Issues · Issue #002 · · ~3-minute read
19.5 cents vs 66 cents: what it costs to make a dollar
Nubank vs Bank of America vs Citi on efficiency, Nubank's new mid-market tier, and why one big bank's retail arm runs at 50 cents.
Good morning. Last week the big US banks reported Q3. A challenger that reported in August spends far less to earn each dollar of revenue than any of them. Today: what that gap really means (and doesn't), Nubank's play for the middle class, and a way of measuring cost you can apply on Monday.
🔍 The Big One: The 19.5% bank
The numbers. For every dollar of revenue, here's how much each bank spent on running costs in its latest reported quarter (Nubank Q2 2026; Bank of America and Citi Q3 2026):
- Nubank: 19.5 cents (its reported efficiency ratio for Q2 2026), on a record $1.1B in net income and a 33% return on equity (Nu).
- Bank of America: 66 cents (its reported efficiency ratio for Q3 2026): $19.7B of noninterest expense on $30.0B of revenue, for $6.9B in net income and a 12.6% ROTCE. Excluding a $1.2B regulatory settlement charge, the adjusted ratio was 62% (Bank of America).
- Citi: 58.5 cents (its reported efficiency ratio for Q3 2026): $13.95B of operating expenses on $23.8B of revenue, with an 11.5% RoTCE (Citi).
Why the gap is so wide.
- No branches, one core platform. Nu serves 139M customers across Brazil, Mexico and Colombia from an app. 83.5% of them are active monthly (Nu).
- High-yield revenue. Nu's net interest margin is 22.9%, driven by credit cards and unsecured loans. When each dollar of assets earns that much, the cost ratio looks small almost automatically.
- AI on the cost line. AI agents now handle more than 60% of customer-support conversations in Brazil "at or above human parity," and Nu's in-house model, NuFormer, runs underwriting on three loan portfolios (same source).
Why it's not a fair fight (yet). These are three ratios with different definitions and accounting regimes (Nu reports under IFRS, the US banks under US GAAP), and Bank of America's headline figure includes a $1.2B regulatory settlement charge that it excludes from its adjusted figures: the adjusted 62% is a non-GAAP measure. Its group ratio also includes a trading business and an investment bank, where pay is the main cost. Look at its Consumer Banking segment alone and the ratio is 50%: $5.8B of expenses on $11.6B of revenue, run through 3,531 financial centers (Bank of America). Nu's ratio also moves around: it rose from 17.6% in Q1 as marketing, real-estate and international costs landed in Q2. And a high-margin book carries higher credit risk: Nu's 90+ day NPLs were 6.9%. Even so, Bank of America's Q3 2026 net income ($6.9B, after the charge) was about 6x Nu's Q2 2026 ($1.1B). Scale still wins on absolute dollars.
Our take. The lesson for incumbents isn't "be Nubank." It's to find the parts of your bank where cost-to-serve is set by habit rather than by need. Servicing chats, card disputes and onboarding are where Nu's approach transfers best. Citi is the bank to watch here: its ratio improved from 64.7% a year ago (a quarter that included a one-off $726M goodwill charge), and it's aiming for 11–13% returns on the way to a 14–15% target (Citi).
🧮 Under the Hood: Where a challenger's profit actually comes from
| Nubank (Q2 2026) | Monzo (FY to Mar 2026) | |
|---|---|---|
| Headline | Gross profit $2.4B | Revenue £1.7B (+39%) |
| Mix | Credit 41% · Float (earnings on customer deposits) 34% · Fees 25% | Four streams each above £300M: account balances, borrowing, payments, wealth |
| Customers | 139M | 15.2M |
| Growth engine | Primary-bank relationships; deposit costs at 88% of interbank rates | About 79% of new customers came via word of mouth |
Sources: Nu Q2 2026; Monzo Annual Report 2026.
Read-across: both have stopped being "card plus app." The float line, the interest earned on customers' deposits, is the underrated one. It pays off only once customers have their salaries paid in, which is why both compete for main-bank status.
🚀 Launch Pad
- Nubank Croma (Brazil). A new tier for what Nu calls "Super Core" customers. It comes with a Platinum card (0.8% cashback), 5% back on 28 subscription services, savings yielding 120% of CDI (Brazil's interbank benchmark rate), and a R$39 monthly fee waived if you spend R$4,000 a month on the card or keep R$30,000 with Nu (Nu). So what: the fee exists mainly to be waived. It's a reason to move more of your spending and savings to Nu.
- Nu becomes a bank in Mexico. Nu launched its bank in Mexico in August with 16M customers, making it the country's largest digital bank. Mexican customers are generating revenue faster than Brazil's did at the same stage: $12.3 vs $5.6 in average revenue per active customer (Nu).
- DBS's assistants start doing things. DBS Joy can now complete tasks for 350,000 corporate users in Singapore. DBS said a phased rollout to more than 100,000 corporate users in Hong Kong would start on 26 September. In Singapore in the first half of 2026, Joy's active users rose 61% and calls and emails to customer service fell 7% (DBS; DBS HK). So what: this is AI in corporate banking, where, in our read, there are few assistants at all, let alone ones that can act.
📘 The Playbook: Measure cost where the work happens
Bank of America's group efficiency ratio was 66% in Q3 2026. Its Consumer Banking segment ran at 50%, with a 31% return on allocated capital (Bank of America). One number hides the other. Our read: the same release hints at where that retail cost line is heading:
- Fewer branches, more digital sales. Financial centers fell to 3,531 from 3,649 a year earlier, while 71% of Consumer Banking sales were digitally enabled and 24.2M clients actively used its Erica assistant, up 18% (same source).
- AI spread wide, not deep (our read). "With more than 200,000 teammates using AI tools and 300-plus approved use cases across the company, we are turning our scale into a competitive advantage," said Chair and CEO Brian Moynihan (same source).
How to adopt it. Stop debating your group cost-to-income ratio and split it by segment, then by process: onboarding, servicing, disputes. For each one, ask what share now runs through a digital channel. The segment with the highest ratio and the lowest digital share is your first target.
🛰️ The Scout: Tokenised deposits and a stablecoin
| Region | What launched | Why it matters | Adoptability (Banks / Fintechs) |
|---|---|---|---|
| APAC | OCBC and Ant International launched 24/7 tokenised SGD and USD deposits for treasury between Singapore and Malaysia (OCBC) | Treasury cash moves outside cut-off times and batch cycles | 3 / 2 |
| Middle East | This month, Ant International became the first Middle East client of HSBC's Tokenised Deposit Service, after pilot transactions from the UAE to Hong Kong and Singapore (Ant International) | Tokenised-deposit networks from different banks are starting to connect | 2 / 2 |
| Americas | Fiserv's digital-asset platform went live with Bank of North Dakota's Roughrider Coin, a stablecoin that 90+ in-state banks and credit unions reach via Fiserv's commercial online banking (Fiserv) | Small banks get stablecoin rails through the Fiserv online-banking system they already use | 4 / 2 |
Adoptability: 1 = hard to adopt, 5 = could ship next quarter. Our editorial judgment.
🌏 APAC Desk: DBS lends to AI, mostly with other people's money
DBS has originated about S$25B of AI-related deals this year, often as lead manager on syndicated loans, and kept only a fraction on its own books, CEO Tan Su Shan said, according to Bloomberg (Bloomberg via Yahoo Finance). Why it matters: arranging loans and selling most of them on earns fees without tying up much capital. It also limits DBS's exposure if, as she said, the market is repricing AI risk. Q3 results are out 5 November.
🔢 Number of the week: 60%+
The share of Nubank's customer-support conversations in Brazil now handled by AI agents (Nu).
Poll: What's the biggest blocker to a lower cost-to-income ratio at your bank? Legacy tech · Branch network · Regulation/compliance · Org structure · Culture
Behind the Bank is independent analysis based only on public sources, linked throughout. Nothing here is investment advice. Spotted an error? Hit reply. We publish every correction.