Q4 2022 Nu Holdings Ltd Earnings Call
York Friedman Investor Relations Officer at New Holdings, Mr. Freedman you May proceed.
Thank you very much operator, and taper off are joining our earnings call today.
If you have not seen our earnings release, a copy is posted in the results Center section of our Investor Relations website.
With me on today's call are <unk>, our founder Chief Executive Officer and Chairman.
Use of Flores, our president and Chief operating officer, and Udi reliable, our Chief Financial Officer.
Additionally, jagged <unk>, our chief product officer will join us for the Q&A session of the call.
Throughout this conference call, we will be presenting non <unk> financial information, including adjusted net income these.
These are important financial measures for the company, but are not financial measures as defined by <unk>.
Reconciliations of the company's no <unk> financial information to the <unk> issue formation 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 and do reliance on them.
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.
<unk>, our founder and CEO , Doug <unk> will discuss <unk> highlights of our fourth quarter 2022 results and some of the opportunities ahead to sequence Lee <unk>, our CFO and use of 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 Levy Levy. Please go ahead.
Thank you George and Hello, everyone.
Thank you for being with us today.
Once again I am happy to share that Nov posted another record quarter, showing continued growth across all of our metrics, including meaningful increase in profitability.
We will also be disclosing numbers for brookdale, the specifics today, which we think show up very exciting.
We welcomed more than 4 million customers to our platform this quarter and we now have close to 75 million clients across all three geos posting a growth of 38% year on year.
We're now the fifth largest financial institution in Brazil, and the sixth largest financial institution in Latin America in terms of number of customers.
Let's now dive into the main operating highlights of the quarter and after a year.
During the fourth quarter, our revenue amount to almost $1 5 billion growing 112% year over year.
Triple digit expansion in revenues is the compounded effect of the strong expansion of our active customer base in Brazil, with our ability to cross sell products and foster client engagement.
<unk> also expanded gross profit by 137% year over year to $578 3 million in the fourth quarter of 2022.
A significant especially for our gross profit margin, which reached 40% this quarter up from 36% in the fourth quarter of 2021 reinforces the operational leverage capacity of our business and the strong execution of our team.
In 2022, which exceeded both in terms of pricing adequately credit products amidst adverse conditions and adapting our funding cost to deal with much higher than expected interest rates.
As a result, we're holding to deliver an adjusted net income of $113 8 million the fourth quarter of 2022.
From $3 2 million in the first quarter of 2021.
The Brazilian operations highlighted in the right side of the slide continue to mature and contribute meaningfully to these results with 93% of our revenue generated by these <unk>.
Adjusted profits for the Brazil operations reached $157 7 million in Q4 of 2022.
From a loss of $3 8 million during the fourth quarter of 2021.
Our progress in Brazil illustrates how our business model is able to start generating meaningful profits, while growing revenue over 100%.
The beginnings of nowhere based on the unbundling of financial services back into industrial 13.
Now our most important business opportunities rest on the re bundling of financial services by building a diversified multi product multi segment multi country portfolio of businesses.
As you can see on this slide even though our adjacent businesses already achieved a notable figure of a million customers.
The company's cross sell capacity.
The growing scale of our core products noise still in the early days of its startup development lifecycle.
That said the signs of inflection of the <unk> products are already clear.
This slide is meant to show two things.
First the pace in which we develop and launch new product has accelerated over time.
Our product portfolio is well positioned to deliver multiple years of strong growth.
While new accounts and credit cards, how just reached inflection points of their gross stages most of our other products.
At earlier stages of their life cycles suggest can still high levels of upsell and cross sell potential for multiple sources and for years to come.
We will continue to expand our platform with disruptive products to further strengthen our relationship with our customers and enable us to acquire increasing levels of customer principality and share of wallet across all demographic segments.
Or must support launching towards 23 include the expansion of our lending products in Brazil into secured lines, such as public payroll and the launching of savings accounts in both Mexico and Colombia.
Just the snow is in the early days of its product development lifecycle. It is also in the early days of its international expansion.
Over the past decade, we have successfully expanded our operations in Brazil have been reached a customer base that represents 44% of the population of the country.
It is inevitable that over customer growth in Brazil over the coming years will be lower than what we experienced over the last years.
Our growth in Brazil, with progressively pivot acquisition into customer monetization.
Conversely, However, we're still at the early stages of the customer acquisition lifecycle in Mexico, and Colombia countries in which our penetration is still low but early signs of performance are extremely encouraging.
Okay.
Mexico, and Colombia are bidding, Brazil, practically every single customer growth and engagement metric theyre growing faster and showing NPS levels higher than dose of Brazil.
Both of these countries, we have already become the top issuer of new credit cards.
The stages of development for <unk> are complementary and expected to provide new with very strong growth engines for years to come.
So better showcase the earnings potential of our model, we want to spend a few minutes digging specifically into our Brazil business, which continues to show very strong top line traction and also meaningful bottom line profitability.
Over the past four years, we expanded our client base in Brazil by 11 next having reached a penetration of 44% of the population of the country.
70%, 80% of the clients came to new through organic channels, mostly member get member, providing us with strong growth the reality and one of the lowest customer acquisition costs, among fintech and incumbent banks globally.
We have been successfully applying the same playbook in Mexico and Colombia.
The compounding effect of customer growth and higher levels of customer monetization have resulted in strong topline growth in Brazil.
In the fourth quarter of 2020 to our Brazilian operations recorded $1 4 billion in revenue, 110% year on year growth in our gross profit margin of 44%.
Adjusted net income grew progressively over the past quarters, reaching $158 million in the fourth quarter of 2022 for.
For an annualized adjusted return on tangible equity of 58% and an annualized return on equity of 40%.
Although part of this number was positively impacted by decision on effects observed in the fourth quarter of the year, such as higher purchase volume and lower cost of funding one can see that the profitability of our operations in Brazil has reached an inflection point.
Already positioning us among one of the financial institutions with the highest return on capital in the country.
But we believe we're still in the early stages of the development of work model. The country, we still significant upside in terms of both topline growth and operating leverage.
Finally, this slide details the outcome of our strategy in Brazil and at the holding level.
The viral expansion of our customer base combined with our successful cross selling and up selling strategies have driven strong profitability in our Brazil business unit.
You had a fourth quarter that is positively affected by seasonality no Brazil posted a return on tangible equity of 25% and our return on equity of 15% for the full year of 2022, even considering the losses reported in the first quarter of the year.
While 2022 was a challenging year, Michael Weiss and very critical for us as we build trust as a newly public company, we could not be more proud of for 2022 results, which largely exceeded our internal expectations.
The execution capability of the entire team was very strong and we prove that it is possible to maintain an accelerated rate of growth as we gain share in every product vertical and geography.
Keeping credit delinquency and check improving operating leverage and ultimately showing strong profitability.
But this shipments as important as they are represent only the first steps of what we can deliver in the future.
Once our new Geos mature and similarly to Brazil scale further and start to compounded profitability potential that our model creates.
With that I would like to pass the floor to our CFO Gilead Milagro, who will walk you through more details of our results. Thank you.
Thanks, <unk> and good evening everyone.
To better frame the discussion around all of our year end results I would like to recap the three key elements of our simple and powerful value generating strategy.
Number one continue to grow our customer base in the markets in which we operate Brazil, Mexico, and Colombia and quickly converting new customers into actually wants to.
Two expanding ever revenue per active customer were our pack through both cross sell and up sell.
And three delivering growth, while one thing one of the lowest cost operating platforms in the industry.
Our fourth quarter results show positive evolution in each one of these three pillars.
Let's start with the first pillar of our threat or customer acquisition in the fourth quarter, we added $4 2 million and ended the year with $74 6 million customer.
38% increase year over year in Brazil, we are steadily adding between one and one 5 million customers per month, the vast majority of which is still come from referrals, which lowers the acquisition cost and accelerates activation in.
In Mexico, we surpassed $3 2 million customers by the end of the quarter as per the last available data for 2022 news market share in terms of new cards issued in the country approach at 29% Y O share of purchase volumes for credit cards already achieved five <unk>.
<unk>.
Our strongest growth in relative terms was in Colombia, where our customer base reached nearly 600000 in Colombia, new accounted for 38% of the number of new cards in 2022 as per the latest available information with 2% market share in.
Terms of purchase volumes for credit cards.
The second part of this pillar is activation, where we continue to drive higher levels in the fourth quarter.
Our overall monthly activity rate reached 81, 9%.
Five six percentage points higher year over year, and the 11th consecutive quarter of sequential increase.
We are seeing positive increasing momentum and activity in all of the three markets in which we operate despite there are different stages on the S curve.
Let's move to the second pillar in our strategy revenue generation. The three charts on this slide.
Clear relationship led to start with the chart on the left we.
We are very proud that as of the end of 2022.
58% of our active customers have chosen <unk> as their primary banking account or PPA. This is the Holy Grail of the financial services business and the cornerstone of our model for three simple reasons number one PPA customers generate <unk> that are much higher than those of <unk>.
<unk> customers.
Number two.
EBITDA customers presents 90 day Npls that are much lower than those of non PPA customers and three PB customers also have lower levels of price elasticity and adverse selections than those of non PVA customers.
The number of TBA customers underscores the develop enough a model that effectively engages and serves our customers with multiple products and throughout all stages of their lifecycle. It begins with how we attract clients, which is through a powerful engine based on customer referrals.
The more customers use new as its primary bank account the greater the number of products they use and the higher the monthly architect they generate.
Every cohort we have been able to accelerate the pace at which new becomes the primary bank account of our customers. We have also been able to accelerate the pace at which our customers use our products. This two factors compounds to speed up our pack for newer accounts and also help.
To push up the overall our pack of the company.
For the fourth quarter, our monthly Artek continued to increase and achieved eight $2 per month.
Boosted by both the increase in cross selling and up selling off our new cohorts and the maturation of our older cohorts, whose efforts are pack reached $23 per month.
We can see in business lines that are monthly <unk> continues to grow sequentially, expanding 37% year over year.
The higher number of active clients combined with higher opex prompt the sustained growth in our revenues.
Revenue grew 112% year over year to $1 $5 billion. Another record high our revenue in 'twenty two was nearly three times higher than in 2021, and almost seven times higher than in 2020.
Now turning to our cards business, we continued to experience strong growth with purchase volumes up 54% year over year to $24 billion in.
In 2022 purchase volumes reached $81 billion and 85% increase over 2021, demonstrating the power of our product cross sell up sell and customer engagement capabilities.
Most of the purchase volumes continue to come from our older cohorts of customers, which is spend three to four times as much per month as recent cohorts.
While there is a difference from the outset between newer and older cohorts as shown on the chart on the right hand side, both show a clear upward trends of consumption over time.
On average credit card spend for a customer who has been with us for more than 24 months triples.
We expect the substantial amount of kind of clients. We added in the last two years to increase their purchase volumes with our guards as their relationships with us continue to mature.
Our consumer finance portfolio controls of credit cards, and personal loans reached the $11 billion, a 62% expansion over year end 2021.
Our credit story has two deals.
On the one hand credit cards continue to grow strongly at 69% year over year as more clients are added to our ecosystem and our low enrollment at all as it plays out.
On the other hand, we have been more cautious with the originations in the personal loan portfolio align with the higher risk of this product.
Originations in personal loans increased this lightly and the overall book grew sequentially during the fourth quarter to $2 billion.
The base of growth has been lower than that of credit cards at 33% year over year that was the ongoing performance of the book, we expect this to accelerate over the coming quarters.
Now, let's review in more details devolution of our credit card portfolio and the originations of our personal loans.
We continue to pursue our strategy of increasing the share of our credit card loans that earn interest closing the gap as compared to the market.
We have narrowed this gap by offering our customers interest, earning installment loans on their credit cards, which as of the fourth quarter surpassed market levels and represented 12% of our credit card loan book.
We see attractive risk adjusted rates of returns on this type of financing.
It allows us to monetize our credit card business beyond simple fee generation and full fewer customer needs.
At the same time, we have been intentional in not expanding our share of revolving receivables, which continues at 7% of our total receivables and once again widening the gap versus the market, whose revolving now accounts for 17% of total receivables.
We based our origination of personal loans on the latest performance of our own cohorts, our assessment of risk going forward, including our judgment of the economic and credit environment.
Last year, we increased the resilience with demand from our loan originations and we have seen positive performance to date, leading to gradual increases in our origination volumes.
We expect this trend to continue going forward as long as this positive performance track Records persists.
Indeed, we continue to see upside in our ability to drive growth in lending in a healthy and profitable manner. We have substantial rich given the size of our customer base. We believe the risk assessment and our platform is best in class, allowing us to deliver superior products and <unk>.
To our customers.
We also have strong capital base and ample liquidity to increase our leverage as.
As market conditions improved and allow our credit risk appetite to increase we should be able to deploy capital effectively and profitably business strategy should be reinforced with the upcoming launch of secured lending.
In July 2022, we launch with money boxes, which are personalized investment too we.
Also started to remunerate deposits at 100% of the Brazilian interbank deposit rate, but retroactively and only for amounts that remain on deposit for more than 30 days <unk>.
Given their stage rollout. This two changes did not materially affect our funding costs in the third quarter.
But in the fourth quarter, we started to see the full impact of this changes.
In the fourth quarter of 2022, our cost of funding improved to an all time low of 78% of the interbank deposit rate bids.
<unk> lab, our financial expenses to decline quarter over quarter. We are now starting to unlock the value of the strong liability franchise that has been viewed over the past few years.
Our deposit base continue to grow deposits increased 55% year over year to $16 billion, we have seen no material impact on the deployment of money boxes or the changes in the remuneration on Aro deposits inflow.
The success of this new strategy already has had unimportance of effect on our profitability for the fourth quarter and should be recurring in the subsequent quarters.
The successful implementation of our new funding strategy combined with the continued growth of our credit portfolio.
Made a meaningful contribution to our results in the fourth quarter. This is most feasible in our net interest income or NII, our NII reached $688 million this quarter.
30% quarter over quarter the improvement in our cost of funding helped increase in our net interest margins or NIM to four percentage points over the level of the third quarter to a record high of 13, 5%.
Why we can attribute much of the recent gains in net interest margins to our new funding strategy. We expect this trend respected seasonality, which is especially strong in the fourth quarter to continue going forward based on three factors number one the growth in our credit portfolio, which should.
Surpassed that of our deposits number two the adequate price for our credit products as we continue to build underwriting resilience with pricing and number three the improved mix of our loan book, especially as we resumed the growth of our personal loans over the coming quarters.
Let's move to the third pillar in our overall strategy.
<unk>, a low cost to serve.
We believe our platform is one of the most cost effective in serving customers in the markets in which we operate for the fourth quarter, our cost to serve amounted to 90 of the dog.
On a year over year comparison, our cost to serve did not grow.
This achievement is even more impressive considering how much we evolved in terms of products per customers and PVH over the same period, our <unk> increased 37% clearly illustrating the strong operating leverage of our business model.
Looking ahead and as we said in past quarters, we expect our cost to serve to remain at or below the dollar level as the scale gives us significant operating leverage and bargaining power with our suppliers.
In terms of gross profit, we achieved $578 million up 137% year over year.
Significant acceleration versus the growth posted less water.
This level of gross profit was the highest we have ever achieved at the same time, our gross profit margin of 40% four percentage points higher year over year accelerated the pace of recovery started in the third quarter.
To illustrate how far we have come our gross profit of $1 $7 billion. In 2022 is more than two times higher than of 2021, and nearly five times higher that of 2020.
Operating leverage is a key element of our strategy with the full benefit is becoming increasingly clear as we advanced product penetration and drive revenue growth. This is visible in our efficiency ratio, which improved for the fourth consecutive quarter to reach an all time low at 40.
7% or 41% excluding share based compensation.
This is already comparable to the levels of efficiency of lots in American income of banks, but it is still far from the potential for our platform that continues to collect the benefits of scale.
We expect our operating leverage to continue to be capture as our scale increases, although there might be seasonal variations affecting this number in the fourth quarter in particular, our platform benefited from stronger purchase volumes and deposits inflows.
Now moving onto the bottom line, we posted another quarter of improving bottom line performance in the fourth quarter of 2022, our adjusted net income and net income amounted to $114 million and $58 million respectively.
Results are encouraging as they serve to validate our strategy and our business model. However, we reinforce that we look at our business with a view towards the long term value creation, which may require us to make additional investments in the short term to optimize our long term opportunities and we expect.
To continue managing the company this way.
We see this fourth quarter and the year of 2022 as a whole as evidence of our sustainable cost advantages.
On cost to acquire we've added over 20 million customers during 2022 and presented one of the lowest customer acquisition costs, among fintech and banks globally on cost to serve we held it constant on an FX neutral basis throughout the entire 2022.
Despite the inflationary pressures in the countries in which we operate and increase the levels of customer engagement.
On cost of risk, we successfully manage the risk in our credit portfolio aimed at a very challenging backdrop and continue to outperform competitors when comparing apples to apples Yousef will provide more details on that shortly.
On cost of funding, we began to unlock the potential of our deposit franchise.
To close the magnitude gap, we had against incumbent banks and widening the positive gap we have against index.
As we go into 2023, we expect the trends from the fourth quarter to continue to gain traction in particular, we emphasize our ability to develop and scale best in class products expand internationally and operate at very low costs.
Now I would like to turn the call over to use of our President and Chief operating Officer, who will walk you through some of the highlights of our asset quality.
Thank you Len.
Let me take you through some key indicators of asset quality and overall credit portfolio helps for the fourth quarter of 2022.
Let us start with overall NPL trends.
Our early delinquency indicator NPL 15 to 90 improved this quarter by 50 basis points, reaching three 7%.
This was driven by two main factors.
Number one the improvement in the credit performance of our personal loan portfolio.
In response to the management actions taken in Q2.
And second the favorable seasonality that takes place during the fourth quarter when early delinquencies usually trough.
It's important to note that that trough is usually accompanied by a rebound in early delinquency rates during the first quarter of each year.
90, plus NPL ratio increased from $4 7 million to five 2%.
But anything in line with the expected stacking behavior of these buckets.
Take this opportunity to reinforce that new has never sold delinquent loans, which otherwise would have had a purging effect, thereby artificially lowering delinquency rates.
With respect to loan renegotiations, they remain at around 7% of our book with approximately half of those coming from current and not pass through customers at the time of renegotiation.
Through the credit card portfolio, the sixth graphs show the time series of NPL by income and where the personal line represents new and the Green line represents the industry.
As we already mentioned during previous calls and as you can see on these updated charts. We continued to outperform the industry on a like for like basis.
For the lower and convince our comparative advantage is even more pronounced.
The gap for each in command continues to widen as you look at the trend over time Dennis.
Demonstrating that our competitive advantage in underwriting remains consistent and sustained.
Just as in past quarters provisions continued to grow primarily driven by the growth in our portfolio.
We frontload provisions when we originate loans based on the expected losses for the life of the credit in accordance with <unk> expected loss methodology.
This quarter much of the expansion in our risk adjusted NIM can be traced back to the improvement in our cost of funding.
However, even after adjusting for that factor, we would still see risk adjusted NIM stronger than that of the third quarter and even stronger compared to that of the fourth quarter of 2021.
Having shared these data and perspectives on credit and asset quality, Let me now turn the call back to our founder and CEO , David Willis for his concluding remarks.
Thanks Joseph.
It has now been a little over one year since our IPO.
And despite much more adverse conditions than we could have anticipated we're proud to have over delivered on our commitments to the market.
Our over 8000 colleagues delivered these results through an unwavering focus on strong execution and I. Thank each and every one of them.
Let me now close by summarizing some of the most important changes in the environment.
We adapt our strategy to deliver on what had been promised and what lies ahead of us for 2023.
First in late 2021 don't expect that the sharp increase in policy rates, the sky rocketed to almost 14% in Brazil.
To mitigate this we launched Marty boxes, and six months later with lowered our cost of funding to 78% of the CDI from about 100%, while both deposits and Moneybox has continued to grow sequentially as strongly.
Second with a tougher environment for asset quality in Brazil, we became more restrictive in originating personal loans, while repricing our products and building resilience within our portfolio.
In parallel we accelerated the launch of secured lending with a general launch of payroll lending in Brazil expected in the upcoming quarter.
We're confident that this is a disruptive solution for our customers, which will foster growth into different client segments. Thus further balancing our credit book.
Third we doubled down on smart efficiency moves to foster profitability and showcase the operating leverage of our model.
One of these moves was a termination of the CSA, which will save the company $70 million per year.
Beyond that it reinforces how committed know as a company is to accelerate value creation for <unk>.
All of our shareholders.
Our efficiency ratio will continue to improve progressively over the coming years, as we captured cost savings opportunities and reduce the rate of head count growth going forward.
Okay.
Finally in 2023, we will prioritize winning our first share of wallet in the upmarket in Brazil.
Where there remains tremendous opportunity growing our personal lending book, both secured and unsecured and expediting the inflection of the growth model in order to use.
Almost 2 million customers with monthly income up 12 stops and <unk>.
Are already clients of doing.
But our share of wallet with them is currently approximately 10%.
In 2023, we will also break into secured lending market positioning and payroll loans as a core product to complement our personal lending product shelf and widened our growth opportunities in the country.
Last but not least 2023 will be the year in which the launch and deepen the penetration of the quaint and tie in both Mexico, and Colombia, which should accelerate the growth and sustainability of our platform in these countries.
We will continue investing significantly in both countries as we think that potential price is very significant.
We entered 2023 with a lot of strength.
Cited to continue proving our model across products and geographies.
We would like to take your questions now.
Thank you very much.
We will now start the Q&A session for investors and analysts.
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I would now like to turn the call over to Mr yard Freedom and Investor Relations Officer.
Thank you operator, and our first question comes from our equity at Morgan Stanley .
Hi, good afternoon, everyone.
<unk>.
Fantastic results and thanks for the additional disclosure on the Brazil numbers.
Profitability.
Point is evidently really impressive so congrats on that.
I wanted to ask about.
Mommy blogs.
It was a really positive surprise this year funding costs of 78% of CDI from 95% in the previous quarter.
To what extent this is.
A seasonal improvement based on the fourth quarter excess liquidity that normally.
Commenting.
Because of the 13th salary.
Or is this sort of like the level from which you could continue to improve in 2023.
And.
What do you think is the opportunity for you to continue to improve that number if I remember correctly I think in a couple of public forums, you said that maybe by the end of 2023 of the funding costs could be at 80%.
Evidently you were at 78% at the end of last year. So how do you see that evolving thank you.
Hi, Jorge Thank you so much for your question.
We do expect the.
The funding cost to remain largely at the same levels throughout the coming quarters respective seasonality as you correctly pointed out in the fourth quarter of every year, we have the additional flow from the 13th salary which has in the month of December 2022.
Pushed down a little more.
The cost of funding than would otherwise be expected in a so called normal month.
However.
We haven't yet seen the full impact of the change in the remuneration, we will only see this in the first quarter of 2023, so with those puts and takes we do expect that cost of funding.
Today's levels is a sustainable level for us to to to see throughout 2023.
Great. Thank you very much lever.
And our next question comes from the line of people about that from Goldman Sachs. Operator, Please open the line.
Hi, good evening.
Debbie Lago Youssef, Thank you for the call and taking my question.
Congratulations you had pretty impressive results. My question is a little bit on the competitive environment and just looking at now.
58% of your active client base you have is primary banking clients already.
When we look at the industry media campaign is particularly the ones focused on similar regions their income levels seem to be suffering.
A lot more than you I suggest you think about Neil.
What do you think has been able to differentiate you and really manage this credit cycle.
Way that many people didn't think it potentially could.
And be able to deliver the results that you can and if you could talk a little bit about how competition, perhaps is influencing that.
No that would be helpful. If you gave some color on that.
Sure Tito Thank you very much for the question.
So this I think the story that we're playing out it's a very different story than the incumbent banks are playing out because on one hand, we have 44% of the adult population in Brazil as a customer.
Very meaningful population on Dr. And we have very small market share still in a lot of our products and credit card, we have something like around 13% and.
Personal loans, we have about three 4%.
So we get to grow within our consumer base share with picking the best customers and can continue gaining share even if the environment is pretty adverse to.
So Doug the first big differentiation there.
Consideration is and this is a.
A point that perhaps the market hasnt understood there well, we are growing our credit book within our own.
What in Brazil called <unk> or the close Ocean. We are we give credit to customers that uses our primary bank accounts that are getting their salaries in our accounts that are using our app to do payments theyre getting in insurance. So that generates a lot of loyalty on one end that generates a lot of information that we can use for underwriting.
We are not providing credit in the open ocean as a lot of banks have actually done over the past 12 months theres been a lot of growing that and open ocean.
So it's been a different strategy as a result, we get to continue to cherry pick within our base that we understand.
And that we know.
The third consideration is we've actually always looks to provide products that are very good for consumers and we are being very careful about taking into account.
Ratios on household debt. So just to give you one data point there on the credit card product, we don't think revolving as a product. This is a good product for consumers to finance is a very high interest rates consumers entering into that into that product and they will see medley ended up getting very high losses.
So we look for customers that are paying on time, we've always had for customers that pay their bill on time, if we could choose we can only get it we will get 100% customers that pay on time.
As a result, what you see is in the market about 70% of customers.
Coming back to getting to the revolver or office only 7%. So we ended up with a consumer base that is healthier that is less leveraged that is provides more data to give us information around underwriting and that we ultimately get to cherry pick to provide credit and continue.
To grow even if the environment is a big headline is adverse and generate some risk regardless of that we did though decided to take it a little bit slower as you saw in 2022, especially in consumer lending, which is a newer product, but as you will see as you see here on the delinquency numbers in Q4, which ended up being better than we.
Fact that even though there is some seasonality we already started.
Growth again and feel comfortable that we can start.
Tweaking up the growth on the lending side, but.
But we will be monitoring this very closely and if the environment shifts we are very very agile and can shift very quickly as well.
Great. Thanks, that's very clear very helpful. One follow up if I may.
Thanks for the slide 10.
Billy in Brazil.
David joined annualize, a 40%, but you still have a very under levered balance sheets and efficiencies improving pretty quickly right.
Do you think there's still upside to that 40% ROE in Brazil as you expand it.
The whole upsell and cross sell to your clients.
Do you think there is some upside to that number.
Yeah.
Tito.
We think that the profitability levels that we are showing now are a good testament of the long term potential of the profitability that we can have as a digital bank.
It provides clear evidence in our view.
The cost modes, and the revenue advantages that.
We have so in the long term, we do believe that there is more upside optionality there in.
In the short term, we don't provide guidance for 2023, we.
We do expect to see some puts and takes in this equation would you expect on one hand to see.
The caps on interchange.
Paid cards coming into fruition on a preferred we do expect that as we accelerate growth.
No.
<unk> weighed on our margins Conversely, as deal wins, we expect that we will continue to grow and extract even more operating efficiency out of our system. So.
So all in all within 2023 is another year of a healthy level of no returns on equity.
Respected seasonality across the quarters in the long term, we believe that there is more profitability first to extract from the model than we have seen so far in Brazil, and we also hope that Brazil is also a good showcase to what we can develop in order to use.
So as we can see in the S curve that we showed.
Mexico, and Colombia are a few years behind Brazil, but we have no doubt they will achieve profitability levels at the same zip codes as the ones that we are achieving in Brazil in a few years.
And just to just throw out a bit on that LIBOR I think ultimately if you take a step back and go back to the kind of first principles of the business model that we've always been.
<unk> is the model of digital banking.
Provide much higher ROE and traditional banking because ultimately you are operating with costs that are over 85% lower that incumbents. We don't have branches in every corner, we don't need hundreds of thousands of employees, we don't need a lot of very expensive headquarters all of that we don't needed to serve customers and even provide a better experience. So.
That has always been sort of the hypothesis, we try to.
<unk> unit economics, when we look at when we show economics of the products that we have in lending there upwards of 60% in credit card or upwards of 100%, but now we finally get to prove prove it to you with an actual geography like Brazil that he set a matures as a mature level and can start showing these level of ROA.
And while there are some benefits of seasonality in Q4 as Michael mentioned.
Ultimately that is that is the direction that I think the model will converge towards in Brazil, and in other geographies as well.
Okay, that's very clear thanks, Kevin Thanks, Michael.
And our next question comes from the line of <unk> of Bofa.
Hi, guys.
Congratulations on the quarter a quick question from me.
At your net interest margin evolution.
You clearly benefit benefited from lower funding costs, but we're looking here at the <unk>.
Model and we're also seeing higher lending spreads on your products, even though your mix is going against you given they are growing more on credit cards and personal loans.
So my question is related to your ability to continue to reprise.
The only.
Given the competitive environment, but the health of your clients right now.
The economy in Brazil.
Okay, not doing great, we know that consumers in Brazil facing the effects of higher rates high inflation bad disposable incomes. So just wanted to understand here like if you see much more room for re pricing your product.
And as a follow up to that question.
We have been hearing a lot of noise in Brazil potential implementation of interest rate caps on credit card loans, if you could discuss that as well that would be helpful. Thank you.
Hi, Mario Thank you so much for your question, let me try to.
Break them into first a little bit on net interest margin and then the second one on.
On the cap on the net interest margin as you have seen and I'll draw your attention to slide number 22 of our presentation, we have seen a fairly material expansion over the past four quarters.
And we expect that this expansion will continue as a result largely of two factors.
Number one we do expect that the credit portfolio will outpace the growth of deposits.
And therefore, we should see the loan to deposit ratio going up and that should be by and large no.
Wins to net interest margins number two we do expect that the continue of the lower cost of funding that should.
Please.
The margins that we have we are not relying going straight to your question on additional re pricing of our products.
But we believe that we will see kind of a shift in mix throughout 2023, I think personal loans unsecured personal loans on one hand may outpace the growth of credit cards, but Conversely, we should also see throughout 2023 at the beginning of <unk> or public payroll loans. So.
A combination of this changing in the mix should provide us also with an expansion of net interest margin by by and large. So I think that is my attempt to address your first question basically net interest margin is expected to continue at a healthy pace not because we will reprice the products up.
But because of the growth of the lending portfolio and the continued lower of cost of funding that is the number number one number two on <unk>.
On the cap on credit cards, we have been hearing and discussing with a few analysts and investors about this question and this is a question that has been deemed the reigning in Brazil for.
Over a decade now right so for over a decade, we have seen attempts to restructure and reshape the unit economics of credit cards.
We have been investing a lot of time understand is actively participate in the discussions.
We don't think theres going to be any.
Short term change to the unit economics of credit cards. It is a very complex product.
That if you change one thing in interest rates you should probably also change other things in interest free installments.
And therefore, he pulls us for a very complex outcome. It is our view also that interest rate caps in credit cards, largely leads to lower levels of finished inclusion and low levels of credit availability to the general public which seems to be of the opposite direction that what node the Brazilian central bank in the.
Current administration once so we don't see any of those risks in the short term, but we are watching this carefully and participating in the debate.
Very clear thank you very much.
And our next question comes from the line of with Stablish for all then from Bradesco.
Hello, Good afternoon, everybody.
Congrats on the border line strong bottom line.
And thanks for the call. My question is is about.
As indeed about the bottom line in the or the net income.
I understand that you do not provided official guidance and I could hear your answer on the Tito's Tito's question, but.
My point here is that our if we annualized for example, the fourth quarter results.
We could have a sense of our feeling about the what would be the net income in 2023.
Right, so what I'm trying to understand here is that.
Do you think that that would be reasonable to use the fourth quarter.
Our results is approx.
For earnings quarter or earnings during the coming quarters, and you play into 'twenty three.
Two youll have a light com.
As a starting point for us or do you see some some change over the course that could change the dynamics that we saw in the in the in the fourth quarter. Thank you.
Yeah.
Gustavo Thank so much for your question.
It is it is it is.
<unk> question to address as we don't provide guidance.
But I think 2023 provides for a mix of puts and takes as I've mentioned to detail.
And on average we expect that we will continue to build relatively healthy levels of returns on equity and bottom line profitability in Brazil, Although we do expect to continue to see seasonality playing its role throughout 2023 as we have seen in 2022 if you.
Take a look on slide 11 of the presentation, you will see that our adjusted return on equity for the third quarter of 2022 was a volatile 20% that it went up to 40% in the fourth quarter. So we expect to continue to see those trends throughout 2023.
But.
<unk> healthy levels of profitability. Nevertheless, two things I would highlight however, as you look at Mexico and Colombia.
<unk> continued to invest and we will continue to invest in both of those countries as we have invested in Brazil.
Has taken Brazil, almost no nine years 10 years to get to today's profitability levels within that mix clinical lambiase.
We will still take a few years, but we will be able to shorten that cycle there over the coming decade. However, as I mentioned in my opening remarks.
Yes.
We will not manage the company trying to optimize for no next quarter or the next two quarters ROE we will optimize.
The results for the long term yet the business model in Brazil shows very vivid signs of profitability that we expect to continue to.
Showcase to analysts and investors as we evolve.
Great great. Thanks level, and just a follow up here specifically on the ROE that you mentioned and I just see the investments that you mentioned in Mexico and Colombia.
We could see that your capital location in Brazil was about $1 7 billion out of $4 9 billion total.
Consolidated my question here, what's your expectations of our capital location in other countries, such as Mexico, and Colombia, I would say one or two years or maybe when do you think that Mexico, and Colombia will be at the same.
Two weeks of a Brazil, I'm, just trying to understand here the capital location because.
I understand that easing for it, especially when annualized euro so I'm just trying to get a sense here.
You kept the location and the.
And then what would be the potential equity overall potential ROE on a consolidated basis. Thank you.
Linda tried to provide some some guidance or.
Guidance I'll provide some color on those on those questions I will draw your attention to page slide 35 of our presentation. There you can see our capital position first and foremost we do believe that our business plan in Brazil <unk> in Colombia is fully funded.
We have plenty of capital plenty of liquidity to support the growth organic.
<unk> in Colombia over the coming years.
We do appreciate however that.
Mexico and Colombia.
Can be more friendly intensive than is in Brazil, especially because of the working capital cycle of credit card in those countries.
And also because of how much interest earning.
<unk> is used in credit cards, so in Mexico, and Colombia, the working capital cycle IP <unk> depots, one depot as Chu, whereas I pay merchants in Brazil, plus 27, and the percentage of the credit card books that is allocated to interest bearing portfolio. There is higher than it is in Brazil for those two reasons. It is more funding intensive for.
For us to operate in those two countries.
And we will have to develop very soon our deposit base in Mexico, and Colombia, and eventually those will become countries in which they will also be more capital intensive with higher levels of return on assets there.
Great. Thanks, very clear thanks, a lot.
Okay.
And our next question comes from the line of Marcello Dallas at grade decrease.
Yeah.
Our seller your line is open.
Okay.
Okay. So it seems that we are having problems with the line of Marcellus Dallas, So let's move on to the next question.
And the next question comes from the line of pedal at Duke at detail.
Thanks, so much.
Ill go of illness.
For the call good evening.
Again, your thoughts a little bit on our loan book growth and vis vis provisions provision expenses, how youre seeing npls evolved on this quarter. It ticked up a bit yes, there is some seasonality here as well.
Phase III formations have been high coverage down so as I model 2023 here I can definitely see the strength of NII offsetting a slower loan book growth, even though some growth yes.
On a struggle see provision expenses coming down as a percentage of the loan book is this year on near term so it makes sense.
Again, thank you.
Yes. This is used to thank you for the question and good evening. So taking your your question in parts, so with respect to provision expense.
I would point you to the appendix of our earnings presentation page 48, I believe that kind of breaks down.
The drivers of that and as in past quarters, it's driven.
Predominantly by growth.
About 90% of it is driven by growth.
When you look at it.
Credit quality and NPL, so beyond what I provided in the <unk>.
The earlier remarks.
I think it's important to kind of distinguish the dynamic of NPL 15 to 90 day early indicator short term delinquencies from 90 plus.
So 15 to 90 decreased sequentially. This very much in line with seasonal patterns.
90, plus increased because 90 plus cuts to behave.
As a as a.
Stock metric right. It accumulates for credit cards that all the way up to a year after entering delinquency buckets and so we've seen kind of the behavior on these two metrics.
Pretty much following expectations.
Awesome.
Going forward to sites.
For me to give you very precise guidance given that the pattern of delinquencies will depend on several factors part of that is the quantity and mix of our own origination as part of that is more macro drivers.
What I can tell you is from a seasonal perspective, we expect as usual Q1.
To be a seasonal peak in delinquencies following the trough in Q4, and then Q2 Q3 tend to be more normal. So this.
That's what I expect the seasonal pattern to look like.
Thank you Alan.
Sorry for my follow up the outlook for provision expenses vis vis loan book growth on a relative basis for 2023.
Coming down gradually as the year goes how you're addressing that.
If it's what I expect the what we've seen in past quarters and in Q4 to continue which is.
Provision expense will primarily be driven by the growth in book the bulk of it.
We've seen a page four on page 48.
Driving that growth.
And again, it's the quantity of the growth, but also the mix is slightly different dynamics between credit cards and unsecured lending and when we introduced secured lending.
It will change the mix a little bit as well over time.
Thank you.
And our next question comes from the line of Chagal by Keith at UBS.
Hi, guys congratulations on the results.
I have a question about the amazing 40, 40% there or does he provided 40 billion operations.
Yes.
Or do you know what would be the possibility if you told banks rules regarding capital.
Alright implemented so what could be the arrow <unk> with <unk>.
The fully loaded of the capital requirements in Brazil.
And as a follow up.
The payroll loan business should it be diluted or not portables.
<unk>. This is line with good evening. Thanks, so much for your question.
The ROE numbers should not change much in the new regulation because as of the end of 2022, we were already operating at.
All in basal already looking at a conglomerate between nine and 10%. So it should be this should increase gradually from 2023 throughout 2025, but we are not operating with a much lower capital base than auto financial institutions would have been had the.
<unk> for the prior regulation. So we can certainly work with you after the call and trying to fine tuning from nine five to $10 five but it should directionally not changed much.
The levels of returns that we are we are getting is off as of today are largely because we are massively overcapitalized in Brazil, if you take a look at our.
Financial statements in the very last page youre going to see the capital ratios of our financial institutions is above 20% the finish of the capital ratios of our payment institutions that about 20% as well so I think that's the <unk>.
Attempt to address your first your first question.
On your second question no I don't think that the.
Payroll loans should be dilutive to our overall Roe.
We are assuming that we're going to have levels of return on equity and returns on tangible equity that are in line or higher with the return on equity that we posted in the fourth quarter of 2022.
But I am not sure if I heard the question Greg.
Those two things.
Level.
Thanks, a lot.
Okay.
And our next question comes from the line of Niihau Agarwalla from HSBC.
Yeah.
Yeah.
Hi, congratulations on the results and thank you for taking my question.
I'd like to talk about asset quality a bit quicker.
Can you give us a sense of what would be the asset quality of the young generation and today.
But the oil dermatology if that's possible.
We have seen the early delinquencies come down and getting this quarter. This is a good sign does this mean you are feeling a bit more comfortable regarding asset quality or are there pockets of volatility maybe kind of give you remain cautious.
About.
How do you see that impacting originations in the coming quarter thing Duane Duane you awake here that you would probably like to maintain originations.
But every quarter.
We expect that to be activated in great great. Many T and what do you see this.
Adding that activation.
Yes, hi, good evening, thanks for the questions. Let me address first your.
Your question on the impact of the write offs methodology change we did.
At the end of the second quarter of last year on Npls.
We've reported in past quarters.
You should think about the impact of 90 plus NPL.
As a reduction of two to two to 200 220 basis points in the quarter, So it's pretty consistent with past quarters.
On that now with respect to NPL trends.
And as you correctly pointed out there's some questions employment in 15 to 90.
Some of that is seasonality some of that was the improvements we drove.
Throughout the year in our underwriting stance, particularly with respect to personal loans as we mentioned in past quarters, we took a bit more of a cautious stance given the uncertainty throughout the year and we've seen very positive results from that.
Both in terms of the repricing we've done on the on.
And the top line as well as <unk>.
And so all in all.
We feel pretty good about.
What we're seeing from a risk return standpoint.
And that drove the sequential increase in originations as Michael pointed out of around 10%.
In personal loans itself.
And so we're pretty encouraged by these trends again, it's hard for me to give you their precise guidance on a going forward basis.
So far we kind of comfort that what we're seeing on those.
Sorry, I didn't get.
The 90 day NPL ratio would've been approximately what would the number be approximately 300, yes. So just to refresh on how the new methodology.
Works Sofa.
Primarily a personal loans whereby the timing of write off moves from 360 days to 120 days for ISR as principals.
An expectation of recovery. So when you are moving the timing of write offs you basically moving whatever it was from 120 days to 360 days delinquency to write off so that tends to decreased 90 plus npls.
And as I indicated that decreases around a 220 basis points of decrease.
Moving from the old to the new methodology and Thats been consistent across quarters. Since we made that change I don't know if that was clear.
Okay. Okay.
Just wanted to confirm about the two.
This is Bryan station, that's perfectly okay and regarding asset quality.
If you could just elaborate.
At this point it seems like things are getting better at it.
The increases are coming down.
What provide easier to guard against it early is there any particular exposure that you are just cautious about the macro and trying to take it slow and keeping an eye on asset quality.
Yes.
On that I mean, I think it's helpful to kind of take a step back in and rewind the clock a little bit to where we've come from.
Independent Bank period. So what we saw is starting in the second half of 2020 very low levels of delinquency.
Normally low because.
Consumers were saving money there were government interventions.
And so forth of very a bunch of reasons, we were an abnormally low delinquency territory.
And it was very clear that the trend was going to be normalization and move upwards of delinquencies.
I personally think that cycle's largely played out and we're now in a new part of the cycle.
And so it's a little bit more of a higher uncertainty part of the cycle.
Yes.
<unk> is to be cautious we're not worried about particular pockets.
But we're always prepared to adjust our underwriting based on everything we see and are monitoring and we've actually built our underwriting system to be able to iterate very dynamically very quickly adjust if we see things play out different from our expectations in either direction, but I would say in the last two quarters and particularly in Q4, we've seen relative signs of stability.
Npls come in fairly close to our expectations.
Perfect. Thank you so much.
And our next question comes from the line of Jamie Friedman at synergy.
Hey, guys. Thank.
Thank you and let me echo the congratulations.
I just.
Wanted to follow up on.
Some of the previous questions, including those from here so.
Michael will walk you through slides 18 to 20.
Thought that the suggestion I don't want to exaggerate was that.
There could be an acceleration in originations I realize you don't give guidance, but if we could everybody seems to be.
And I ask it about the same thing so I get it.
What is it maybe log or uses that would make you more confident in opening the credit box because it seemed like in 'twenty, two just to kind of.
Right.
Revisit would happen the boxes open then it was clear there was reopened that it was closed. So anyway is this where are we in the goldilocks is it is it and what would make you more confident lending again. Thank you.
Jamie. Thank you so much for the question, let me, let me try to to address and then I'll also invite use them to complement I think there are a few aspects that he addressed in his response to <unk>.
Would help us here as well.
But I think if you if you take a look at our no presentation slide 18, you're going to see that the growth that we have had.
Is bureau of no basically two deals as I mentioned in my opening remarks number one is credit card credit car has grown over the past year at a clip of about almost 70% year on year and we continue to see very strong support and its growth throughout the first quarter of 2023.
We believe that we're going to have another strong year at 2023 as a whole in personal loans as you can go to slide 20, and know referring to some of the comments that you made earlier in the call.
We were in fact, a little bit cautious throughout 2022.
We waited for a few quarters for delinquency to stabilize we have seen delinquency stabilize in the third quarter, but primarily in the fourth quarter and if you take a look in the fourth quarter. We have already started to accelerate the originations of personal loans. It went from about $4 $6 5 billion Reais, so no more or less 10% growth.
All else constant by which I mean, if we continue to see.
No.
Losses, and delinquencies is playing out as per our expectations you should expect to see ourselves no growing a bit more the originations of personal loans throughout 2023 now in 2023.
We would also expect to see.
We're launching secured personal loans, mostly public payroll loans, which should be an additional growth engine for our loan book throughout 2023, and 2024, but use of I'm not sure. If you have any anything to to add to jamie's questions.
Yes, Jamie just to add a couple of thinks of that in terms of how we think about the credit box and tightening or loosening I mean, we operate.
Always working backwards from booking.
Every loan every credit grants to be NPV positive throughout the life of the loan and to pass.
Fairly straightforward conservators and its requirement. So typically we want every cohort of customers to be able to sustain a doubling of risk and still be above our hurdle returns and so thats, what we work backwards from and we kind of observed.
<unk>.
And are monitoring the latest behavior of our latest cohorts and kind of adjust accordingly. So it's unusual that we make very big wholesale changes too.
Two our underwriting scorecard at any given point in time, it tends to be much more dynamic much more gradual much more tweaking around the edges unless there are extraordinary events. So I think <unk> seen a little bit of that in the fourth quarter with the increase in the personal loan volume.
And again it is.
<unk> performance continues to come in per our expectations.
That trend.
We continue the other thing to think about it beyond tightening loosening of the credit box, what impacts our underwriting or origination borrowings is due to the quantity of customers, we have available to us to underwrite and in particular.
The quantity of customers for whom we have a lot of data so if their R&D.
Our PVA customers primary banking customers and that gives us a lot more confidence and a lot more certainty in terms of being able to underwrite them.
For credit cards or higher limits or for personal loans.
Thank you Sir Thank you Michael.
And our next question comes from the line of Jean Simonyi at Moffett Nathanson.
Hey, guys good evening.
Thank you for squeezing me in.
Actually I wanted to ask a question on your 2023 priorities specifically it was very helpful to hear I think David in the beginning of the call you kind of called out of capitalizing strategic areas that you are maybe youre looking looking to focus on in 2023.
Including secured loans ethylene segment added in Mexico, and Colombia, I wanted to ask him a product angle, so new product launches or maybe the products that are early in their development that.
That youre focusing on for 2023, what's the top two three products. They are that out we really shouldn't be watching.
This year.
Hi, Good evening. This is Jack Google I'm, the Chief product Officer, New Bank and let me take let me take a swing of your question.
We complement with what David said and reinforce some elements of it.
There are a series of launches that we're really happy with it either recently happened or or are pending first I'll reinforce a couple of that that both davita in Lago have mentioned, we are excited at new bank year by year to go after the large profit pools in the Mark.
It's that we operate so we started with credit card.
And moved over the last couple of years into unsecured lending.
And now we're excited to move into secured lending, which is the third largest profit pool in the country starting.
With a big focus on.
Loans secured via public payroll, we also have investment back loans, which we've recently launched.
And looking to build out our secured loan portfolio. So just reinforcing that point.
Okay.
You also mentioned in David mentioned, the focus on building up a deposit base in Mexico, and ultimately in Colombia, as well by opening up our bank account product Quinta and both of those countries. This year that'll be important in its own right as part of.
Broadening our product offering for our customers and also.
To help drive funding.
For credit.
Those markets of the world.
A few other products that I will I will mention.
First one that we launched a little while ago, but is now getting to the point, where we're starting to make it available to more customers as our credit card product for small businesses, our visual to a credit card product.
Which again allows us to.
A address the credit card market, but b also.
Broaden our offering for small businesses and build out the other side of our network.
And.
And the other product that I would I would mention to you is the product. We just announced publicly I think it was yesterday, which is auto insurance and again. It's just an example of us rounding out our product portfolio, particularly for customers who are in the middle and upper parts of the.
The income spectrum, so so that stands out.
And we're also continuing to work on scaling up our money boxes, which you've talked a lot about and our ultra violetta of market credit card.
Which is to send a lot of promise in the last several months. So so those are few of the things that I would highlight for you.
Got it very helpful. Thank you I'll leave it there.
Okay.
And our next question comes from the line of Alex on there Mike Rath at Keybanc.
Hey, everyone. Thanks for taking my question.
Maybe first just on the credit portfolio I wanted to ask just on slide 19.
The 12% receivables mix of installments.
Obviously, you're kind of above market, just curious as to where you're comfortable or kind of targeting that.
That 12% trend.
In the near term and long term.
Yes, hi, there.
The growth.
Growth in.
Interest, earning.
Receivables and credit card. So this was the product of us basically launching a number of new features to for customers to be able to.
To finance the purchases to finance payments, whether they'd be back repayments and fixed payments is one of the latest features we've added and we've seen a lot of success and strong adoption really strong behavior.
From this feature so it wasn't really that we were working backwards from a particular number.
But really.
Seeing strong customer adoption of these features.
And very strong unit economics from those.
Going forward.
Continuing to test and introduce new features.
So hard for me again to give you specific guidance on where that number is going to land, but we've been pretty happy with.
The customer adoption and the performance of those features are introduced on credit card financing.
Okay. That's helpful. And then maybe just one more kind of macro related questions.
Just some kind of help or commentary on how you're thinking about potential TBD tailwind and headwinds for 'twenty three no not looking for guidance, but just more generally speaking how should we think about some of the puts and takes for 'twenty three.
<unk>.
So look I think if you look historically on PPV.
Over the next over the last three years the market has grown at no 30% to 35% per year part of that was basically a recovery of the TBD.
<unk> I think now we're getting to a point in time in which market expands.
Aggregate <unk> of the market to grow at anywhere close to low double digit rates for 2023 2024.
That should be that should not be the growth rates that one should expect from our cards business. We should expect from our cards business to grow materially higher than that as we expect to continue to gain market share in both credit cards as well as prepaid slash debit cards, we have been gaining market share.
Over the past two years at a pace of about 150 to 250 bps per year.
We should expect to continue gaining market share strongly over 2023 and 2024.
Great. Thank you.
Thank you.
And I got to thank you everyone and this concludes today's call and on behalf of new holidays and of our Investor Relations team I want to thank you very much for your time participation in our earnings call. Today, we are very excited to continue growing and strengthening our position in Brazil, Mexico, and Colombia over the coming days, we will be following up.
With the questions received via our platform. So please do not hesitate to reach out to our team. If you want to make any further questions. Thank you and have a good night.
Conference call has now concluded.
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