Q3 2022 Nu Holdings Ltd Earnings Call
Good afternoon, ladies and gentlemen, welcome to New Holdings conference call to discuss the results for the third quarter of 2022.
He's like presentation is that accompanying today's webcast, which is available in news Investor Relations website, Www Dot investor stock Newt in English and Www to English and already spoke to note in Portuguese.
This conference is being recorded and the replay can also be accessed on the company's IR website.
This call is also available in Portuguese.
To access it you can press the globe icon on the lower right side of your Zuma screen and then choose to enter the Portuguese film.
After that select mute original audio.
But as this hand, Nossa <unk> fittings in Portuguese clicking a week when you do global hour loudly if any what did you say to that hotel on zoom you sell a Sony Hope soon Portuguese Brill.
I was just I don't know Massawa Sitka peak C. Jammu's Todd why would you do as you know.
Please be advised that all participants will be in listen only mode.
You may submit online questions at any time today using the Q&A box on the webcast.
I would now like to turn the call over to Mr York, Friedman Investor Relations Officer, and New Holdings you May proceed.
Thank you very much operator, and thank you all for joining our earnings call today.
I have not seen our earnings release, a copy is posted in the result center section of our Investor Relations website.
With me on today's call are now this Atlas, our founder and Chief Executive Officer, and Chairman user Flores, our president and Chief operating officer and get them reliable, our Chief Financial Officer. Additionally, Jagged do go our chief product officer will join us for the Q&A session of the call.
Throughout this conference call, we will be presenting no <unk> financial information, including adjusted net income.
These are important financial measures for the company, but are not financial measures as defined by <unk>.
Reconciliations of the company's no Iff's financial information.
Formation to the Ifr as financial information are available in our earnings press release.
Unless noted otherwise all growth rates are on a year on year FX neutral basis.
I would also like to remind everyone that today's discussion might include forward looking statements, which are not guarantees of future performance and therefore, you should not put undue reliance on that.
These statements are subject to numerous risks and uncertainties and could cause actual results to differ materially from the company's expectations.
Please refer to the forward looking statements disclosure in the company's earnings press release.
Today, our founder and CEO , Doug the Dallas, we will discuss the main highlights of our third quarter 2022 results and some of the opportunities ahead.
Sequence Lee <unk>, our CFO and user Flores, our president and COO will take you through our financial and operating performance for the quarter after which time, we will be happy to take your questions.
Now I would like to turn the call over to that view.
Please go ahead.
Thanks sure.
Hello, everyone. Thank you for being with us today I'm.
I'm happy to share that no turn in another strong quarter.
Our nine year history as a company we have already seen a lot we saw a GDP contraction of 7% during the year. So if 2015 2016, the largest recession in Brazilian history, we saw presidential impeachment, we start Ryan and governments and left leaning governments communist going across the three countries we operate.
And today, we see a slightly more volatile environment than we saw in 2021, which brings a bit more caution, but theyre also creates opportunities to continue capitalizing on our long term fees into remains intact. The future of financial services will be built by technology conference and we're in the lead position in Latin America, one of the largest regions into work.
<unk>.
Today, we're happy to report that during the third quarter no reported breakeven at the holding level posting a net profit of $7 8 million and an adjusted net profit of $63 1 million.
While growing revenue at 171% year over year, and welcoming more than 5 million new customers, becoming the sixth largest financial institution in Latin America by number of active customers.
This mix of growth and profitability showed where being able to balance appropriately the significant growth opportunity. We have ahead, while strengthening the earnings fundamentals of our business model we.
We will continue to reinvest our profits to fuel our growth and long term value creation.
During the third quarter, we continued to see progress among all of our main business metrics. We passed 70 put 4 million total customers across all three countries, while seeing our activity rate per customer increased to a new high of 82%.
Our purchase volume grew 75% year over year to $21 2 billion.
<unk>, reaching a market share of 12% in Brazil.
And while we have increased the level of resilience of our credit underwriting to account for the more volatile macro environment, our credit portfolio was still able to grow 83% year over year to $9 7 billion.
While being fully funded by our owned retail deposits that grew to $14 billion.
While our business opportunity started by unbundling financial services through a fully digital strategy or current imperative is to re bundle and build a diversified multi product multi country and multi segment platform.
Our customers actively tell us that they wanted to consolidate their entire financial lives with new and so these were bundling continues to progress at an accelerated pace driven by significant access and demand from our base and now accounts for about 40% of that a population of Brazil.
Let me share with you our progress on each of these fronts.
We have been able to develop and launch innovative products that are fundamentally better than what one could finding the markets in which we operate always looking to have the highest net promoter score in every category we choose.
The velocity with which we develop and launch new products has accelerated recently as we invest significantly in your own technology platforms and ways of working.
As you can see on this chart active users are growing in almost all of our products in a double or triple digit year over year basis.
New products continue to pass even more interest figures for instance, personal loans had a 279% increase in active customers over the past year or.
Or active SME accounts reached $1 3 million, an increase of 117% in a year.
<unk> customers expanded 148% year over year.
And finally, our recently launched <unk> product has grown to $1 3 million active customers less than six months after launch.
Notice that a lot of this growth is driven by the secular trends of digitization of the economy and products that solve real customer payments and have little to do with the economic cycle.
We're still at the early stages of strengthening our platform with products that will further support or product cross sell strategy and our revenue accretion we will continue to manufacture our own products, where we believe we can be the best in class product manufacturer and like their unit economics, but we will also continue to leverage our product partners to complement our scale.
Sets and balance sheet whenever applicable.
Our forthcoming launches include collateralized loans savings accounts in Mexico, and financial planning tools, among others that will make our platform have an even stronger value proposition for our customers.
The second key pillar of our business model is expanding or multi country platform. We believe the strength of our technology platform has positioned us favorably to cross borders effectively and efficiently innovating our retail banking growth internationally.
Together, Mexico, Colombia can be bigger than Brazil for us and we're growing in those markets faster than we grew in Brazil.
We could not be more excited with the early success of our multi country strategy.
We have already become the number one issuer of new credit cards in both Mexico, and Colombia, and the growth has not shown any sign of slowing down although.
Although impressive already client uralic tends to accelerate down the road.
Once we launch or deposit taking products in each of Mexico, and Colombia customer growth is expected to experience step change increases as we have seen in Brazil.
And this change has to happen in both countries over the course of the coming year.
The third pillar of our platform is to advance into multiple client segments all at once.
Customer pain across all segments.
We wanted to highlight this point here as we have heard from many investors a fair amount of confusion as to who the typical new bank customers.
You can see from the demographic breakdown of our current customer base presented in this slide we have made strong inroads across all demographic segments in Brazil.
In fact, our customer segment distribution is similar to those of incumbent banks in the country highly.
Highlighting our significant potential to expand further or average revenue per active customer or artwork as we invest in our roadmap.
So at the end of Q3 2022, or ARPA was only one fifth the average art Peck of Brazilian incumbent banks, which create significant upside in our monetization plan as we continue our product diversification.
Notice also that 8% of our customer base belongs to the high income group, which is similar to other major financial institutions in Brazil, and also provides good diversification through more challenging macroeconomic cycles.
I want to remind you that everything we built to date started from a principle of building the absolute best product in each category.
We believe that in a more competitive environment customers can finally choose the very best product experience. This simple insight continues to be our north star is a comforting.
This is best captured by our net promoter score metric, which after almost a decade of our foundation continues to command indisputable leadership across all of the markets in which we operate.
We believe this metric is a leading indicator for growth and then for profitability.
We have delivered a strong customer experience that engendered unique loyalty levels among our clients.
We chose to make customer experience, where most important marketing investment.
It has worked well across Brazil, Mexico, and Colombia <unk>.
70% to 80% of our 70 million plus customers have come to new organically, mostly through word of mouth proving that our formula continues to be effective.
We believe to have achieved DAU over MAU ratios of leading social media players above 50% as can be observed in this evolution chart.
In our view this demonstrates the opportunity we have to build a powerful and comprehensive consumer platform evolving from a digital banking offering.
A very large and engaged consumer base enables a lot of future optionality in the ecosystem as we go beyond financial services.
We're excited with these opportunities and the roadmap ahead of us over the coming years.
With that I would like to pass the floor to our CFO , Jeremy <unk>, who will walk you through more details of our results. Thank you.
Many thanks and good evening, everyone before reviewing our third quarter results, let's recap on the key elements of our simple powerful and value generating formula first is expanding our customer base across our chosen markets, Brazil, Max clinical Olympia and quick.
Fully converting acquired customers into active ones.
Second is expanding average revenue per active customer or our pack through both cross sell and up sell.
Third is delivering growth, while maintaining one of the lowest cost operating platforms in the industry with this in mind, let's look at the third quarter results and see how well this three elements are generating value.
With regards to customer acquisition, new continues to grow at a steady pace, adding $5 1 million customers. During the third quarter importantly, we have been achieving this mainly through organic channels with very low customer acquisition costs, while maintaining the same level of net additions.
From the two previous quarters.
This brought total customers to over $70 million by quarter end.
46% year on year increase.
Further we are seeing faster and sustained growth rates in Mexico, and Colombia, which together accounted for approximately 500000, new customers in this quarter.
But we are not in the business of simply collecting customer accounts.
We're succeeding in driving monthly activity rates higher.
Average day rose to 82% up from 73% a year ago and 80% in the prior quarter.
This marks the 10th consecutive quarter of higher customer activity further evidence of our ability to continue expanding news ecosystem, while driving customer engagement, we estimate that the news now the fifth largest financial institution in Brazil, and the number of active customers and the six.
Largest financial institution in Latin America, using the same concept.
On this slide we showed the compounding effect of our ability to drive engagement and cross and upsell products. As we have stated in the past. These charts show the evolution of our customer cohorts, namely increasing engagement of our customer base and a higher number of products per.
Active customers that are both driving ARPA growth.
Why are we reached a monthly <unk> of $7 $9 in the third quarter's mature cohorts are already at $22, we expect higher opex as our customer cohorts continue to mature and we had both new products and features to news ecosystem.
Higher engagement combined with more products sold per customer have been significant drivers of our ability to monetize news expanding customer base. This is reflected in our <unk> expansion that contributed three digit year on year revenue growth as you can see on the next slide.
The compounding effect of a growing number of active customers and higher levels of product upsell and cross sell enable us to grow monthly art Peck, 61% year over year on an FX neutral basis and to deliver another quarter of strong annual revenue growth.
Revenue grew 171% year over year on an FX neutral basis to over $1 $3 billion a record high.
While monthly architect has expanded gradually as you can see in the left chart. We believe there is a still long way to go to reach our full <unk> potential as David highlighted previously we have a growing customer base that resembles the income distribution of clients from incumbent banks.
While running at a fraction of their opex, we have the ability to increase our opex with both credit and noncredit products with both products manufactured by new end products offered by our product partners.
Beyond the substantial upside we see in our our Peck keep in mind the significant advantages of our low cost operating platform that enables us to serve customers with lower opex levels and still produce very healthy unit economics.
Turning to our card business, we continue advancing on this front with purchase volumes up 75% year over year on an FX neutral basis to $21 $2 billion. There's a strong performance also reflects more product cross sell upsell and.
Sustained customer engagement importantly, the vast majority of our credit card book comes from back book that is customers. We have acquired in the past periods.
After our customers complete 24 months of relationship with new their credit car average spending in our platform usually triples, while their total average spending usually doubles and this should continue driving market share gains as we mature new cohorts in fact, our market share in <unk>.
<unk> volume increased once again this quarter and is already running at approximately 12% of the total for the industry.
Our consumer finance portfolio, which comprises credit cards and personal loans expanded 83% year over year, bringing our total credit book to $9 $7 billion accelerating versus the previous quarter. Despite two headwinds.
First <unk>.
Sex negatively impacted the balance figures on an FX neutral basis. However, our credit book would have increased by around $900 million during this quarter or approximately nine 7% quarter over quarter.
Second or originations of personal loans continue to be contained at similar levels of the previous quarters. As we had indicated in our previous earnings call in August to go off this more duration is strengthening our credit and resilience in light of a more uncertain short term outlook for the Brazilian economy.
Given the short term durations of these loans.
Similar origination levels yields stable balances simply because they originate that volume is being offset by the amortized loans in the period.
Let's now review in more detail the evolution of our credit card portfolio and originations of personal loans.
As discussed last quarter, we have been intentional in our strategy of closing the gap of our interest earning per fall U or IEP versus the market.
This has occurred and should continue to occur as the year transactions off installments with interest as you can observe in this chart IEP, our ryzen from installments, including those related to new financing features such as finance banks leaps purchase financing and peaks credit has outpace.
This growth in IEP from revolving loans.
Does this strategy might add risk to our book, but has been paid off in terms of risk adjusted margins as we will demonstrate in the coming sections.
Moving onto origination of personal loans as we noted in our previous earnings call.
As of all originations in personal loans is closely tied to the short term outlook for the Brazilian economy, and the credit performance of our cohorts, we have kept our originations and pricing levels relatively constant this past quarter and continue to accrue healthy unit economics across all of our cohorts.
Beyond the short term dynamics, we remain confident in our ability to expand our lending portfolio we.
I believe we have the best product in the market our customers already account for one third of the personal loan market in Brazil, and we have plenty of capital and liquidity to deploy most credit conditions improve.
In other words, the only bottleneck for our growth in personal loans is our own credit risk appetite.
Advancing on our strategy to build a robust local currency deposit franchise and lower funding costs, we expanded our deposit base by 73% year on year on an FX neutral basis closing the quarter with a total deposit balance of <unk>.
$14 billion and our loan to deposit ratio of 25%.
A reminder, that this happened together with two important initiatives that took place in July .
First the launch of the money boxes, which are investments targeting tools aimed at customizing deposits. According to specific goals with different income auctions and second the repricing of our short term deposits, which will no longer be reiterated at 100% up the Brazilian interbank deposit.
Right <unk>.
<unk> is withdrawn before 30 days.
On an FX neutral basis deposits would have grown $1 $1 billion quarter over quarter or almost 2 billion reais per month, using the average exchange rate for the period, implying no meaningful accretion post the launch of the money boxes and the subsequent changes on that.
The remuneration for short term deposits implemented in July .
The successful rollout of does this strategy can also be noted by two additional important data points.
First as you can note in the chart on the left hand side of this slide funding costs started to come down already during the third quarter in fact during the month of September .
Average funding cost already had reached 91% and this should continue to decline during the coming two quarters until it reaches a new normal.
Second until the end of September only two weeks after the completion of the rollout more than one 7 million New bank customers had created approximately $2 5 million money boxes with total AUC in the twos amounting to almost $300 million.
Together with the growth of our credit portfolio. The gradual decrease of our cost of funding impacts another important metric of our business. Our net interest income or NII reached $527 million this quarter growing 18%.
Quarter over quarter or 25% on an FX neutral basis, as we expand our credit portfolio, we optimize the use of our large and low cost deposit base and expand our net interest margin or NIM as can be seen on this chart. We have achieved a mean of 11 one.
<unk> this quarter versus nine 7% during the last quarter and seven 7% during the third quarter of 2021.
As we have pointed out one of the key competitive advantages of our platform is its very low cost to serve.
The average monthly cost to serve remains stable at about 80 cents.
While our monthly <unk> expanded 61% year over year and reached seven $9 demonstrating the strong operating leverage of our model.
Looking ahead as we said in the past quarters, we expect our cost to serve to be maintained below the dollar level. As this scale gives us significant operating leverage and bargaining power with our partners.
Moving down the P&L, we delivered another quarter of record high gross profit up 90% year over year on an FX neutral basis to $427 million. This quarter, we started to observe an inflection in our gross.
Fit which after four quarters of compression.
Or is it to increase once again, an expanded two percentage points to 33%.
Operating leverage is a key element of our strategy as we continue to grow revenues, we further dilute our low cost operating platform driving better profitability.
As shown on this chart, we have consistently improved our efficiency ratio over time down to 55, 1%. This quarter from 91, 6% in the first quarter of 2021, and 58, 2% last quarter.
We expect this trend to continue and compound over time as we scale up the business. This should be mostly driven by the fact that the majority of our operating expenses is personnel related and we should expand head count at a slower pace over the coming quarters compared to the previous quarters.
Where do we where staff in our local geos.
Moving onto the bottom line, our recurrent profitability confirms again that we are on the right path with our earnings generating Formula. We've reported net income was $7 $8 million. This quarter adjusted net income was $63 $1 million.
Both reflect the combination of the higher customer engagement that we have been emphasizing and the operating leverage of our platform that has started to kick in.
However, we will continue to manage the company for the long term and pursue new business opportunities.
The execution of this strategy may require us to make additional investments in the short term.
Sequentially postponing profitability ramp up.
We will believe does this how we optimize for the long term value creation for our shareholders given the number of profitable growth Optionality as we have at hand.
To sum up this quarter, we have continued to observe strong early signs of the operating leverage in our platform and it's important to reemphasize that despite our undeniable growth orientation, as we expand into new product verticals, new markets and new segments.
We keep a tight look into the profitability levers of the business model.
We will never abandon our cost diligence as we firmly believe that digital banking, it's even more a play of costs than off revenues and then the long term winners in the lots and American financial services industry will be tech enabled companies with the lowest manufacturing costs, which at the same.
<unk> are able to create the highest rated products that consumers love.
In this context, I would like to revisit our four cost pillars and emphasize our competitive advantages.
First we continue to have one of the lowest acquisition costs in the industry with very limited paid marketing.
This is a result of having more than 70% of our customers coming from referrals and word of mouth.
Second our cost to serve there is 85% lower than that of incumbent banks.
As the result of our being a true technology company conceived under modern lean agile and scalable platforms.
Third significantly better cost of risk compared to the industry in the products and segments in which we operate on a like for like basis is Yousef will demonstrate next we believe to have NPL ratios, 30% lower than those of the industry.
Fourth.
As we are also fully funded with retail deposits at a cost below the interbank rate, our 25% loan to deposit ratio one of the lowest in the industry is a statement of the trust and engagement from our customers and we should become even more competitive I had on <unk>.
Cost of funding as we captured the benefits of the recent repricing of deposits and the launch of money boxes as well as we implement the savings checking accounts products in Mexico and Colombia.
Now I would like to turn the call over to Youssef, Our President and Chief operating Officer, who will walk you through our asset quality performance.
Thank you logo.
Let me now go over some key indicators of asset quality and overall credit portfolio for the third quarter of 2022.
Okay.
Let me begin with overall NPL trends.
The lead indicator NPL 15 to 90 increased by 50 basis points quarter over quarter to four 2%.
This was driven by two main factors.
The deceleration in personal loan origination volumes, which increased NPL for this product due to the so-called denominator effect.
In fact this accounts for most of the NPL increase for personal loans this quarter.
And second a general macro trend deterioration, which affected the broader market as evidenced by other financial institutions that have already reported this quarter.
Okay.
90, plus NPL ratio increased from four one to four 7% under the new write off methodology, we adopted for personal loans.
For ease of comparison, we are providing additional analyses in the next few slides showing the trends under our previous write offs methodology for our consumer Finance book.
I would also like to address potential misconceptions, we have heard in the market related to the nexus between our delinquency metrics in credit cards and personal loans.
First the personal loan product is originated exclusively through cross selling to existing new bank customers. So.
Only the customers about whom we have accumulated prior credit underwriting data.
Customers, who are delinquent on a credit card product are not eligible for a personal loan product.
If you are late with any payment obligations and credit cards, you cannot obtain a personal loan.
Second all renegotiations in refinancing, which happened in credit cards remain and are accounted for as credit card receivables the same applies to personal loans.
There are no transfers of receivables or financing from credit cards personal loans or vice versa.
Third we have not sold any receivables in any of our credit portfolios.
Therefore, the NPL metrics presented here fully reflect the inherent individual performance of the credit card and personal loan products.
This chart shows two important pieces of information about our credit card book.
The sixth graph showing the time series of NPL by income Bad where the purple line represents new and the Gray line represents the industry.
And on the right hand side, the breakdown of credit card balances Bank command again, comparing new to the industry.
As you can see news balances are more skewed towards the lower income segments than the industry.
This alone should cause our npls to be higher than the industry because of this different mix.
Yeah.
However, as you can appreciate on the aforementioned six grafts, we have consistently outperformed the industry in each <unk>.
And even more importantly, the lower the income band the more pronounced our comparative advantages.
Furthermore, when you look at the trend over time, you see that the gap has been widening for each income band.
In other words, our competitive advantage and underwriting is consistent and sustained and in fact, increasing over time and across segments.
Okay.
When we compare our consolidated consumer finance portfolio, including both credit cards and personal loans on the same set of metrics, we observe a consistent set of trends.
This new chart was created by adjusting for the distortions caused by collateralized lines included in the personal loans category, excluding payroll as reported by the Brazilian Central Bank.
We currently do not have any collateralized liner or loans in our book.
We estimate that the mix of these collateralized lines has increased significantly over the past two years and currently account for more than 25% of the personal loans category excluding payroll.
Without this adjustment any comparison of our consumer finance portfolio against the industry would be significantly biased.
And while our portfolio is obviously not immune to cyclical trends and deterioration. We are confident as this analysis demonstrates that we continue to outperform the industry on a like for like basis.
In fact, even when you replicate this analysis, we just showed on a lagged basis to adjusted growth, we still end up outperforming the industry by a factor of 30% on a like for like basis.
So the conclusion holds overtime across segments and on a growth adjusted basis.
To conclude this section let us now discuss provisions.
Okay.
Our provisions continued to grow primarily driven by the growth of our portfolio.
We frontload provisions when we originate loans based on the expected losses for the life of the credit. This is the core principle of <unk> nine expected credit loss methodology on which we base our accounting practices.
In addition, although npls have increased sequentially in the third quarter. It is important to note that the unit economics of all credit cards and all personnel on cohorts have remained strong and resilient as we continue to adequately priced the risk of our credit portfolio.
In fact, this can be clearly seen in the improvement of our risk adjusted net interest margin on this chart.
Even with the increase in our credit loss allowance expense, we have managed to increase our risk adjusted NIM to three 2% this quarter up from two 3% in the prior quarter and two 6% in the third quarter of 2021.
Okay.
Having shared these data and perspectives on credit and asset quality, Let me now turn the call back to our founder and CEO W. Denis for his concluding remarks.
Thanks Joseph.
To summarize our efforts this quarter on the basics of our thesis I would like to thank first a new continuous managing the company for the long term, while ensuring improvements in all of its business fundamentals.
During the third quarter, we continue growing our revenue in excess of 170% and gross profit of 90% year over year, while achieving positive net income at the holding level.
While the macro you have been more volatile and we increased resilience in our lending products. We also expanded net interest in gross margin, which shows where being able to price higher risk appropriately. While also seeing continued operating leverage.
Second our relentless focus on products that really server customers needs and are excellent and user experience continues to show up in net promoter scores that are virtually two times the average of incumbent players in the markets we serve.
NPS is a statement that we're customer centric by design.
Across different markets, we have delivered a strong customer experience that engender loyalty among our customers.
We chose to make the overall customer experience or most important marketing investments and this drove the word of mouth, the translated into customer growth and empowerment of our brands.
Third all of this was achieved by maintaining our growth levers intact. In fact, we have already achieved leadership positions in the most relevant Latin markets to a multi product multi country and multi segment business model.
We have become the sixth largest financial institution in the Tam by number of active customers achieve 12% market share in card purchase volume and became top issue of new cards in three countries we operate.
We're very proud of what we have achieved this past quarter and even more excited with what lies ahead of us in the coming quarters.
I would like to take your questions now thank you very much.
We will now start the Q&A session for investors and analysts if you wish to ask a question. Please press the reaction button and then click on raise their hand.
If your question is answered you can exited the queue, Mike leaching on put your handout.
Please limit yourself to one question and a follow up.
If you have further questions. Please re enter the queue.
You may submit online questions at any time today using the Q&A box on the webcast.
I would like to turn the call over to Mr Yard Friedman Investor Relations Officer.
Thank you operator.
Wait while we collected.
The call the questions.
And our first question comes from the line of quite of equity from Morgan Stanley .
Could you. Please open his line.
Hi, everyone.
Good afternoon, and congrats on the Great results. My question is on.
The origination of the personal loan book.
What visibility do you have.
On when that could accelerate.
Ed.
Fourth quarter first quarter is it sort of like more of a second half of next year.
Are you seeing that and how can we from the outside monitor or one or.
Are the kpis that you're looking at to call that acceleration or that risk appetite increasing thank you.
Yeah.
Hi, Jorge Thank you so much for the question. So we ended the third quarter with with all of our cohorts performing very well, including those of personal loans was quite robust and resilient unit economics.
This metrics remain healthy.
We have seen in the past quarter and at the beginning of the fourth quarter 2022, we may potentially increase the origination of personal loans.
This quarter's deal.
It's also important to know what hit that in 2023, we do expect to begin the ramp up of our secure.
Personal loan business.
Those off no investment banking loans payroll loans and <unk> loans. It is quite hard to foresee how fast this ramp up will happen, but we are super excited with the prospects of no complementing our unsecured consumer credit portfolio with a secured credit portfolios started in 2023.
Great well. Thank you that was very clear and congrats again.
Thank you and our next question comes from the line of Mario <unk> from Bank of America.
Hi, good afternoon, everybody congratulations on the results as well.
My question is similar to Jorge it's Mike.
Yeah.
When would you feel more comfortable in accelerating your growth because as you show right you have <unk>.
Better asset quality than your peers.
You are just new loans that you're originating.
Creating value, they're not destroying value as you showed that on a risk adjusted margins.
So I was wondering are you being too conservative in slowing down now why not be more aggressive since you have all these advantages and it seems to me like Youre pricing is similar to your peers.
Hey, Mike Thanks for the question.
I think we are we are basically trying to be quite disciplined in the way that we develop and ramp up on new products. So as you pointed out.
We are not constrained by the demand so all of our customers, which now account for about 39% of the adult population in Brazil. The equally accounts now for more than a third.
The personal loan market in the country. So demand is not a constraint our product has one of the best NPS is that exists in the market as the viewpoint it out.
The conversion seems to be quite quite healthy so our ability to deploy the best in class Providence convert it is not a constraint.
Capital and liquidity are equally not constraining factors. So is the single largest constraining factor for us to grow in personal loans and unsecured personal loans is really our conference with our no credit.
Youre right the prospects of the Brazilian economy. So we will watch it quite carefully we are very excited with the prospects, but we do believe that.
It would serve us better to be more disciplined at this point in time and accelerate when the market Sandoz better signals that we are more comfortable with our ability to successfully deploy.
More of those in this segment. It is however is no slight different from the stickier credit problems I think for secured especially payroll loans, if GTS in investment banking loans.
Thank the credit underwriting is less of a concern.
And our ability to ramp up those products.
Because trained by by that they mentioned.
Okay.
Can I ask the other question then related to your cost of funding Ryan you showed a 95%.
He has been improving you said during your remarks do you expect it to continue to decline in the next couple of quarters until it reaches a new level what is that new level. What is the sustainable level that you are looking for.
Yes, so just stepping back for one second so we started to deploy the new remuneration strategy for the quarter in mid July the ramp up very carefully for mid July into the end of September and only by the end of September .
Did we reach about 97% rollout so the impact of the lower funding costs.
Our financial results in the third quarter of 2022 are still relatively limited so our funding cost decreased in the quarter to about 95% of CDI I believe in September was down to about one.
1% of CDI.
Full impact will only be felt in the fourth quarter of the year most likely in the first quarter of 2023.
Really hard for us to draw any high conviction no direction on where this will end it will largely depend on the behavior of the consumers going forward.
So far we have been tracking the implications of this move to three dimensions to know.
Asset inflows NPS and engagement, we have not seen any material impact on that so we are very close to that this was the right move vertical to do and also for our customers.
I'm really not in a position module to provide you with a high conviction guidance on where this will end.
Okay.
We would look at it.
Traditional banks I think.
The cost of funding is closer to 60% CVI do you think.
Should eventually be able to reach a level similar to them or should you always kind of a higher cost of funding.
And then the incumbents.
I think 65 would be.
So big of a drop in our cost of funding I think for this first move in the reduction of our cost of funding I would expect something.
Between that and our current funding costs.
Okay. Thank you.
Got it.
Yes.
And our next question comes from the line of <unk> <unk> at Goldman Sachs.
Hi, good evening.
The REIT level and the use of thank you for the call and taking my questions and congratulations also on the strong results.
My question, a little bit of a follow up on the personal loans, but more just thinking from the asset quality perspective.
<unk> held up fairly well considering what we've seen in the market and in some some of the incumbent peers, but looking at the early Npls. They were up 50 bps.
In the quarter last quarter. They were stable you had mentioned that that was a good leading indicator.
For the outlook for asset quality and potential acceleration on your personal loan portfolio.
To get a little bit more color on that and I know part of the impact was because of the slower origination you mentioned and that impacted those early mpls.
But how do you think about that.
Going forward was it simply due to the slowdown in origination I don't know if you have color between like credit cards and personal loans with those early mpls. How do you think about early npls sort of evolving from here.
Hey, Tito. This is you said thank you for your question so.
As I mentioned in the earlier remarks.
Thinking about the.
Early NPL 15 to 90 day did increase by 50 basis points in the quarter and there were two drivers as you mentioned.
One driver was the deceleration in personal loan originations so called denominator effect.
There was a second driver, which is kind of broad based deterioration similar to what other players in the market has seen.
So it was a combination of those two factors principally no.
With respect to going forward.
No.
We are watching the performance of <unk>.
All our portfolios all of our cohorts there very closely.
And all of the three.
The macroeconomic backdrop into three markets in which we operate.
Given the uncertainty that we're going through it's really hard to give you any high conviction outlook.
Or going forward and for 2023.
What I can tell you with a high degree of conviction that we're we're very confident in our ability to monitor to take action quickly and to navigate the cycle as we have navigated prior cycles.
But we have relatively short duration credit portfolio, both in credit cards and personal loans and so we are confident that any actions. We take will be will have a high impact.
We reflected in the performance of those portfolios.
If anything the resilience.
Origination has decreased over the last two three quarters as a result of those actions you can see that in particular.
The increase in risk adjusted NIM.
That we should win.
The results presentation.
Great. Thanks, Steve.
Thats helpful.
Just to maybe explore a little bit.
Further both on is this something that you'll be monitoring to be able to accelerate the personal loan growth and the other thing that we've heard from incumbents anything you may have mentioned in the past that the NPL cycle could potentially peak I don't know if its <unk> early next year I mean, just in terms of.
When do you think you could be beyond the worst of it and I know, it's hard to predict.
Is it a quarter or two because they are very short term loans just to think about how long this credit cycle could potentially last.
Yes, yes.
Turning points, obviously hard to predict with any level of confidence or accuracy. So I wouldn't.
I personally wouldn't venture a guess as to when we will see the peak.
And when things will turn.
But again I can tell you that we're confident in our ability to when we see things evolving in one direction or another take action very quickly as we have over the last couple of quarters.
Okay.
Just to add here.
The big advantage of personal loan is a credit product and so as you say very short term duration very high very information rich. So we get to monitor the performance of this product in this portfolio really basically daily and are able to make decisions around acceleration or the exploration.
Most podcasts are the different portfolio, depending on where we get to see so I think this quarter has been much more volatility in this space is respected and so the programs that will show you as well.
<unk>, where we're absolutely in the low kind of seeing opportunities through accelerating certain parts of the portfolio and where they are ready to do that unless we start feeling a little bit more comfortable.
Great perfect. Thanks, Tavy, Thank you Sir.
And our next question comes from Thiago Batista UBS.
Okay.
Hi, guys.
Yes.
Yes.
Thanks for the results are very strong bottom line.
One question about the high income segment or the fluids segment.
Showing the slides and the bank has a very small presence.
<unk>.
Do you believe that this should be a focus of the bank going forward and how big this should be afforded a bank and if you believe new need to change the approach for the segment for instance, maybe have advisory for divestment or kind.
Kind of measure of floor.
The bank.
Business so.
If you believe this affluent segments should it be more of a relevant for new or not.
Yes. Thank you for your question absolutely. It is a big opportunity we have as you see that around 8%.
For our business our.
Around 66 million customers in Brazil that means we have over 5 million customers high income, which is a pretty sizeable percentage of <unk>.
That market segment.
Right now we don't tend to have we don't seem to be number one share of wallet for that customer segment a lot of the times just missing limits. So we tend to have too low of a limit for this customer segment or the product is missing certain attributes either as a credit card product or <unk>.
<unk> products and the investment side or the insurance side, so a lot of their focus over the past year.
Data has been about closing those gaps and theres been a lot of investments in us trying to figure out how do we limit or the higher income population is going to be a key focus for us next year as if we manage to take that share of wallet from customer.
<unk> up that actually move the needle pretty significantly for the portfolio and brands and as diversification also show.
I think yes.
You bring to bring up pretty big point in any type of strategic focus for us.
Thanks.
And our next question comes from Geoffrey Elliott from autonomous.
Hello, Thanks, very much for taking the question.
First just a quick clarification.
The slides.
On Npls by income they use the old <unk>.
Sales methodology to 360 days.
Both personal loans credit cards, but could you tell us what that.
NPL ratio the 90 day past due ratio would've been under the prior methodology.
For the whole portfolio relevant then.
Individually income fund.
Yes, Jeff this is useless and thank you for the question.
You're correct.
Slides that analysis is done on the basis of the old <unk>.
Methodology and just as a reminder, the principal difference between the old and new methodologies that for personal loans, we now right.
121 days delinquents.
We used to write off the 361 similar to credit cards.
So to your question.
NPL 15 to 90 would have been substantially similar up 50 basis points in the quarter.
Because there is relatively little impact of the change in methodology on early delinquencies as I mentioned 90 plus.
Npls would have decreased 130 basis points in the quarter why the larger increase.
You have to think about the fact that the difference between the two metrics and the old write off methodology is basically made up of all the personal loans.
Were 121, all the way up to 360 days delinquent.
That pool of loans is basically a reflection of the growth in the personal loan portfolio.
Between two and four quarters right because those are women delinquents between four and 12 months and.
Two and four quarters ago, our personal loan portfolio grew by about 50% as you can appreciate.
In.
The results presentation I believe it's page 15, which Michael went through so it's merely a reflection of the increase in the size of the book.
That would explain that higher increase in Naples.
Thanks for clarifying that and then just stepping back on the deterioration I appreciate it's broad it's happening.
The other banks.
In some ways, it's kind of confusing that this would happen now when you've gone.
Fuel tax cuts unemployment falling.
Silvio peso.
You bet.
For East what's your take on.
What's going on why there is this broader deterioration in credit across the industry.
Yes, it's a great question Jeff.
I think theres, a number of puts and takes and a lot has changed in the last year or so there's been normalization from very low levels of delinquency.
About a year or so ago.
There has been increase.
High levels of inflation and there's been changes in government assistance programs, which peaked in 2020.
Dropped a fair bit in 2021.
There is some view that it might increase again under the new administration. So theres a lot of puts and takes it up.
Things in different directions. So it's hard to pinpoint exactly what is the driver right now that we're that we're observing.
Great. Thanks Joseph.
And our next question comes from Marcello Telles from Credit Suisse.
Marcelo.
Hi, everyone can you hear me well no again, yes. So.
Bachelor shows on the on the on the very strong results.
My My question is with regards to two asset quality. It was very interesting to see.
Our asset quality performance.
Right from the the rest of the industry for those specific products so and.
It's interesting, especially in the context that when we see prices players kind of.
Pointing out a bit from the credit card.
Segment, such as bulk of the Brazil or Bradesco so can.
Can you explain to US why do you think.
As you know is make you so.
Different vis vis incumbent players.
Is it the amount of data you have.
On your clients, how we work with that data or is also the fact that you have you know a lot of clients that are really not open notion account.
Meaning clients that have accounts with no banks that have more transaction Alice so.
How should we think about the reasons.
Four.
For that better performance. Thank you yes.
Use it again here great question I'd say there are several factors that explain.
And then on the root of our underwriting capabilities as you mentioned there is.
Data richness.
Which it takes to form for the vast majority of our customer of not only external data, we get from credit bureaus, and the like but actual experienced in transaction data with us.
The vast vast majority of credit card customers.
Andy has.
Posit account, where we can serve and gather data on.
Their deposits there.
Activity.
100% of our personal loans customers come from cross sell so we already have not only deposit account and data, but also credit card experience and data so that it gives us a lot of rich.
Rich information on which to underwrite that's certainly a big big driver of it I would say we've also built over.
Over the last several years a lot of.
Discipline in terms of process and methodology that we use to monitor.
Our portfolios all the cohorts and take action and very rapid cycle, we built that process that methodology, but also the technology and the <unk>.
And the pipelines to be able to do that to be able to deploy new models in rapid fashion.
Fashion.
And.
Also a strong governance.
And credit culture in the company. So we focus a lot on maintaining discipline of resilience and returns we have multiple lines of levels of reviews whenever we make credit decisions.
It's a combination of several factors that we think are the root of that.
Ongoing testing I should say.
To make sure we understand.
All of the causal drivers of credit performance.
Overall returns.
Yeah.
Thank you.
Wanted to highlight one point that you just mentioned I think it is.
Important to highlight here, which is <unk>.
While let's say four five years ago, we were really giving credit cards to customers that we did not know since we started just with a credit card product today, we really are cross selling to our base of accounts.
Account holders, we have over 50 million account holders in Brazil, and only about 32 million of credit cards. So we get to really understand the financial situation of these customers.
About 55% of them, we become their primary bank account with their primary relationship.
And once they are servicing their salary and their accounts when we start paying once they start using pix, which by the way we were one of the largest players mixed in Brazil. Then that gives you a lot of information to get comfortable with given our credit card, which a lot of the times the gains with the loan limits and death.
The way that we manage our downside risks.
We begin with our loan growth strategy, let me start now and as we get to know these customer Marlborough. The next 612 months gross dynamically.
And in situations with March more volatility like the one we're today, we get to not increase limits or.
Increased us David small and so.
It really ends up being a different approach to anything come out to Phoenix at the market today that are really going after mono liners or they just have one product.
Our credit and then buy.
By default attracting at times a lot of adverse selection.
Thank you very clear and it's all allow me just a follow up you know with.
With one question kind of tied to two to this comes off the product cross sell.
<unk>.
When you think about you are much much lower customer is quite remarkable your I'm not sure customers now I think you have it on our pack off around $22, which I think is actually an increase from the $21 you had in the previous quarter. Despite the currency.
<unk> quarter over quarter. So what are the products that you know that you have to cross sell to get to that $22 off. This much for clients is just let's say more usage of the credit car or getting bigger credit card limits or maybe its insurers or the types of products. How should we think about the path towards that $22 <unk>.
So that is super good question.
I think when you look to the mature cohorts that we have today.
The majority of those Opex is basically composed by interchange off no prepaid cards and credit cards.
And with us very small yet penetration of personal loans going forward I think as we increased personal loan penetration in our base, both unsecured and secured.
<unk> amount of art Peck should actually be associated with this specific cross sell so why do we have seen is our Pac expansion as of today has been primarily driven by the up sell off credit cards, and prepaid accounts and prepaid cards and investments going forward.
Will it be driven by the cross sell of new products personal loans secured unsecured investments insurance marketplace, crypto and SME accounts.
Yeah.
Very clear, thank you and congrats again.
Yeah.
And our next question comes from the line of Federal Law.
<unk>.
Thank you so much good evening everybody.
Little bit on credit cards. Please so here on the personal loan.
<unk> and recall this being offered mostly to your credit card clients to better piece of it how is that making you think about credit cards, how you're adapting and as I think about.
Coverage ratios.
Your expected loss model, rather than being fed with new data.
Everybody's a little bit worse data.
Shouldnt it be resulting in higher coverage ratios for credit costs should we think about coverage going forward in this new.
The worst scenario. Thank you.
So.
Thanks for your question I think we have seen increases in individual coverage ratios of the balances that we have they actually went from about <unk>.
Nine 7% to 10, 6%.
The coverage ratios of credit cards have also gone up a little bit if you take a look at our the explanatory notes in our financial statements.
I think going forward, we are quite comfortable with the COVID-19 ratios that we have are both no personal loans and credit cards.
As the 90, plus Npls no begins to stabilize.
We think the overall coverage ratios of the industry and ours will start to converge back to normal pre COVID-19 levels.
But so far I think credit card cohort has gone up.
And overall coverage ratios are above 200%, probably going below 200% whats the 90, plus mpls stabilizes.
That's clear thank you.
Okay.
And the next question comes from the line of Rafael Friday at Citibank.
Hi, guys. Good evening I have a question about the slide 14. These expertise you show the breakdown of the transaction volume by prepaid cards and credit cards.
Other surprised by the size of it.
<unk> cards in the total transactional world I would like to understand how this translates to the credit card portfolio.
Credit card portfolio has more or less the same breakdown or not.
And a second question would be related to the interest bearing loans that there were a significant increase in.
The revolver lines on the total I would like to understand if this is something that.
It's by design, you're revoking this or it's related to the need for the clients do you use more revolving lines, so understand a little bit about this thank you.
No. Thanks for the question, let me, let me try to split them into so first I think on slides 14, and I think your second question is probably more related to slide 16, but I think for the first question. What you have seen here is.
The evolution of the purchase volumes for both credit cards and prepaid cards, you can see that.
Prepaid cards have outpaced no credit cards over the past four five quarters.
And our market share in prepaid plus debit volumes has it starts to catch up with that of credit cards I think for credit cards. We have approached the market share of about 12 12, 2% in the third quarter in terms of purchase volumes I think prepaid cards, we used.
To be slightly below that but we are quickly catching up.
Average purchase volume.
On prepaid cards as a slightly lower than the average purchase volume of credit cards and Thats one of the reasons why you see on the right hand side of this.
<unk> 2014.
The newer cohorts to start with relatively lower levels.
So I think that's.
The answer to.
Your first question.
So yes.
Just to understand also how this translates for the credit portfolio. So when I look forward to the credit card portfolio.
Profit is.
Related to prepaid cards or Theres only credit cards.
I think it's a credit card, it's only credit cards, there's no nexus between the purchase volume of prepaid cards, and our credit book of credit cards.
Okay perfect.
Okay, then going to your second question I think I would draw your attention to slide number 16, and we try to breakdown the the credit card no.
Portfolio in three buckets as you can see so you can see the known IEP.
The revolving IP and non revolving IP.
There are two things that I would draw your attention here. So first I think we have.
<unk> interest bearing balances as a percentage of the total portfolio that has been below that of the industry and we have been catching up over time now we have not been catching up over time by increasing the revolving balance. So if you take a look the revolving balance have remained pretty much stable between <unk>.
7%, what has really driven the growth in our investment in our IBP has been the increase in debt financing.
For fall two that went from 5% to 10% and that has been a very intentional addition of new products and features that we have added into credit card that basically allows consumers to basically take finances within the credit card like financing will lead to financing and even <unk>.
Finance.
Those are intentional features that we have successfully launched over the past waters that have increased the usage of credit cards to our customers no. It's important to mention is I think youssef highlighted in his opening remarks that even though those are described as finance and features within credit cards.
<unk> accounted for that.
The credit card families. So there is no transferring of receivables or financing from credit cards to personal loans or vice versa.
Perfect. Thank you.
And our next question comes from the line of Jamie Friedman at SSG.
Hi, Hi, guys. Your use if the V logo.
So in prior calls you had disclosed some detail about principality I don't see it in the slide deck I may have missed it I apologize logo, but any commentary you might have on principality would be useful.
Sure I think let me draw your attention to.
Q is slide 12.
So in slide 12 on the.
Left hand side you can see.
Our definition of <unk>.
Primary banking relationship customers, so first a little bit of the finishing what we how do we define a primary banking relationship customers. So we define a customer to be our primary banking relationship customer when he or she transfers to new every month more than 50% of his or.
Or her post tax income right. So when you transfer to us more than 50% of your post tax income we consider that you have become a primary banking relationship customers.
And two things I would draw your attention.
And this chart. So first you can see that across all of the cohorts starting from January 2017 into January 2022, we have become the primary banking relationship of more than 50% of our customers.
So we are not again in the business of collecting social security numbers. We are in the business are becoming the primary banking relationship our customers.
The second thing that I would highlight in this chart is that we are getting to 50% primary banking relationship faster and faster.
No in January .
The January 17 cohort it took us about six months to get there now it's taken us less than 12 months to get there.
Why is this happening I think it is happening for two reasons.
One <unk> the other one and documents the exhaustion of those one is I think the.
The advent of digital banking.
Has been embraced by more and more new Latin American consumers peaks has been a mess if you will.
And for.
The adoption of digital banking in Brazil, specifically the second reason is more endogenous if you take a look at the chart in the middle of the slide.
As we launch more products as we launch more features.
We earned the right to be the primary banking relationship with more and more customers. We have a much more compelling value proposition. If you were a customer of new bank back in 2017, you would have only one product traded car now you have multiple products you have credit cards.
Prepaid cards.
<unk> accounts investments insurance. So that has also been a phenomenal engine to take up the primary banking relationship of our customers.
Okay. Thanks for that and then for my follow up.
For <unk> in both your prepared remarks, you mentioned the secured lending initiatives.
Wondering how we should be thinking about the impact to margins.
As you rollout more and more secure lending products. Thank you.
So I think on the secured lending product.
There are.
Two things that I would highlight and specifically on.
Casino Abu payroll lending and investment back loans first and foremost the amount of upfront provisioning that we have to constitute abuse is lower than unsecured.
Payroll unsecured lending so our payback from an accounting standpoint this faster the second one is that the.
Secured personal loans they draw much less capital than the unsecured personal loans.
And therefore, the risk adjusted net interest margins are fairly compelling as well as the return on capital are equally very compelling.
It is important however to build.
Build the right expectations, we are super excited with the launch and the ramp up of the secured lending business throughout 2023.
It's very uncertain, how fast this ramp up will happen.
So we do believe that most of the originations that are we going to have in 2023 will remain coming from unsecured personal loans I think the secured personal loans is the ramp up story that will likely get traction no starting in the first half with more heavily in the second.
Half of the year.
Got it thank you Michael.
Okay.
And our next question comes from the lineup, though gene Simonyi at Moffett Nathan.
Good evening. Thank you for this detailed presentation.
Wanted to ask a relatively high level question just on the gross profit margin trajectory.
At pickup this quarter could you talk us through a little bit what are the kind of.
Puts and takes that that created this tick up this quarter and how permanent is this trajectory off of the of the gross profit margin.
Absolutely. So I think this uptick that we had in the gross profit margin.
Has been driven by two things primarily.
Number one is the velocity of the growth of the credit portfolio and number two.
Is the movements in interest rates, so as interest rates go up in the country.
As they have gone over the past six to eight months.
We see a compression in the gross profit margin.
And as interest rates have stabilized in the country opens room for gross profit margins to re converge back to their original levels off no high threes low fours.
Alright.
The second thing is <unk>.
We basically accelerates that.
The ramp up of notes secured personal loans.
This should allow us to equally improve our credit quality would increase.
Credit portfolio without putting as much pressure to our gross profit margin as the growth of unsecured credit portfolio.
However.
If and when we do accelerate unsecured personal loans I think it was one of the questions that lead module and Jorge asked this at the beginning of the call. It will put additional pressure on gross profit margins, because we will again have to basically for <unk> because the tuition up of provisions. So there will be a few.
Puts and takes.
Going forward.
And.
We would expect that this will be.
Preserve or extended mildly over the coming quarters.
Got it got it very clear. Thank you and then for my follow up.
Strategic question I wanted to ask you guys could comment quickly on your strategy as it relates to crypto over the last quarter. It has been a couple of interesting developments with new coin and with your announcements about it at that.
That's fast trajectory of new crypto, reaching one 3 million users. So maybe you can just give us a brief overview of at this point, where it is critical to fit in into your ecosystem is it primarily an engagement driver user acquisition driver.
When it will become or could it become a significant source of revenue just if you can give us some high points and that would be very helpful.
Sure absolutely so.
Obviously, a lot of noise around crypto.
Okay.
For us it's been mainly a factor around.
Customer engagement and support and providing a product that customers are actively asking about.
Over the past 12 to 24 months, we would actually see more outflows going to crypto broker sent to even invest furnished on investment brokers and so there is there's a huge amount of interest even through these winter.
The script of winter.
And we've been just surprised about the level of adoption or I'll keep the platform.
Surpassing 2 million crypto serves getting to one $3 million.
So we want to be where customers here.
This is an asset that customers are continuously invested behind that number one we've also announced that we're working our own crypto token related to a potential loyalty.
So across our entire ecosystem.
Julian the browser shedding at Olive Garden I think we ultimately think about this this is a.
Really big lever to increase loyalty and engagement across all the different products that we have in our ecosystem and perhaps you won't go beyond as we start building a marketplace between the 17.
Seven 1 million customers, we have on one end and.
Over $2 3 million small business customers that we haven't the other as well as the large big merchants that are shutting in or efficacy.
Marketplace today so.
We are excited about about using <unk>.
Here is an enabler of that loyalty and.
We will say it will continue to invest behind and are excited about the opportunity of that.
As you can provide to us.
Got it thank you very much.
Yeah.
And our next question comes from the lineup so at Wolf.
Hey, guys good evening and thanks for taking my questions. It's.
Greg.
The active rate continues to expand but just wondering really how we should think about it going forward just as it continues to sort of expand into the SCR above 80% level in the.
Amount.
Non active users continues to decrease just wondering what sort of how youre thinking about the trajectory of your monthly active user rate and if theres any sort of shift in strategy, you're pondering sort of get this ever shrinking.
Active users to transition into multi assets. Thanks.
Scott. Thank you for the question this is John .
So a new bank.
I'll take a stab at your great question.
A few a few thoughts first of all as Lago noted earlier, we've seen a strong consistent trajectory now multi year of improving our monthly active.
As you as you have seen.
So no doubt as we continue.
Higher and higher levels the rate of growth is going to slow and the difficulty of continuing to tick it up.
Going to get harder, but we are determined to continue.
To try and see how far we can push it frankly.
We've been surprised at how much we've been able to continuously push it up into the right.
The other thing I would highlight and it goes back to your question that someone asked a bit earlier.
As we continue to focus not just on our monthly active right.
An increasingly deep levels of engagement, whether it's our daily active rate over monthly actives are so called down now.
Which I think to be loaded continues to go up so even as our monthly active rate starts to hit some boundaries. We think we can push and even deeper level of higher engagement in DAU MAU further up and Thats a significant focus of the company as we head into 2023 and similarly, as we've talked a lot about our primary bank.
Relationship right, which continues.
To edge up continuously so even as our baseline engagement and monthly actives will no doubt hit some some.
Level of saturation at some point.
We believe we can continue to drive engagement up a deeper and deeper levels, whether it's <unk>, whether it's primary banking relationship and really the confluence of the two.
But as as we have always done and as lager them to be both pointed out in their presentations.
The engagement of our customers and.
The NPS and the love of our customers of the products. We provide is our north star and we continue to see if we can push to continue there.
And our focus and will continue to be as we go forward.
Great. That's very helpful and just as a follow up sort of similar topic, but when we started look at the new geographies in Mexico and Colombia.
I know, it's early days, there, but anything you can sort of share color wise in terms of what youre seeing with activity rates in those geographies, maybe relative to what youre seeing in Brazil, and also relative to what you had seen sort of in the early days of your your launch in Brazil as well.
Sure absolutely. So we added just in slide five a bit of a.
Some data out of that on the growth, but I would basically ask your question, saying that both Mexico, Colombia are beating Brazil at effectively every single metric.
Growth rates, you, rather the right tack.
Back.
Our pack.
NPS really you name it it's been really surprising to see both countries operating at a high level higher level about Brazil as we.
Frankly hard initially that the Brazil story was going to be hard to beat.
You don't really see any other examples globally of a financial services firm growing virally word of mouth and so when we thought about they can use to Mexico, Colombia, we werent up we're not expecting that we think partly what's happening is that there is actually a better product market fit in these countries financial services penetration is lower and so in Mexico. For example, we have a net promoter score up nine.
For which is really the high probably the highest NPS of any consumer product in any category globally.
That just show the product market fit we see in this market.
And just a lack of access to financial services real demand. These are very very big pain. So we're very encouraged by the example of these two countries still a lot to prove with generative launched savings, we still need to really start.
Three the entire analytic product play.
Playbook, but so far feel very very good about the track record in both countries.
Great very helpful. Thanks, guys.
Thank you.
And our last question comes from the line of Alex Mark Graf at Keybanc.
Hi, all thanks for taking the question.
To start maybe just to continue on that last thought I think you had mentioned some rough timing of the launch of the savings and checking products and your other geos.
Any more specifics you can provide that kind of indicate where you are in the process of launching those and maybe what steps are left.
Or what you're waiting on with respect to those offerings.
Sure so.
Really the bottleneck has been a lot of their regulatory permissions we.
Acquired a license in Mexico, and I know the price was applying for a greenfield licensing, Colombia, and Mexico were very close I expect that we will be testing this product with customers still already this quarter already Q4.
An accelerating ramp up if everything goes according to plan with regulators through 2023, Colombia should also be an MVP.
Testing customers. Each one is really three but probably towards the second half of next year, but definitely the.
The delivery of savings for both countries should be.
And next year.
At a larger and larger scale.
Super helpful and just a quick follow up on I think it's slide 12.
Products per active customer per cohort can you just describe the kind of credit versus non credit mix as you look at some of those earlier cohorts.
Yes, so I think the first.
First.
Hi penetration product is credit card, which is more of a product.
<unk> won but all of the other products with the exception of personal loans, which was launched over the past two years only.
No credit products. So the most relevant products that constitute and Hugh the cross sell that you see on the chart in the middle of the slide 12.
Our non credit such as.
Looking into the bank account investments insurance marketplace.
Those are all high engagement known consumer credit products.
Yeah.
Great. Thank you all.
And this concludes our conference call today.
Thank you for attending.
[music].