Nubank hits record profit as foreign investors flee Brazilian stocks

Brazil wakes up this Friday facing a contradiction that neatly captures the country's current moment: while Nubank posts the largest quarterly profit in its history, the accelerating exodus of foreign capital from the stock exchange has deepened to levels unseen in years, pressuring the currency and exposing the fragility of a market that, until April, seemed to have regained the favor of global investors.

Nubank, whose shares trade on the NYSE under the ticker NU, reported net income of US$1.061 billion in the second quarter — 49% year-over-year growth and a result 10% above market consensus. Return on equity reached 33%, compared with 28% in the same period of 2025, driven by the combination of falling credit costs and expanding risk-adjusted net interest margin, which rose from 9.5% in the first quarter to 12.4% between April and June. CFO Rob Livingston described the moment as "magical" to Brazil Journal. The company's shares surged around 9% in US after-hours trading. It is a result that could hardly be more timely — or more out of step with the broader mood of the Brazilian market.

While Nubank celebrates, foreign investors have accelerated their withdrawal from local assets. According to Valor Econômico, the exchange registered outflows of R$4.7 billion in a single session — a volume not seen since April 2021. In August, foreign flows have already accumulated more than R$7 billion in outflows, and since April the negative balance has reached R$32 billion. The dollar closed Thursday up 0.27%, at R$5.191, pressured by this movement. The backdrop is the combination of geopolitical uncertainty — the war involving the US and Iran continues to disrupt energy markets and risk appetite — with domestic electoral noise that investors are beginning to price in. The exchange, which had hovered around 200,000 points in the first half, has given back a significant share of the gains accumulated with foreign capital.

Fiscal pressure complicates the picture. Congress approved on Wednesday legislation that expands spending outside the fiscal framework's limits in 2026, accommodating a series of sectoral benefits — for ethanol, fertilizers, rural producers, and even FIFA on account of the 2027 Women's World Cup — which, according to Valor Econômico analysis, raise total tax incentives to nearly 5% of GDP, contradicting a complementary law approved by Congress itself that capped them at 2%. In symbolic exchange, the government slipped into the text an article promising to contain the growth of certain expenditures starting in 2027. The market, however, does not appear convinced: the share of federal public debt tied to the Selic rate reached its highest level in 20 years, a direct reflection of investors' reluctance to extend duration in an environment of growing fiscal uncertainty. The National Treasury has been forced to issue an ever-larger volume of short-term paper indexed to the benchmark rate — currently at restrictive levels — to finance the government, increasing the debt's vulnerability to Selic movements.

Against this backdrop, this Saturday's maturity of approximately R$260 billion in Tesouro IPCA+ 2026 bonds injects a substantial volume of liquidity into the domestic capital market. The destination of these funds — whether reinvested in government bonds, funds, or risk assets — will be closely watched by portfolio managers in the weeks ahead.

On the external front, Brazil faces two heavyweight developments. The US government included the country on a list of more than 40 nations considered high-risk for so-called transshipment — the triangulation of Chinese goods to circumvent US tariffs. The news comes days after Peter Navarro, an adviser to Trump, accused Brazilian companies of forming an alleged cartel in US beef processing. In reaction to the 25% tariff on Brazilian exports announced in July under Section 301 of US trade law, Brasília formally initiated on Thursday the process of invoking the Economic Reciprocity Law against Washington, notifying the US government via Itamaraty and requesting diplomatic consultations. The escalation is significant and adds another risk vector to the business environment.

The second-quarter earnings season reveals acute sectoral tensions. Azul, which trades on Nasdaq under the ticker AZUL, swung from a R$1.3 billion profit a year ago to a loss of R$1.041 billion, with the average price of jet fuel jumping 61.8% in the quarter. The company cut seat supply by 10.6% and forecasts a further cut of around 4% in the third quarter before resuming growth in the fourth. Hapvida plunged 33% on the exchange after reporting a 95.8% drop in adjusted second-quarter profit, having wiped out R$14.3 billion in market value over the past twelve months — the result of compressed margins, elevated loss ratios, and growing litigation in the private healthcare sector. CSN posted a loss of R$773.1 million, nearly six times greater than in the same period of 2025, even with revenue growing almost 6%. Going the other way, Braskem swung from a R$267 million loss to a R$3.33 billion profit in the same period, benefiting from expanding petrochemical spreads in the international market — a remarkable result for a company that, according to Reuters, is internally discussing an extrajudicial reorganization filing to address more than US$10 billion in debts in Brazil, the US, and Europe.

The inversion of the footwear trade balance — with Brazil importing US$66 million against US$62 million exported in July, the first time in nearly three decades — crystallizes the advance of Chinese competition in domestic industrial segments, a trend also visible in the automotive market, where Stellantis's Jeep saw its SUV market share fall from 20% to 10% since 2022 in the face of the Chinese brand offensive. The Central Bank, in this context, imposed a new rule requiring 24-hour holds on crypto transactions above US$10,000 — a measure that displeases the sector but which analysts consulted by Folha de S.Paulo assess as necessary to align crypto market controls with those of the traditional financial system, especially after investigations revealed that Pixbet allegedly used crypto assets and offshore companies to conceal assets and evade taxes, leading the Ministry of Finance to preliminarily suspend the company's license.

In the coming weeks, the market will watch three vectors closely: the evolution of trade negotiations with Washington and any actual invocation of the Reciprocity Law; the pace of foreign outflows from the exchange and their impact on the currency as the electoral calendar approaches; and the government's ability to convince creditors that the 2027 fiscal signal is credible, particularly in a context where Congress has shown a voracious appetite for exceptions to the framework even in a pre-election year.

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**Nubank (NYSE: NU)** — The fintech reported a record net income of US$1.061 billion in the second quarter, growing 49% year-over-year, with ROE of 33% and a risk-adjusted net interest margin of 12.4%, beating market consensus by 10%; shares advanced around 9% in US after-hours trading.

**Braskem (NYSE: BAK)** — The petrochemical company swung from a R$267 million loss to net income of R$3.33 billion in the second quarter, with recurring EBITDA of R$5.25 billion versus R$427 million a year earlier, driven by the expansion of international petrochemical spreads; the company is simultaneously discussing an extrajudicial reorganization filing to address more than US$10 billion in global debts.

**Hapvida (B3: HAPV3)** — Shares of the healthcare operator plunged 33% after adjusted profit fell 95.8% in the second quarter, having wiped out R$14.3 billion in market value over the past twelve months, with the company signaling "high double-digit" price adjustments and cancellation of loss-making contracts totaling 947,000 plans.