In August, Nubank reported that NPLs of 90 days or more reached a record 7% during the second quarter. The vast majority of these NPLs are in Brazil, Nubank’s home market and its largest. It has smaller businesses in Mexico and Colombia.

Bloomberg said in a report published earlier this month that Nubank’s payments of 90 days or later are significantly higher than the 5.5% average for the banking sector calculated by Brazil’s central bank. “The discussion on credit quality made us decide to follow this from a little further away,” Fernando Fontoura, a portfolio manager at Persevera Asset Management in Sao Paulo, told Bloomberg. Persevera unloaded the Nubank shares it held in June as the position became “crowded,” Fontoura said. Meanwhile, both JPMorgan Chase and UBS recently downgraded their outlook for the online lender to neutral in July, citing deteriorating asset quality.  

In a written response to questions from Bloomberg, Nubank said its strategy has resulted in increased revenue and greater resilience, “more than offsetting the higher delinquency rates that come with it. It added “When we identify an asset class or customer segment with compelling risk-adjusted returns that also encourages responsible customer behavior, we actively pursue growth in these areas.”

For their part, investors do not seem worried about bad debt at Nubank. The company’s stock price has risen 1.6% over the past month, 19.6% over the past six months and almost 113% over the previous year. Investors are likely looking at Nubank’s strong fundamentals, especially its significant scale and ability to be profitable – in contrast to most digital banks – and figuring that the NPL issue is a bump in the road.