during the period		(24,336)		(12,737)
Total amount reclassified from cash flow hedge reserve to the statement of profit or loss during the period		10,664		4,585
to "Customer support and operation"		8,642		2,287
to "General and administrative expenses"		2,667		2,470
Effect of changes in exchange rates (OCI)		(645)		(172)
Deferred income taxes		5,382		3,268
Balance at end of the period		(10,900)		(3,397)

The future transactions that are the object of the hedge are:

		06/30/2023						12/31/2022
		Up to 3 months		3 to 12 months		Total		Total
Expected foreign currency transactions		55,535		169,445		224,980		129,459
Total		55,535		169,445		224,980		129,459

 

b) Hedge of portfolio's interest rate risk

The Group holds portfolios of customer loan and refinancing of credit cards receivables at fixed interest rates, in its banking book which are exposed to interest rate risk. To hedge this risk, the Group entered into DI futures contracts, and applied hedge accounting aiming to eliminate differences between the accounting measurement of its derivatives and hedged items.

The Group’s overall hedging strategy is to reduce fair value changes of the part of the fixed rate portfolio as if they were floating rate instruments linked to the attributable benchmark rates. As such, in order to reflect the dynamic nature of the hedged portfolio, the strategy is to rebalance the DI future contracts and evaluate the allocated amount by the credit portfolio. Additionally, ineffectiveness could arise from the disparity between expected and actual prepayments (prepayment risk).

In accordance with its hedging strategy, the Group calculates the DV01 (delta value of a basis point) of the exposure and futures to identify the optimal hedging ratio, and monitors in a timely manner the hedge relationship, providing any rebalancing if needed. The need for the purchase or sale of new DI future contracts will be assessed, to counterbalance the hedged item’s fair value adjustment, aiming to assure hedge effectiveness between 80% and 125%, as determined on hedge documentation.

The effectiveness test for the hedge is done on a prospective and retrospective basis. In the prospective test, the Group compares the impact of a 1 basis point parallel shift on the interest rate curve (DV01) on the hedged object and on the hedge instrument fair value . For the retrospective test, the fair value change since the inception of the hedged object is compared to the hedge instrument. In both cases, the hedge is considered effective if the correlation is between 80% and 125%. As of June 30, 2023 the effectiveness ratio for the hedges of the credit card and loan portfolios were 100% and 99%, respectively.

For designated and qualifying fair value hedges, the cumulative change in the fair value of the hedging derivative and of the hedged item attributable to the hedged risk is recognized in the consolidated statement of profit or loss in "Interest income and gains (losses) on financial instruments - financial assets at fair value". In addition, the cumulative change in the fair value of the hedged item attributable to the hedged risk is recorded as part of the carrying value of the hedged item in the consolidated statement of financial position.

Changes in fair value

		06/30/2023
		Hedge object		Fair value adjustment to the hedge object				Derivative hedge instrument
				Asset		Liability		Fair value variation
Interest rate risk
Interest rate contracts - Future - portfolio hedge - credit card		16,976		10		-		(13)
Interest rate contracts - Future - portfolio hedge - loan		464,511		(8)		-		(334)
Total		481,487		2		-		(347)

c) Hedge of corporate and social security taxes over share-based compensation

The Group's hedge strategy is to cover the future cash disbursement related to highly probable future transactions and accrued liabilities for corporate and social security taxes at RSU vesting or SOP exercise from the variation of the Company's share price volatility. The derivative financial instruments used to cover the exposure are total return swaps ("TRS") in which one leg is indexed to the Company's stock price and the other leg is indexed to Secured Overnight Financing Rate ("SOFR") plus spread. The stock fixed at the TRS is a weighted average price. The hedge was entered into by Nu Holdings and therefore there is no income tax effect.

The Group applies the cash flow hedge for the hedge structure thus the market risk is replaced by an interest rate risk. The effectiveness assessment is performed monthly by (i) assessing the economic relationship between the hedged item and the hedging instrument; (ii) monitoring the credit risk impact in the hedge effectiveness; and (iii) maintaining and updating the hedging ratio. Given the possibility of forfeiture impacting the future cash forecast of the employee benefit plan, the Group manages exposures to keep the hedging level within an acceptable coverage. The derivative fair value is measured substantially based on the stock price which is also used in the measurement of the provision or payment for corporate and social security taxes. There is no expectation for a mismatch between the hedged item and hedging instrument at maturity other than the SOFR.

		Six-month period ended
		06/30/2023		06/30/2022
Balance at beginning of the period		(4,876)		-
Fair value change recognized in OCI during the period		40,021		(13,507)
Total amount reclassified from cash flow hedge reserve to the statement of profit or loss during the period (i)		(26,087)		1,290
Balance at end of the period		9,058		(12,217)

(i) Presented as share-based compensation in general and administrative expenses.

Expected cash disbursement

		06/30/2023								12/31/2022
		Up to 1 year		1 to 3 years		Above 3 years		Total		Total
Considering the reporting date fair value of the hedged item:
Expected cash disbursement for corporate and social contributions		65,073		60,829		-		125,902		59,058
Total		65,073		60,829		-		125,902		59,058

 

 

20. INSTRUMENTS ELIGIBLE AS CAPITAL

 

		06/30/2023		12/31/2022
Financial liabilities at fair value through profit or loss
Instruments eligible as capital		3,766		11,507
Total		3,766		11,507

There were no defaults or breaches of instruments eligible as capital or on any financial liability during the six-month period ended June 30, 2023 and year ended December 31, 2022.

In June 2019, Nu Financeira issued a subordinated financial note in the amount equivalent to US$18,824 at the issuance date, which was approved as Tier 2 capital by the Brazilian Central Bank in September 2019, for the purposes of calculation of regulatory capital. The note bears a fixed interest rate of 12.8%, matures in 2029, and is callable in 2024.

The Group designated the instruments eligible as capital at fair value through profit (loss) at its initial recognition. The losses of fair value changes arising from its own credit risk in the amount of US$68 were recorded in other comprehensive income (gains of US$3,329 in the six-month period ended June 30, 2022). All other fair value changes and interests in the amount of US$3,029 (US$9,480 in the six-month period ended June 30, 2022) were recognized as profit (loss).

		06/30/2023		06/30/2022
Balance at beginning of the period		11,507		12,056
Interest accrued, net of gain from repurchase		(2,999)		1,226
Fair value changes		795		8,254
Own credit transferred to OCI		68		(3,329)
Repurchase		(6,036)		-
Effect of changes in exchange rates (OCI)		431		347
Balance at end of the period		3,766		18,554

 

 

21. FINANCIAL LIABILITIES AT AMORTIZED COST – DEPOSITS

 

		06/30/2023		12/31/2022
Bank receipt of deposits (RDB)		16,708,534		14,273,959
Deposits in electronic money		1,317,464		1,534,582
Bank certificate of deposit (CDB)		7,730		-
Total		18,033,728		15,808,541

In October 2017, Nu launched "Conta do Nubank" (at the time, referred to as "NuConta"). As a prepaid account, the amounts deposited by customers are classified as electronic money and must be fully allocated to government securities, in accordance with Brazilian regulatory requirements (see note 12b). Therefore, this type of deposit cannot be used for any other type of investment or as a financing source for credit operations.

In June 2019, Nu Financeira’s RDBs were included as an investment option inside "Conta do Nubank". Deposits in RDB have guarantees from the Brazilian Deposit Guarantee Fund (“FGC”). Unlike the deposits in electronic money, after the compulsory deposits requirements (see note 15), Nu is not required to invest the remaining resources from RDB deposits in government securities, the balance can be used as a financing source for lending and credit card operations.

The return from both electronic money and RDB deposits is 100% of the Brazilian CDI rate as of the initial date, if the balances are kept for more than 30 days. Nu also offers the "Money Boxes" option, in which RDBs generate daily yield as of the deposit date. All of those deposits have daily liquidity.

In September 2020, Nu Financeira launched a new investment option – a RDB with a defined future maturity date. These RDBs had maturities of up to 27 months and a weighted average interest rate of 104.5% as of June 30, 2023 (104% on December 31, 2022) of the Brazilian CDI rate.

Currently, deposits in electronic money in Brazil include "Conta do Nubank" and also "Conta NuInvest" balances, the latter corresponding to on-demand deposits of the Groups’ investment brokerage clients, with the same characteristics described above. In Mexico, there is no requirement to invest "CuentaNu" deposits, as it is locally denominated, in specific assets. Therefore, they can be used as a financing source for the credit card operations, and the return is the Interbank Equilibrium Interest Rate "TIIE" -2.5%, as of June 30, 2023.

Breakdown by maturity

		06/30/2023
		Up to 3 months		3 to 12 months		Over 12 months		Total
Deposits in electronic money		1,317,464		-		-		1,317,464
Bank receipt of deposits (RDB)		16,095,817		499,149		113,568		16,708,534
Bank certificate of deposit (CDB)		-		6,694		1,036		7,730
Total		17,413,281		505,843		114,604		18,033,728

 

		12/31/2022
		Up to 3 months		3 to 12 months		Over 12 months		Total
Deposits in electronic money		1,534,582		-		-		1,534,582
Bank receipt of deposits (RDB)		13,864,513		296,292		113,154		14,273,959
Total		15,399,095		296,292		113,154		15,808,541

 

 

22. FINANCIAL LIABILITIES AT AMORTIZED COST – PAYABLES TO NETWORK

 

		06/30/2023		12/31/2022
Payables to credit card network (i)		7,633,288		7,054,783
Payables to clearing houses		116,277		-
Total		7,749,565		7,054,783

(i) Corresponds to the amount payable to the acquirers related to credit and debit card transactions. Credit card payables are settled according to the transaction installments, substantially in up to 27 days for Brazilian transactions with no installments and 1 business day for international transactions. Sales in installments (parcelado) have monthly settlements, mostly, over a period of up to 12 months. For Mexican and Colombian operations, the amounts are settled in 1 business day. The segregation of the settlement is shown in the table below:

 

 

Payables to credit card network		06/30/2023		12/31/2022
Up to 30 days		3,982,128		3,829,398
30 to 90 days		1,930,090		1,741,186
More than 90 days		1,721,070		1,484,199
Total		7,633,288		7,054,783

Collateral for credit card operations

As of June 30, 2023, the Group had US$313 (US$305 on December 31, 2022) of security deposits granted in favor of Mastercard. These security deposits are measured at fair value through profit (loss) and are held as collateral for the amounts payable to the network and can be replaced by other security deposits with similar characteristics. The average remuneration rate of those security deposits was 0.39% per month in the six-month period ended June 30, 2023 (0.31% per month in the year ended December 31, 2022).

 

 

23. FINANCIAL LIABILITIES AT AMORTIZED COST – BORROWINGS AND FINANCING

 

		06/30/2023		12/31/2022
Borrowings and financing		764,522		585,568
Total		764,522		585,568

a) Borrowings and financings

Borrowings and financings maturities are as follows:

		06/30/2023
		Up to 3 months		Over 12 months		Total
Borrowings and financings
Term loan credit facility (i)		39,243		97,868		137,111
Syndicated loan (ii)		3,407		600,930		604,337
Financial letter (iii)		-		23,074		23,074
Total borrowings and financings		42,650		721,872		764,522

 

		12/31/2022
		Up to 3 months		3 to 12 months		Over 12 months		Total
Borrowings and financings
Term loan credit facility (i)		3,100		32,632		82,462		118,194
Syndicated loan (ii)		103		2,494		464,777		467,374
Total borrowings and financings		3,203		35,126		547,239		585,568

(i) Corresponds to four term loan credit facilities obtained by Nu Servicios and reassigned to Nu Financiera, in Mexican pesos.

(ii) Corresponds to two syndicated credit facilities. The first, in which Nu’s subsidiaries in Colombia and Mexico are the borrowers and the Company is acting as guarantor, the total amount of the credit facility is US$650,000, of which US$625,000 is allocated to Nu Mexico and US$25,000 to Nu Colombia. The second, in which Nu Colombia SA has been granted a 3-year facility, the total amount corresponds to US$150,000 from IFC (International Finance Corporation), also guaranteed by the Company.

(iii) In June 2023, the Group issued financial letters in Brazilian reais in the amount equivalent to US$22,987 on the issuance dates.

The terms and conditions of the loans outstanding as of June 30, 2023, are as follows:

		06/30/2023
Borrowings and financing		Country		Currency		Interest rate		Maturity		Principal amount
Term loan credit facility		Mexico		MXN		TIIE 182 + 1.0% up to 1.45%		July 2023 up to November 2024		110,000
Syndicated loan		Mexico		MXN		TIIE 91 + 1.00%		April 2025		435,000
Syndicated loan		Colombia		COP		IBR (1) + 1.0% up to 3.59%		April 2025 up to January 2026		87,500
Financial letter		Brazil		BRL		CDI + 1.8%		April 2025 up to June 2025		22,987

(1)

IBR: Bank Reference Indicator (Indicador Bancario de Referencia).

Changes to borrowings and financings are as follows:

		06/30/2023
		Term loan credit facility		Syndicated loan		Financial Letter		Total
Balance at beginning of the period		118,194		467,374		-		585,568
New borrowings		-		73,720		21,699		95,419
Payments – principal		-		(10,546)		-		(10,546)
Payments – interest		(5,154)		(30,939)		-		(36,093)
Interest accrued		7,534		33,946		82		41,562
Transaction costs		-		(868)		-		(868)
Effect of changes in exchange rates (OCI)		16,537		71,650		1,293		89,480
Balance at end of the period		137,111		604,337		23,074		764,522

 

 

		06/30/2022
		Bills of exchange		Term loan credit facility		Bank borrowings		Syndicated loan		Total
Balance at beginning of the period		10,400		136,843		-		-		147,243
Addition due to business combination		-		-		4,729		-		4,729
New borrowings		-		-		-		353,878		353,878
Payments – principal		(9,556)		(24,291)		(4,458)		-		(38,305)
Payments – interest		(1,910)		(3,884)		(568)		(1,760)		(8,122)
Interest accrued		43		3,894		158		2,564		6,659
Effect of changes in exchange rates (OCI)		1,023		2,620		139		1,017		4,799
Balance at end of the period		-		115,182		-		355,699		470,881

Covenants

The credit facilities and syndicated loans above-mentioned have associated restrictive clauses (covenants) which establish the maintenance of minimum financial indicators resulting from capital, funding and liquidity (cash) position, as well as profitability metrics and leverage ratios including, but not limited to, net debt to gross profit, in addition to non-financial indicators according to each contract. The non-compliance with financial covenants is considered as an event of default and may lead to debt acceleration. There are also cross-default clauses triggered in the event Nu Holdings and/or some subsidiaries fail to pay any material indebtedness. The covenants are monitored on a regular basis.

Guarantees

The Company is guarantor to the above-mentioned borrowings from Colombia and Mexico. Nu Pagamentos is also a guarantor to certain term loan credit facilities.

 

 

24. PROVISION FOR LAWSUITS AND ADMINISTRATIVE PROCEEDINGS

 

		06/30/2023		12/31/2022
Tax risks		-		15,747
Civil risks		4,522		2,096
Labor risks		131		104
Total		4,653		17,947

The Company and its subsidiaries are parties to lawsuits and administrative proceedings arising from time to time in the ordinary course of operations, involving tax, civil and labor matters. Such matters are being discussed at the administrative and judicial levels, which, when applicable, are supported by judicial deposits. The provisions for probable losses arising from these matters are estimated and periodically adjusted by management, supported by external legal advisors’ opinion. There is significant uncertainty relating to the timing of any cash outflow, if any, for civil and labor risk.

a) Provision

A provision in the amount of US$15,747 on December 31, 2022 referred to a potential legal obligation related to the increase in the contribution of certain Brazilian taxes (PIS and COFINS). The Group had a judicial deposit related to this claim, and in June 2019, Nu withdrew the lawsuit. The release of the judicial deposits in favor of the Brazilian Tax Authorities occurred in May 2023, representing final settlement of the matter with the consequent use of the provisioned amount.

Civil lawsuits are mainly related to credit card operations. Based on management’s assessment and inputs from Nu’s external legal advisors, the Group has provisioned US$4,522 (US$2,096 on December 31, 2022) considered sufficient to cover estimated losses from civil suits deemed probable.

b) Changes

Changes to provision for lawsuits and administrative proceedings are as follows:

		06/30/2023						06/30/2022
		Tax		Civil		Labor		Tax		Civil		Labor
Balance at beginning of the period		15,747		2,096		104		17,081		980		21
Additions		-		6,170		135		-		980		11
Payments / Reversals		(16,402)		(4,085)		(119)		(2,382)		(553)		(14)
Effect of changes in exchange rates (OCI)		655		341		11		1,119		43		2
Balance at end of the period		-		4,522		131		15,818		1,450		20

c) Contingencies

The Group is a party to civil and labor lawsuits, involving risks classified by management and the legal advisors as possible losses, totaling approximately US$11,222 and US$2,894, respectively (US$7,128 and US$1,814 on December 31, 2022). Based on management’s assessment and inputs from the Group’s external legal advisors, no provision was recognized for those lawsuits as of June 30, 2023, and December 31, 2022.

As of June 30, 2023, the total amount of judicial deposits shown as “Other assets” (note 17) is US$3,288 (US$18,864 on December 31, 2022) and is substantially attributed to the judicial deposit carried on behalf of the shareholders of Nu Invest, prior to the acquisition, due to a tax proceeding related to withholding taxes inappropriately deducted from amounts paid to employees.

 

 

25. DEFERRED INCOME

 

		06/30/2023		12/31/2022
Deferred revenue from rewards program		50,305		34,546
Deferred annual fee from reward program		3,118		3,283
Other deferred income		1,459		3,859
Total		54,882		41,688

Deferred revenue from rewards programs is related to the Group's reward program for its credit card customers, called "Rewards". The program consists of accumulating points according to the use of the credit card in the ratio of R$1.00 (one Brazilian real, equivalent to US$0.21 as of June 30, 2023 US$0.19 as of December 31, 2022) equal to 1 point and cashbacks. The points do not expire, and there is no limit on the number of Rewards an eligible card member can earn. Deferred annual fees from the reward program comprise amounts related to the rewards fees which are paid annually by customers until they are earned.

The redemption of the points occurs when the customers use them in various purchase categories, such as air tickets, hotels, transportation services, and music.

Nu uses financial models to estimate the redemption rates of rewards earned to date by current card members, and, therefore, the estimated financial value of the points, based on historical redemption trends, current enrollee redemption behavior, among others. The estimated financial value is recorded in the profit or loss when the performance obligation is satisfied, which is when the reward points are redeemed.

 

 

26. OTHER LIABILITIES

		06/30/2023		12/31/2022
Clients transfers - PIX (i)		-		305,508
Sundry creditors		113,822		122,767
Payment transactions - other		141,025		80,798
Credit card ECL allowance (note 13)		25,856		17,566
Intermediation of securities		2,484		28,340
Insurances		12,899		5,182
Other liabilities		53,187		75,839
Total		349,273		636,000

 

(i) Clients transfers - PIX corresponds to unsettled PIX transactions on non-business days.

 

 

27. RELATED PARTIES

In the ordinary course of business, the Group may have issued credit cards or loans to Nu’s executive directors, board members, key employees and close family members. Those transactions, as well as the deposits and other products, such as investments, occur on similar terms as those prevailing at the time for comparable transactions to unrelated persons and do not involve more than the normal risk of collectability.

As described in note 3, "Basis of consolidation", all companies from the Group are consolidated in these unaudited interim condensed consolidated financial statements. Therefore, related party balances and transactions, and any unrealized income and expenses arising from inter-company transactions, are eliminated in the unaudited interim condensed consolidated financial statements.

In 2023, the exchange differences arising from intercompany loans between entities of the group with different functional currencies are shown as “Interest income and gains (losses) on financial instruments” in the statement of profit (loss).

 

a) Transactions with other related parties

		06/30/2023		12/31/2022
		Assets/ (Liabilities)
Others		-		316

 

		06/30/2023		12/31/2022
		Revenues (expenses)
Others		-		(1,112)

 

As of June 30, 2023 the Company did not have any transaction with other related parties. On June 30, 2021, the Group entered into a service and naming rights agreement with Rodamoinho Produtora de Eventos Ltda., owned by a former member of the Company’s Board of Directors ("Board"). This director has not been a member of the Board since September 2022, when the Company ceased recognizing Rodamoinho as a related party. In addition, the Group did not make payments for Reprograma, a philanthropic project managed by a family member of the Company’s controlling shareholder, in the six-month period ended June 30, 2023.

 

 

28. FAIR VALUE MEASUREMENT

 

The main valuation techniques employed in internal models to measure the fair value of the financial instruments as of June 30, 2023 and December 31, 2022 are set out below. The principal inputs into these models are derived from observable market data. The Group did not make any material changes to its valuation techniques and internal models in those periods.

a) Fair value of financial instruments carried at amortized cost

The following tables show the fair value of the financial instruments carried at amortized cost as of June 30, 2023, and December 31, 2022. The Group has not disclosed the fair values of financial instruments such as compulsory and other deposits at central banks, other financial assets, deposits in electronic money, RDB, and borrowings and financing, because their carrying amounts are a reasonable approximation of fair value.

 

 

		06/30/2023						12/31/2022
		Carrying amount		Fair value - Level 2		Fair value - Level 3		Carrying amount		Fair value - Level 2		Fair value - Level 3
Assets
Compulsory and other deposits at central banks		2,826,879						2,778,019
Credit card receivables (i)		10,387,703		-		10,650,948		8,233,123		-		8,204,077
Loans to customers (i)		2,433,217		-		2,384,504		1,676,276		-		1,920,518
Other receivables		1,346,560		-		1,348,817		521,670		-		522,359
Other financial assets		141,099						478,283
Total		17,135,458		-		14,384,269		13,687,371		-		10,646,954
Liabilities
Deposits in electronic money		1,317,464						1,534,582
Bank receipt of deposits (RDB)		16,708,534						14,273,959
Bank certificate of deposit (CDB)		7,730		7,740		-		-
Payables to network		7,749,565		7,275,570		-		7,054,783		6,399,704		-
Borrowings and financing		764,522						585,568
Total		26,547,815		7,283,310		-		23,448,892		6,399,704		-

(i)

It excludes the fair value adjustment from the hedge accounting.

The book value from credit card receivables and loans to customers includes the amounts that are the hedge items of the portfolio hedge, described in note 19. The credit risk components for both receivables are not part of the hedge strategy.

Borrowings and financing fair value is equal to the book value given that any prepayment shall be equal to the total outstanding amount. The fair value of floating rate demand deposits are assumed to be equal to carrying amounts.

The valuation approach to specific categories of financial instruments is described below.

i) Fair value models and inputs

Credit card: The fair values of credit card receivables and payables to network are calculated using the discounted cash flow method. Fair values are determined by discounting the contractual cash flows by the interest rate curve and a credit spread. For payables, cash flows are also discounted by the Group's own credit spread.

Loans to customers: Fair value is estimated based on groups of clients with similar risk profiles, using valuation models. The fair value of a loan is determined by discounting the contractual cash flows by the interest rate curve and a credit spread.

Other receivables: Fair value is calculated by discounting future cash flows by a risk free interest rate and a credit spread.

b) Fair value of financial instruments measured at fair value

The following table shows a summary of the fair values, as of June 30, 2023, and December 31, 2022, of the financial assets and liabilities indicated below, classified on the basis of the various measurement methods used by the Group to determine their fair value:

		06/30/2023
		Published price quotations in active markets (Level 1)		Internal Models (Level 2)		Internal Models (Level 3)		Total
Assets
Government bonds
Brazil		5,985,235		-		-		5,985,235
United States		157,199		-		-		157,199
Mexico		1,392		-		-		1,392
Corporate bonds and other instruments
Certificate of bank deposits (CDB)		-		1,571		-		1,571
Investment funds		-		133,964		-		133,964
Time deposit		-		262,067		-		262,067
Bill of credit (LC)		-		1		-		1
Real estate and agribusiness certificate of receivables (CRIs/CRAs)		102		21,442		-		21,544
Real estate and agribusiness letter of credit (LCIs/LCAs)		-		127		-		127
Corporate bonds and debentures		848,569		202,112		-		1,050,681
Equity instrument		-		-		22,249		22,249
Derivative financial instruments		340		19,695		6,188		26,223
Collateral for credit card operations		-		313		-		313
Liabilities
Derivative financial instruments		6,435		35,280		-		41,715
Instruments eligible as capital		-		3,766		-		3,766
Repurchase agreements		-		144,922		-		144,922

 

 

		12/31/2022
		Published price quotations in active markets (Level 1)		Internal Models (Level 2)		Internal Models (Level 3)		Total
Assets
Government bonds
Brazil		8,222,278		-		-		8,222,278
United States		171,184		-		-		171,184
Mexico		1,382		-		-		1,382
Corporate bonds and other instruments
Certificate of bank deposits (CDB)		-		3,712		-		3,712
Investment funds		-		302,779		-		302,779
Time deposit		-		446,436		-		446,436
Bill of credit (LC)		-		138		-		138
Real estate and agribusiness certificate of receivables (CRIs/CRAs)		2		32,173		-		32,175
Real estate and agribusiness letter of credit (LCIs/LCAs)		-		1,197		-		1,197
Corporate bonds and debentures		676,953		158,675		-		835,628
Equity instrument		-		-		22,082		22,082
Derivative financial instruments		2,154		11,423		27,908		41,485
Collateral for credit card operations		-		305		-		305
Liabilities
Derivative financial instruments		384		9,041		-		9,425
Instruments eligible as capital		-		11,507		-		11,507
Repurchase agreements		-		197,242		-		197,242

i) Fair value models and inputs

Securities: The securities with high liquidity and quoted prices in the active market are classified as level 1. Therefore, all the government bonds and some corporate bonds are included in level 1 as they are traded in active markets. Brazilian securities values are the published prices by the 'Associação Brasileira das Entidades dos Mercados Financeiro e de Capitais' ("Anbima"). For US and Mexico bonds, fair values are the published prices by Bloomberg. Other corporate bonds and investment fund shares, the valuation of which is based on observable data, such as interest rates and interest rate curves are classified as level 2.

Derivatives: Derivatives traded on stock exchanges are classified as level 1 of the hierarchy. Derivatives traded on the Brazilian stock exchange are fairly valued using B3 quotations. Interest rate OTC Swaps are valued by discounting future expected cash flows to present values using interest rate curves and are classified as level 2. The embedded derivative conversion feature from the senior preferred share was calculated based on methodologies for the share price described in note 10. The options related to the warrant from Creditas Partnership are fair valued using a Black-Scholes model and are classified as level 3.

Equity instrument: For the fair value of the equity instrument, the Group used contractual conditions as inputs that are not directly observable, and therefore it is classified as level 3.

 

Instruments eligible as capital: If the instrument has an active market, prices quoted in this market are used. Otherwise, valuation techniques are used, such as discounted cash flows, where cash flows are discounted by a risk-free rate and a credit spread. Instruments eligible as capital were designated at fair value through profit (loss) in the initial recognition (fair value option).

Repurchase agreements: The fair value is the transaction value itself given that repurchase agreement is a collateralized short-term one day agreement.

 

c) Transfers between levels of the fair value hierarchy

For the six-month period ended June 30, 2023 and year ended December 31, 2022, there were no transfers of financial instruments between levels 1 and 2 or between levels 2 and 3.

 

 

29. INCOME TAX

 

Current and deferred taxes are determined for all transactions that have been recognized in the unaudited interim condensed consolidated financial statements using the provisions of the current tax laws. The current income tax expense or benefit represents the estimated taxes to be paid or refunded, respectively, for the current period. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities. They are measured using the tax rates and laws that will be in effect when the temporary tax differences are expected to reverse.

a) Income tax reconciliation

The tax on the Group's pre-tax profit differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities. Thus, the following is a reconciliation of income tax expense to profit (loss) for the period, calculated by applying the combined Brazilian income tax rate of 40% for the three and six-month periods ended June 30, 2023 and 2022:

		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022
Profit (loss) before income tax		323,977		(24,612)		567,606		(92,263)
Tax rate (i)		40%		40%		40%		40%
Income tax		(129,590)		9,845		(227,042)		36,905
Permanent additions/exclusions
Share-based payments		6,312		9,922		(205)		(985)
Operational losses and others		(378)		(2,777)		(4,190)		(4,978)
Foreign exchange variation on investments abroad		(1,694)		(3,974)		83		-
Effect of different tax rates - subsidiaries and parent company		18,731		(17,764)		22,113		(12,792)
Other non-deductible expenses		7,508		(490)		8,252		(741)
Income tax		(99,111)		(5,238)		(200,989)		17,409
Current tax expense		(263,071)		(96,249)		(468,935)		(195,301)
Deferred tax benefit		163,960		91,011		267,946		212,710
Income tax in the statement of profit or loss		(99,111)		(5,238)		(200,989)		17,409
Deferred tax recognized in OCI		1,378		(1,849)		4,589		221

 

(i) The tax rate used was the one applicable to the financial Brazilian subsidiaries, which represent the most significant portion of the operations of the Group. The tax rate used is not materially different from the average effective tax rate considering all jurisdictions where the Group has operations. The effect of other tax rates is shown in the table above as “effect of different tax rates – subsidiaries and parent company”.

b) Deferred income taxes

The following tables present significant components of the Group’s deferred tax assets and liabilities as of June 30, 2023 and 2022, and the changes for the periods then ended. The accounting records of deferred tax assets on income tax losses and/or social contribution loss carryforwards, as well as those arising from timing differences, are based on technical feasibility studies which consider the expected generation of future taxable income, considering the history of profitability for each subsidiary individually. The use of the deferred tax asset related to tax loss and negative basis of social contribution is limited to 30% of taxable profit per year for the Brazilian entities and there is no time limit to use it.

				Reflected in the statement of profit or loss
		12/31/2022		Constitution		Realization		Foreign exchange		Reflected in OCI		06/30/2023
Provisions for credit losses		583,791		470,692		(170,600)		81,539		-		965,422
Provision PIS/COFINS - Financial Revenue		6,299		-		(6,561)		262		-		-
Other temporary differences (i)		123,103		68,094		(41,513)		11,527		-		161,211
Total deferred tax assets on temporary differences		713,193		538,786		(218,674)		93,328		-		1,126,633
Tax loss and negative basis of social contribution		97,857		55,295		(62,149)		7,347		-		98,350
Deferred tax assets		811,050		594,081		(280,823)		100,675		-		1,224,983
Futures settlement market		(13,739)		(3,076)		5,431		(435)		-		(11,819)
Fair value changes - financial instruments		(3,291)		(2,227)		(136)		(519)		(793)		(6,966)
Others		(24,088)		(55,210)		14,413		(1,378)		-		(66,263)
Deferred tax liabilities		(41,118)		(60,513)		19,708		(2,332)		(793)		(85,048)
Fair value changes - cash flow hedge		(1,758)		56,058		(60,565)		(875)		5,382		(7,140)
Deferred tax recognized during the period				589,626		(321,680)				4,589

(i) Other temporary differences are composed mainly by other provisions and supplier provisions.

 

 

				Reflected in the statement of profit or loss
		12/31/2021		Constitution		Realization		Foreign exchange		Reflected in OCI		06/30/2022
Provisions for credit losses		204,459		265,185		(92,796)		5,798		-		382,646
Provision PIS/COFINS - Financial Revenue		5,965		-		-		362		-		6,327
Other temporary differences (i)		72,343		33,351		(12,974)		3,284		-		96,004
Total deferred tax assets on temporary differences		282,767		298,536		(105,770)		9,444		-		484,977
										-
Tax loss and negative basis of social contribution		77,985		37,256		(4,194)		2,893		-		113,940
Deferred tax assets		360,752		335,792		(109,964)		12,337		-		598,917
Futures settlement market		(18,850)		(12,990)		8,944		(613)		-		(23,509)
Fair value changes - financial instruments		(2,144)		(455)		165		(113)		(3,047)		(5,594)
Others		(8,340)		(5,822)		23		(41)		-		(14,180)
Deferred tax liabilities		(29,334)		(19,267)		9,132		(767)		(3,047)		(43,283)
Fair value changes - cash flow hedge		1,057		7,650		(10,633)		2,983		3,268		4,325
Deferred tax recognized during the period				324,175		(111,465)				221

 

(i) Other temporary differences are composed mainly by other provisions and supplier provisions.

30. EQUITY

 

The table below presents the changes in shares issued and fully paid and shares authorized, by class, as of June 30, 2023 and December 31, 2022.

 

Shares authorized and fully issued		Note		Class A Ordinary shares		Class B Ordinary shares		Total
Total as of December 31, 2021				3,459,743,431		1,150,245,114		4,609,988,545
Conversion of shares class B to A				58,312,073		(58,312,073)		-
SOPs exercised and RUSs vested		10		64,418,580		-		64,418,580
Shares withheld for employees' taxes		10		(8,536,770)		-		(8,536,770)
Issuance of class A shares - Cognitect and Juntos acquisitions				1,362,201		-		1,362,201
Issuance of shares due to IPO over-allotment				27,555,298		-		27,555,298
Total as of December 31, 2022				3,602,854,813		1,091,933,041		4,694,787,854
Conversion of class B shares in class A shares				590,000		(590,000)		-
SOPs exercised and RUSs vested				42,651,541		-		42,651,541
Shares withheld for employees' taxes		10		(4,359,685)		-		(4,359,685)
Shares repurchased				(290,676)		-		(290,676)
Share issued to service providers				4,355,374				4,355,374
Issuance of class A shares - Olivia acquisition				5,471,479		-		5,471,479
Total as of June 30, 2023				3,651,272,846		1,091,343,041		4,742,615,887

 

Shares authorized and unissued		Class A Ordinary shares		Class B Ordinary shares		Total
Business combination - contingent share consideration		-		-		5,107,809
Reserved for the share-based payments		-		-		354,717,097
Shares authorized which may be issued class A or class B		-		-		43,501,000,417
Shares authorized and unissued as of June 30, 2023		-		-		43,860,825,323
Shares authorized issued		3,651,272,846		1,091,343,041		4,742,615,887
Total as of June 30, 2023		-		-		48,603,441,210

a) Share events

In January 2022, Nu Holdings issued an additional 27,555,298 ordinary class A shares due to the over-allotment option ("Green Shoe") exercised by the underwriters.

In May 2023, the Company concluded private issuances of a total 4,355,374 Class A shares as consideration paid to acquire services.

As of June 30, 2023, the Company had ordinary shares authorized and unissued relating to commitments from acquisitions of entities, the issuance due to the share-based payment plans (note 10) and authorized for future issuance without determined nature and which could be class A or B ordinary shares.

b) Share capital and share premium reserve

All share classes of the Company had a nominal par value of US$0.0000067 on June 30, 2023 and December 31, 2022, and the total amount of share capital was US$84 (US$83 as of December 31, 2022).

Share premium reserve relates to amounts contributed by shareholders over the par value at the issuance of shares.

The total of exercised Stock Options (SOP) was US$ 7,013 for the six-month period ended on June 30, 2023.

c) Issuance of shares

The following table presents the amount in US$ of shares issued, increase in capital and premium reserve in transactions other than business combinations, the exercise of the SOPs and vesting of RSUs in the six-month periods ended June 30, 2023 and 2022:

		Capital and share premium reserve
Event		06/30/2023		12/31/2022
Shares issued on IPO over-allotment		-		247,998

In January 2022, Nu Holdings issued 27,555,298 ordinary Class A shares and raised proceeds of US$247,998 as a result of the exercise of the underwriters’ over-allotment option ("Green Shoe"), related to the IPO in December 2021.

d) Accumulated gains (losses)

The accumulated gains (losses) include the accumulated profit (losses) of the Group and the share-based payment reserve amount, as shown in the table below.

As described in note 10, the Group's share-based payments include incentives in the form of SOPs, RSUs and Awards. Further, the Company can use the reserve to absorb accumulated losses.

		06/30/2023		12/31/2022
Accumulated losses		(334,445)		(701,062)
Share-based payments reserve		881,187		765,639
Total accumulated gains (losses)		546,742		64,577

 

e) Shares repurchased and withheld

Shares may be repurchased from former employees when they leave the Group, as a result of contractual terms of deferred payments on business combinations, or withheld because of RSUs plans to settle the employee’s tax obligation. These shares repurchased or withheld are canceled and cannot be reissued or subscribed. During the six-month period ended June 30, 2023 and year ended December 31, 2022, the following shares were repurchased:

		06/30/2023		12/31/2022
Number of shares repurchased		290,676		-
Total value of shares repurchased		-		-
Number of shares withheld - RSU		4,359,685		8,536,770
Total value of shares withheld - RSU		18,491		51,212

f) Accumulated other comprehensive income

Other comprehensive income includes the amounts, net of the related tax effect, of the adjustments to assets and liabilities recognized in equity through the consolidated statement of comprehensive income.

Other comprehensive income that may be subsequently reclassified to profit or loss is related to cash flow hedges that qualify as effective hedges and currency translation that represents the cumulative gains and losses on the retranslation of the Group’s investment in foreign operations. These amounts will remain under this heading until they are recognized in the consolidated statement of profit (loss) in the periods in which the hedged items affect it, for example, in the case of the cash flow hedge.

The own credit reserve reflects the cumulative own credit gains and losses on financial liabilities designated at fair value. Amounts in the own credit reserve are not reclassified to profit (loss) in future periods.

The accumulated balances are as follows:

		06/30/2023		12/31/2022
Cash flow hedge effects, net of deferred taxes		(1,842)		(7,486)
Currency translation on foreign entities		142,859		(108,356)
Changes in fair value - financial instruments at FVTOCI, net of deferred taxes		(14,587)		(22,298)
Own credit adjustment effects		557		489
Total		126,987		(137,651)

 

 

31. MANAGEMENT OF FINANCIAL RISKS, FINANCIAL INSTRUMENTS, AND OTHER RISKS

 

a) Overview

 

The Group monitors the risks that could have a material impact on its strategic objectives, including those that must comply with applicable regulatory requirements. To efficiently manage and mitigate these risks, the risk management structure conducts risk identification and assessment to prioritize the risks that are key to pursue potential opportunities and/or that may prevent value from being created or that may compromise existing value, with the possibility of having impacts on financial results, capital, liquidity, customer relationship and reputation.

Risks that are actively monitored include Credit, Liquidity, Market, Operational, IT, Cyber, Regulatory, Compliance, AML (Anti-money laundering) and Reputational Risk, Interest Rate Risk in the Banking Book (IRBB), Model Risk, and also the risk from Cryptocurrency business.

Nu considers Risk Management an important pillar of the Group's strategic management. The risk management structure broadly permeates the entire Company, with the objective of ensuring that risks are properly identified, measured, mitigated, monitored and reported, in order to support the development of its activities. Risk Management is related to the principles, culture, structures and processes to improve the decision-making process and the achievement of strategic objectives. It is a continuous and evolving process that runs through Nu's entire strategy, to support Management in minimizing its losses, as well as maximizing its profits and supporting the Company's values.

The Group's risk management structure considers the size and complexity of its business, which allows tracking, monitoring and control of the risks to which it is exposed. The risk management process is aligned with management guidelines, which, through committees and other internal meetings, define strategic objectives, including risk appetite. Conversely, the capital control and capital management units provide support through risk and capital monitoring and analysis processes.

Each of the risks described below has its own methodologies, systems and processes for its identification, measurement, evaluation, monitoring, reporting, control and mitigation.

In the case of financial risks, such as credit, liquidity, IRRBB and market risk, the measurement is carried out based on quantitative models and, in certain cases, prospective scenarios in relation to the main variables involved, respecting the applicable regulatory requirements and best market practices. Non-financial risks, such as operational risk and technological/cyber risks, are measured using impact criteria (inherent risk), considering potential financial losses, reputational damage, customer perception and legal/regulatory obligations, as well as evaluated in relation to the effectiveness of the respective structure of internal controls.

There were no significant changes to the risk management structure that was reported in the most recent annual financial statements as of December 31, 2022.

 

 

 

●

Credit risk

The Group’s outstanding balance of financial assets and other exposures to credit risk is shown in the table below:

		06/30/2023		12/31/2022
Financial assets
Cash and cash equivalents		6,175,049		4,172,316
Securities		156,233		91,853
Derivative financial instruments		26,223		41,485
Collateral for credit card operations		313		305
Financial assets at fair value through profit or loss		182,769		133,643
Securities		7,479,797		9,947,138
Financial assets at fair value through other comprehensive income		7,479,797		9,947,138
Credit card receivables		10,387,713		8,233,072
Loans to customers		2,433,209		1,673,440
Compulsory and other deposits at central banks		2,826,879		2,778,019
Other receivables		1,346,560		521,670
Other financial assets		141,099		478,283
Financial assets at amortized cost		17,135,460		13,684,484
Other exposures
Unused limits (i)		14,895,719		12,971,982
Credit Commitments		14,895,719		12,971,982

(i) Unused limits are not recorded in the statement of financial position and are considered in the measurement of the ECL because it represents credit risk exposure.

●

Liquidity risk

Primary sources of funding - by maturity

		06/30/2023								12/31/2022
Funding Sources		Up to 12 months		Over 12 months		Total		%		Up to 12 months		Over 12 months		Total		%
Bank receipt of deposits (RDB)		16,594,966		113,568		16,708,534		96%		14,160,805		113,154		14,273,959		96%
Borrowings and financing		42,650		721,872		764,522		4%		38,329		547,239		585,568		4%
Bank certificate of deposit (CDB)		6,694		1,036		7,730		0%		-		-		-		0%
Instruments eligible as capital		-		3,766		3,766		0%		-		11,507		11,507		0%
Total		16,644,310		840,242		17,484,552		100%		14,199,134		671,900		14,871,034		100%

Maturities of financial liabilities

The tables below summarize the Group’s financial liabilities and their contractual maturities:

		06/30/2023
Financial liabilities		Carrying amount		Gross nominal outflow (1)		Up to 1 month		1 to 3 months		3-12 months		Over 12 months
Derivative financial instruments		41,715		41,715		286		5,596		35,359		474
Instruments eligible as capital		3,766		7,911		-		-		-		7,911
Repurchase agreements		144,922		144,922		144,922		-		-		-
Deposits in electronic money (*)		1,317,464		1,317,464		1,317,464		-		-		-
Bank receipt of deposits (RDB)		16,708,534		16,970,179		16,103,008		168,804		558,074		140,293
Bank certificate of deposit (CDB)		7,730		8,447		-		-		6,443		2,004
Payables to credit card network		7,633,288		7,633,288		3,982,128		1,930,090		1,719,282		1,788
Borrowings and financing		764,522		915,323		42,869		22,099		61,828		788,527
Total		26,621,941		27,039,249		21,590,677		2,126,589		2,380,986		940,997

(*) In accordance with regulatory requirements and in guarantee of these deposits, the Group holds the total amount of US$1,734,114 in eligible securities composed of Brazilian government bonds as described in note 12b, under a dedicated account within the Brazilian Central Bank as of June 30, 2023 (US$2,252,464 as of December 31, 2022).

(1) The gross nominal outflow was projected considering the exchange rate of Brazilian Reais, and Mexican and Colombian Pesos to US$ as of June 30, 2023.

 

●

Market risk

The table below presents the VaR which uses a confidence level of 99% and a holding period of 10 days, by a historical simulation approach, with a 5-year historical window. For Brazil, it is calculated only for the Trading Book in line with the way portfolios are managed.

VaR		06/30/2023		12/31/2022
Nu Financeira (1) / Nu Pagamentos (Brazil)		407		478
Nu Holdings (2)		10,227		10,321

(1) Includes Nu Financeira and its subsidiaries Nu Invest and Nu DTVM.

(2) Considers only financial assets held directly by Nu Holdings as other subsidiaries do not have significant market risk exposures.

 

 

●

Interest rate risk in the banking book (IRRBB)

The following analysis is the Group's sensitivity of the mark to market fair value to an increase of 1 basis point (“bp”) (DV01) in the Brazilian risk-free curve, Brazilian IPCA coupon curve, US risk-free curve and Mexican risk-free curve, assuming a parallel shift and a constant financial position:

DV01		06/30/2023		12/31/2022
Brazilian risk-free curve (1)		(116)		(41)
Brazilian IPCA coupon		(3)		(5)
US risk-free curve		(130)		(121)
Mexican risk-free curve		4		1

(1)

Includes FIP, Nu Pagamentos, Nu Financeira, Nu Invest and Nu DTVM.

The interest rate risk in Colombia and in Brazilian subsidiaries other than those mentioned above, is not significant as of June 30, 2023 and December 31, 2022. To maintain DV01 sensitivities within defined limits, interest rate futures, traded in B3, and swaps derivatives are used to hedge interest rate risk.

●

Foreign exchange (FX) risk

The financial information may exhibit volatility due to the Group’s operations in foreign currencies, such as the Brazilian Real and Mexican and Colombian Pesos. At the Nu Holdings level, there is no net investment hedge for investments in other countries.

As of June 30, 2023 and December 31, 2022, none of the entities of the Group had significant financial instruments in a currency other than their respective functional currencies.

 

 

32. CAPITAL MANAGEMENT

 

The purpose of capital management is to maintain the capital adequacy for Nu's operation through control and monitoring of the capital position, to evaluate the capital necessity according to the risk taken and strategic aim of the organization and to establish a capital planning process in accordance with future requirements of regulatory capital, based on the Group's growth projections, risk exposure, market movements and other relevant information. Also, the capital management structure is responsible for identifying sources of capital, for writing and submitting the capital plan and capital contingent plan for approval by the Executive Directors.

a) Composition of capital

i) Financial conglomerate in Brazil

The regulatory capital used to monitor the compliance of a financial conglomerate with the Basel operating limits imposed by the Brazilian Central Bank, is the sum of two items, as follows:

●

Tier I Capital: the sum of Common Equity Tier I, which consists of paid in capital, capital, reserves and retained earnings, less deductions, and prudential adjustments and the Additional Tier I, which consists of subordinated debt instruments without a defined maturity that meet eligibility requirements.

●

Tier II Capital: consists of subordinated debt instruments with defined maturity dates that meet eligibility requirements. Together with the Common Equity Tier I it composes the Total Capital.

The table below shows the calculation of the capital ratios and their minimum requirement for the Financial Conglomerate, required by the current regulation in Brazil.

Financial Conglomerate		06/30/2023		12/31/2022
Regulatory Capital		1,615,103		1,091,675
Tier I		1,394,793		905,782
Common Equity Capital		1,232,284		769,640
Additional		162,509		136,142
Tier II		220,310		185,893
Risk Weighted Assets (RWA)		8,005,724		5,106,361
Credit Risk (RWA CPAD)		5,970,343		3,958,772
Market Risk (RWA MPAD)		76,230		70,159
Operational Risk (RWA OPAD)		1,959,151		1,077,430
Minimum Capital Required		840,601		536,168
Excess margin		774,502		555,507
Basel Ratio		20.2%		21.4%

 

 

ii) Nu Pagamentos

The subsidiary permanently maintains its shareholders' equity adjusted by the income accounts in an amount corresponding to, at least, the highest amount between i) 2% of the monthly average of payment transactions carried out by the subsidiary in the last 12 (twelve) months; or ii) 2% of the balance of electronic currency issued by the Nu Pagamentos, calculated daily.

 

 

The table below shows the calculation of the capital ratio for Nu Pagamentos, in accordance with current regulation in Brazil.

Nu Pagamentos		06/30/2023		12/31/2022
Adjusted Equity (a)		1,704,547		1,135,199
Max Amount (b)		4,908,226		3,923,171
Monthly average of payment transactions		4,908,226		3,923,171
Balance of electronic currencies		967,017		1,492,236
Capital Ratio (a/b)		34.7%		28.9%

iii) Nu Mexico Financiera

Nu Mexico Financiera’s capital management aims to determine the capital needed for its growth and to plan additional sources of capital, to permanently maintain its Regulatory Capital higher than the requirements defined by the CNBV.

As of June 30, 2023, its regulatory capital was equivalent to US$468,029 (US$470,092 as of December 31, 2022), resulting in a Capital ratio of 42% (49% as of December 31, 2022), with 10% being the minimum required for Category 4 SOFIPO.

 

33. SEGMENT INFORMATION

In reviewing the operational performance of the Group and allocating resources, the Chief Operating Decision Maker of the Group (“CODM”), who is the Group’s Chief Executive Officer (“CEO”), reviews the consolidated statement of profit (loss) and comprehensive income (loss).

The CODM considers the whole Group as a single operating and reportable segment, monitoring operations, making decisions on fund allocation, and evaluating performance. The CODM reviews relevant financial data on a combined basis for all subsidiaries.

The Group’s income, results, and assets for this one reportable segment can be determined by reference to the consolidated statement of profit (loss) and other comprehensive income (loss), as well as the consolidated statements of financial position.

a) Information about products and services

The information about products and services are disclosed in note 6.

 

 

b) Information about geographical area

The table below shows the revenue and non-current assets per geographical area:

		Revenue (a)								Non-current assets (b)
		Three-month period ended				Six-month period ended
		06/30/2023		06/30/2022		06/30/2023		06/30/2022		06/30/2023		12/31/2022
Brazil		1,305,670		761,811		2,396,229		1,374,242		612,353		551,668
Mexico		89,224		42,808		169,736		69,988		32,825		17,610
Colombia		16,825		3,676		30,008		5,073		10,116		5,124
Cayman Islands		-		-		-		-		41,599		43,994
Germany		-		-		-		-		66		88
Argentina		-		-		-		-		-		46
United States		242		312		811		795		6,552		7,495
Total		1,411,961		808,607		2,596,784		1,450,098		703,511		626,025

 

(a) Includes interest income (credit card, lending and other receivables), interchange fees, recharge fees, rewards revenue, late fees and other fees and commission income.

(b) Non-current assets are right-of-use assets, property, plant and equipment, intangible assets, and goodwill.

The Group had no single customer that represented 10% or more of the Group's revenues in the three and six-month periods ended June 30, 2023 and year ended December 31, 2022.

 

 

34. NON-CASH TRANSACTIONS

 

	06/30/2023		12/31/2022
	US$		US$
Olivia's acquisition - share consideration	-		36,671
Shares issued to service providers (note 30a)	21,533		-

 

 

35. OTHER TRANSACTIONS

 

a) Accounting for crypto-assets - Staff Accounting Bulletin No. 121 ("SAB 121")

In March 2022, the Securities and Exchange Commission ("SEC") released Staff Accounting Bulletin (SAB) 121, which addresses the rights and obligations of the parties to a crypto asset safeguarding arrangement. SAB 121 explains that an issuer that has obligations to safeguard digital assets held for their platform users should recognize those digital assets as an asset and a liability to return them to the customers, both of which are measured at fair value.

 

 

In June 2022, the Group launched a platform, through its subsidiary Nu Crypto Ltda. ("Nu Crypto"), which allows clients to trade crypto assets, in partnership with a specialized broker. The custody activity is performed by the broker, which holds the cryptographic key information, and the Company's contractual arrangements state that its customers retain legal ownership of the crypto; have the right to sell or transfer the crypto assets; and also benefit from the rewards and bear the risks associated with the ownership, including as a result of any crypto price fluctuations. The Company maintains an internal recordkeeping of the crypto assets held for the customers.

The Group concluded that its activities may create crypto-asset safeguarding obligations (as defined in SAB 121) to its customers as a result of certain technological, legal and regulatory risks and, therefore, it should record a safeguarding liability and a corresponding asset at the fair value of the crypto assets held by customers on the Group’s platform.

The following table summarizes the balances relating to crypto assets held for customers. For the purpose of these unaudited interim condensed consolidated financial statements, which were prepared specifically to meet CVM requirements, the asset and liability have not been recognized.

		06/30/2023		12/31/2022
Fair value of the crypto assets held for customers		33,568		18,313

 

 

 

 

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	Nu Holdings Ltd.
	By:	/s/ Jorg Friedemann
		Jorg Friedemann Investor Relations Officer

 

Date:  August 11, 2023

 

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