Q2 2023 Nu Holdings Ltd Earnings Call
Can you just deducted by funding costs transactional expenses and credit loss allowances.
<unk> by almost five accident period with gross profit margins expanding accordingly, even though credit delinquency has increased over the past 12 months and despite our conservative expected credit loss provisions.
Lastly, all of the aforementioned drivers combined with the strong operating leverage of our platform and the initial maturation of our early products in Brazil has led to a substantial acceleration in net income growth, but particularly evident in the chart on the right over the past three quarters.
We expect these compounded effect to continue in the coming periods offering a valuable combination of growth with enhanced profitability in our platform.
As we have previously noted nurse inception in 2013 revolved around the concept of unbundling financial services.
However to date or more significant business opportunities lined the rebounding in financial services by building, a diversified multi product multi segment and multi country portfolio of businesses.
As shown in this slide even though our adjacent businesses have successfully garner a million customers demonstrating our remarkable cross sell capacity.
As we will discuss ahead in this presentation. We believe other critical launches taking place. This year, we will continue to help us earn the right to become primary banking providers of more and more customers supporting our growth and profitability flywheel.
Now turning to our profitability I'd like to highlight the evolution of the key financial metrics, we presented over the past quarters.
From this quarter on we will focus only on the numbers of our holding company as we understand that our Brazilian operations already well understood.
The momentum continued into the second quarter as you can see by the numbers on this slide.
So we're three years continued to scale and benefit from the inherent operating leverage of our model. We're holding company is now translating into potentially into profits no.
<unk> Holdings recorded an impressive adjusted net income of $263 million in the second quarter, representing an adjusted annualized Roe of 19%.
These current levels of profitability already positioning us on par with many traditional incumbent banks in the Latin American region, even though Mexico and Colombia are still in the early investing stages.
Even more remarkable we achieved these results, while maintaining regulatory capital ratios of 22% in Brazil, and 42, 2% in Mexico significantly above the minimum required of 10, 5% in both countries.
In addition to the capital in our subsidiaries, it's important to note that our excess cash in the holding level of $2 $4 billion means that we are extremely well capitalized to deliver on our expected growth ahead.
Finally, it is important to emphasize that we're delivering the sound levels of profitability, despite significant investments in future products and geographies as well as a robust 60% year on year revenue growth rate, which few financial institutions that scale are able to show.
I've seen what's more we're very excited with the momentum of the business and now I'd like to pass it over to our CFO <unk>, who will walk you through our numbers in detail quiet Lego. Thank you.
Thank you Debbie and good evening, everyone. As Barry noted we delivered another set of strong operating and financial Kpis, driven by our simple powerful value generating formula.
<unk> consistently growing our customer base across our three geos and rapidly converting them into active ones.
Second increasing average revenue per active customer or our pack by leveraging our cross selling and upselling capabilities and third delivering sustainable growth, while maintaining one of the lowest operating costs in the industry.
Now, let's look at the second quarter results to see once more how well these three elements keep generating value.
Starting with our customer base, which expanded by 28% year on year as we added $4 6 million new customers, reaching a total of $83 7 million customers at quarter end.
In Brazil monthly net adds continue at a level of about one 5 million customers achieved mainly through organic channels with very low customer acquisition cost we.
We are now the fourth largest financial institution in the country in number of customers. According to the Brazilian Central Bank.
As noted in our prior call, we have been achieving faster and sustain that growth rates in Mexico since the launch of our digital savings account when the new.
We have reached the mark of more than 1 million customers less than one month. After its launch in may of this year.
In Colombia, we already have 700000 customers and we expect to grow even more after the launch of our savings account into country planned for the end of this year.
Active customers increased 32% year over year with the monthly activity rate posting another consecutive quarterly increase reaching 82, 2% up from 82% a year ago. We.
We believe this positive outcome.
<unk> two news ability to continue growing our ecosystem, while driving higher customer engagement.
Moving to our second pillar, which is revenue expansion.
As shown on the left chart nearly 60% of our active customers are already primary banking relationship customers, which represents the percentage of our active customers who transfer out over 50% of their post tax income on a monthly basis.
In general the more customers use new as their primary bank the greater the number of products to us driving successive increases in the monthly art Peck regenerate.
The second chart is our product cross sell chart, which shows how we have accelerated the pace at which our customers use our products.
As we launch new products, we are successfully cross selling them to our customer base and earning the right to become their primary bank.
Lastly, the third chart is our art Peck chart, the more we engage our customers and the faster we increase our cross sell and up sell capabilities the more sustainable the monetization of our expanding customer base becomes <unk>.
This effect can be observed again this quarter as our monthly <unk> reached a new high of nine $3. The monthly opex of our more mature cohorts are already at $24 <unk>.
Higher RPI.
Led to another quarter of solid revenue growth as shown on the next slide.
Monthly Opex continue to steady sequential growth trend expanding 18% year over year on an FX neutral basis. We are confident that there is a skew untapped potential for further our pet growth.
<unk> closer to realizing our full <unk> potential.
Archive growth along with sustained expansion of our customer base resulted in a 60% year over year increase in revenue on an FX neutral basis.
Reaching a new record high of $1 $9 billion.
Moving to our cards business purchase volumes increased to $26 3 billion up 30% year over year on an FX neutral basis.
Growth was mainly driven by successful product upsell and cross sell strategies, along with higher customer engagement.
The right hand chart displays how purchase volumes increase as cohorts age.
Older cohorts consistently purchase higher volumes, it's worth highlighting the newer cohorts appear to grow more slowly than more mature cohorts due to two factors number one on the superior team scale as these newer cohorts accounted for almost 20 times more customer.
Than older cohorts.
Number two newer cohorts have at least initially.
Lower credit card penetration using debit only which usually implies lower ticket sizes.
Our market share in terms of purchase volume is that approximately 13, 9% of the industry's total with debit cards at 14, 5% and credit cards at 13, 6%.
We are confident that we can further increase our shares in the future given our steady new customer acquisition and the maturation of their relationships with us.
Our consumer finance portfolio composed of credit cards, and personal loans reach at $14 $8 billion.
Up 48% year over year.
Total credit card loans maintained their growth trend, increasing 54% year over year to $12 billion as we continued to add new customers to our ecosystem, while keeping our low and grow credit expansion approach.
However, the highlight this quarter is the lending portfolio, which increased 33% year over year to $2 8 billion.
Lending cohorts continue to perform better than expected given us the confidence to increase originations once again.
Let's now move on to the breakdown of interest, earning loans in our credit card portfolio.
As we have previously discussed in our earnings calls our focus remains on increasing the share of interest, earning credit card loans.
Our interest, earning stallman balance continued to expand and now makes up a record high 19% of our total credit card loan book.
Conversely revolving receivables was capped at 7% of total credit card receivables for the fourth consecutive quarter.
We believe interest, earning installments have attractive risk adjusted rates of returns that allow us to further monetize our credit card business.
As our lending portfolio continues to show strong resilience.
Better than expected performance, we have once again increased our risk appetite and origination levels. This quarter loan origination was up 53% year over year.
Seven 3 billion Reais.
The performance of our personal loans cohort improved over the last several months given us the conviction necessary to increase loan originations.
As our portfolio continues to show strong credit resilience, we progressively grow within our risk appetite.
Looking to deploy capital profitably inconsistently.
The launch of public payroll lending complements this is strategy and reinforces the opportunities for growth we have ahead.
We are confident in our ability to continue to drive attractive growth in lending disbelief is supported by our large customer portfolio, our best in class underwriting platform, our strong capital base and our ample liquidity position.
Moving on to funding total deposits expanded 23% year over year to $18 billion. This quarter as we advance on our goal of building a robust local currency retail deposit franchise to fund the majority of our consumer finance operations.
Our loan to deposit ratio increased to 35% up from 33% less water as we continue to optimize our balance sheet.
In line with our expectations our cost of funding in Brazil was at 80% of the interbank deposit rate in the country, demonstrating our progress leveraging the value of our robust liability franchise.
Just one month after the public launch of 20, new in Mexico, you'd hit an impressive milestone of 1 million customers at the close of the second quarter of 2023, Quinta New accounted for one 3 million customers and received total deposits of more than one point.
Beat in Mexican pesos equivalent to $90 million with a cost of funding lower than 80% of the low point for bank rate and significantly below our current cost of funding in Mexico.
We believe our value proposition has been well received leading to a steady increase in new customers each month.
This has contributor to further strengthen our deposit franchise in Latin America.
We believe the combination of the continued growth of our credit card lending portfolios together with the improvement of our funding costs have contributed to the expansion of our net interest income or NII and our net interest margins or NIM to new record high levels our NII.
A gain and not a digit this quarter, reaching $1 billion, which.
Which represents yet another strong growth off of 133% year over year, resulting in an increase of 260 basis points in our net interest margin quarter over quarter.
Now focusing on the last pillar of our strategy, maintaining a low cost to serve.
We strongly believe that one of our platforms. Most relevant competitive advantages is low cost to serve in the second quarter of 2023, our cost to serve per active customer remained unchanged year over year at 80.
While <unk> increased by 18% underscoring the strong operating leverage of our business model.
As we stated in prior quarters. Our aim is to keep our cost to serve at or below the one dollar level as we believe our scale provides us with significant operating leverage and bargaining power with our suppliers.
Moving down the P&L gross profit reached a quarterly record high of $782 million.
Up 113% year over year.
Our gross profit margin reach at 41, 8% more than 10 percentage points higher year over year consolidating the acceleration in the pace of expansion is started in the third quarter of 2022.
We were able to achieve this result, despite the fact that we had a higher level of provisions in this quarter, resulting from the expansion of the originations of our lending portfolio as we upfront credit loss provisions.
Operating leverage is a key element of our strategy.
By further increases in revenues and maintaining a low cost operating platform, we have boosted profitability.
As shown on this chart, we have improved our efficiency ratio over time.
In the second quarter, you had reached another all time low of 35, 4% or 29, 2% excluding share based compensation improving for the sixth consecutive quarter.
This level of efficiency already ranks New holdings is one of the most efficient companies in Latin America.
We expect to capture additional operating leverage as our scale increases through the continued expansion of our customer base, the upsell and cross sell for our products and the launch of new features together with an improved results in our new views of Mexico, and Colombia, which.
He will parade with losses.
Lastly, we continue to drive increased profitability delivering adjusted net income of $263 million.
And net income of $225 million.
This positive results confirm the effectiveness of our strategy and business model.
While we are very pleased with the results. We have achieved so far let me reinforce that we manage our business with a view towards long term value creation. This can require additional investments in the short term aimed at unlocking long term value creation opportunities.
To conclude the review of our performance this quarter, let me recap the sustainable advantages across our four cost pillars number one on cost to acquire we added almost 5 million customers in the quarter, while maintaining one of the lowest customer acquisition costs, among consumer fintech and banks globally.
Number two on cost to serve our cost to serve remained below the $1 level, which we estimate as being 85% lower than those of incumbents.
Number three on cost of risk, we successfully managed the risk of our consumer finance portfolio aiming at a very challenging backdrop and continue to outperform competitors when comparing apples to apples.
Joseph will provide more details on this topic shortly.
And number four and cost of funding, we maintain our cost of funding and the level of 80% of CDI as we began to unlock the potential of our retail deposit franchise closing the negative gap, we had a guest's incumbent banks and widening the positive gap against consumer Fintech.
We are very excited about what we achieved this quarter and we are confident in our ability to develop and scale best in class products.
Spanned internationally and continue to operate at low cost us now.
Now I'd like to turn the call over to Youssef, Our President and Chief operating Officer, who will walk you through some of the highlights of our asset quality.
Thanks, Eli, though and good evening to you all once again, let me take you through some of the key indicators of asset quality and credit portfolio for the second quarter of 2023.
Let's start with the NPL trends.
Overall, our leading indicator NPL, 15% to 90% improved slightly over the last quarter decreasing by 10 basis points to four 3% in line with our expectations.
Part of that drop was driven by the improvement in the performance of our personal loan cohorts as mentioned earlier.
The 90, plus NPL ratio increased as expected from five five to five 9%.
As in past quarters. This continues to be driven by the stacking behavior of loans moving through the delinquency buckets.
As 90, plus is more of a stock rather than a flow metric.
And like in past quarters, we did not sell any credit receivables, which would have otherwise artificially decreased NPL rates by virtue of the purging effect of asset sales.
Renegotiations for their part remained at around 9% of the book this quarter.
And nearly half of those renegotiations came from loans that were current and not pass through at the time of renegotiation.
Turning to the performance of our credit card portfolio against the industry. This slide shows the time series of Npls by income back.
With the purple lines, representing new and the green lines, representing the industry.
We continue to see our npls outperforming the industry on a like for like basis and for lower income bands are comparative advantage remains even more pronounced.
Similar to prior quarters, our provisions increased primarily driven by the growth in our portfolio.
Remember that we frontload provisions when we originate loans based on the expected losses for the life of the credit and in accordance with <unk> expected loss methodology.
The increase in provisions therefore is directly linked to the higher loan origination volumes recorded in the quarter.
Our risk adjusted net interest margin reached another record high at 8% expanding by 140 basis points quarter over quarter, and 570 basis points higher than a year ago.
Having shared these data and perspectives on credit and asset quality, Let me now turn the call back to our founder and CEO that'd be the Willis for his concluding remarks.
Back to you.
Thanks Joseph.
But I.
I would like to talk about two relevant product launches that took place during recent months secured launched in Brazil, and <unk> in Mexico.
Consider these two products is essential additions to our roadmap for both countries given their relevance for us to grow our business and earn the right to become the primary banking relationships of more and more customers.
Regarding secured loans, we officially launched payroll loans for federal employees in April and started the testing phase of F. GTS backed loans a few weeks ago.
Including apparel Lowenstein, our roadmap is going to be essential for several reasons first half for most we believe it gives us access to a largest asset class for consumer lending in Brazil amounting to over 600 billion rehash.
Currently more than 35% of this market, it's already taken by new bikes clients.
<unk>.
Second we believe that offering payroll loans and now also <unk> back loans is crucial for us to establish primary banking relationships with an increasing number of customers that tend to be high income.
Sharps as they deal product for those that are eligible enhancing our engagement with them.
Importantly, these new lines of products, we have decided to price aggressively.
<unk> of our business model efficiency and the fact that we're not going through intermediaries.
Okay.
Lastly, incorporating secured loans into our portfolio is valuable to their remarkably low level of effective losses associated with this product.
We believe these initiatives will help us complement balance and fortify or unsecured credit portfolio with lower risk offers.
We're already living with all of the secure credit products, but still in testing mode with relatively small sample sizes.
While we're still in the early days, we're on track with our expectations.
<unk> rate is progressing nicely, which can be attributed to our differentiated UX and attractive pricing.
By eliminating loan brokers from the process, we have passed on some of the associated benefits to our final borrowers.
In addition, the current level of losses for payroll loans has been better than our initial expectations.
With our well established position in federal loans from Brazil, we seek to earn the right to become primary banking providers of more and more customers and nutrition.
Regarding <unk>, we officially launched in May and within a month across the 1 million customer milestone in this product in Mexico.
At the end of June we reached $1 3 million accounts and collected more than $1 5 billion Mexican peso deposits.
Just for the sake of comparison, the average deposits per customer in Mexico is more than <unk>. The average of Brazilian customers' deposits. Our checking account was launched in the country in 2017.
Quentin who plays a pivotal role in our roadmap for Mexico based on three key factors.
Diversified funding sources and reducing costs.
The Latam markets are highly concentrated making it challenging to rely solely on wholesale funding as competitors may not be willing to fund our growth.
Additionally, securitization products are usually shallow in Latin American markets, and they often becoming accessible when needed the most.
We believe that to grow our consumer finance business in Latam, we need to develop local currency retail deposits to provide a stable and sustainable funding source today with an effective you're lower than 80% of their risk free rates and as mentioned before significantly below our current cost of funding going to Mexico.
Funding rate, plus 100 bps, which means more than 12% per year.
Accelerated customer growth.
<unk> has the potential to look or referral flywheel, resulting in accelerated customer growth.
Until the end of Q1, 'twenty three we could only onboard customers co matter of credit card threshold, leading to a high decline ratio of approximately 70% of applications.
Now with <unk> in place, we have the opportunity to onboard 100% of applicants, we don't necessarily incurring additional credit risk.
And finally data driven credit underwriting.
Since our credit underwriting engine is built on AI and machine learning, making a crucial to have sufficient data scalability. The faster we grow our customer base, the more refined and accurate or credit assessment be comps strengthening our risk management practices and supporting responsible lending.
Notwithstanding the fact that the maturation curve of new products, usually take a year, we cannot be more optimistic about the future given not only our early progress and gives new launches, but also the upcoming ambitious plan for the second half which include to name only a few payroll loan portability and refinancing ians's payroll loans.
<unk> lending and quintanar in Colombia.
You have repeatedly stated together with our customer attraction and cost differentiation superior products and services Foster cross sell and up sell capabilities, which are essential for our business model supporting retention loyalty growth and profitability.
With that we would like to take your questions now.
You very much.
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I would like to turn the call over to Mr York, Friedman Investor Relations Officer.
Thank you operator, and our first question comes from the line of Peter <unk> Goldman Sachs.
Hi, Good evening, everyone and thank you for the call and taking my question and congratulations on another strong quarter.
I guess my question is on the level of provisioning good loans.
It drives a lot of the provisioning, but just to think about it early npls showed a slight improvement.
<unk> mint, there and we've kind of seen that across the industry.
Yeah, just to think about when.
Provisioning can be expected maybe become a tailwind right I mean gross margin did improve in the quarter.
Despite that but you mentioned in the past I think gross margins can eventually get.
60% level or so I know when you are much more mature.
But if the credit outlook is improving.
Potentially be a tailwind.
In the foreseeable future.
Hi, Tito this is yusuf thanks for the question so look.
We we don't provide guidance on on credit quality or delinquencies or consequently provisioning from a forward looking perspective, but you can take a look at how.
The coverage ratios have trended.
In the appendix of our earnings presentation page 33, I believe.
From.
Coverage of 90, plus it's been fairly stable around 213014%.
And the coverage of balance generally mirrors, NPL 90, plus and it has been largely.
Forming for expectations so.
Yes.
To your point should delinquencies improved obviously provisions can become a tailwind but.
We'll see actual performance as it comes in.
Yes.
Great. Thanks, Yusuf and if I can follow up I guess, just a little bit on the loan growth.
In particular.
Payroll loans have now launched I think any initial color on that.
Tracking and if that can be significant in the second half of the year or is that more will take a little bit longer because that could also be another potential tailwind to net cost of risk given just the risks on the payroll loans, there and a lot more.
Yeah, no absolutely. So we had to integrate a number of different contracts to launch payroll loans, we did that already we're up and running on Q2, we've been iterating the product, making sure. It's a great product for consumers easy to understand we're getting comfortable more and more.
With the type of feedback we are receiving and I think you'll start seeing us increasing the pace of originations over the next few quarters.
If everything goes according to plan, but but but.
Yeah, I mean, I think over the next few quarters, you'll start seeing meaningful demand and again. This is the largest profit pool in financial services in Brazil, So very large market and as we've said in the past or customer base accounts.
For something like 35% of that entire profit pool.
And we are we have a great <unk>.
Product.
Going directly to consumers and we're pricing very effectively interest rates are 30% to 40% below market. So we think we have very good value proposition that should allow us to take significant share in this market.
But again, we'll have to take step by step and see how those costs as we start rolling it out to the entire customer base.
Two if I may if I may complement here a few thoughts on payroll loans, we have launched <unk> as a pilot test in the second half of the year, we're going to launch ISS and portability and I highlight the portability because in a declining interest rate environment.
The ability to actually pork loans from other banks, maybe a relevant source of growth for us and it's something that we intend to lean heavily over the coming quarters.
Having said that I do not expect the payroll loans will actually move the needle that much in terms of no P&L in loan balance in 2023, I think it is more something for 2024 and beyond.
That's great. Thanks.
We'd love to use it.
And congrats again on a great quarter.
And our next question comes from the line of Fayetteville are duking it out.
Thanks, guys and congrats good evening everybody.
One on service revenues Gray.
Great job, there as well as an interchange Simpsons would have been flattish in all despite the caps to confirm how you guys see that going forward as well.
You mentioned credit appetite slowly there as well and on the second part on funding costs and a surgeon in deposits very nice to see a very stable costs and are on the ground lease. We see you guys looking for longer term instruments that would cost more than 80% of the CDI and also in <unk>.
Of course, Theres other ways to TPG, but just give us some color how you see that going forward.
The interest.
Liabilities cost of funding mix given that is changing a little bit. Thank you.
Hi, Peter this is <unk>. Thanks, so much for your question.
Hi.
I do believe that.
That we will progressively increase the duration of our liabilities as we increase the duration of our assets. So we will continue to actually match very well.
Our asset liability book, However, we believe that we can do so the skew with a very healthy balance of short term deposits at relatively low cost of funding at around 80% of CDI and we can entertain other pockets of liquidity in the Brazilian and in international markets that it would allow us.
To.
Increase the duration of our liabilities so we have.
No recently started to issue longer dated time deposits in our platforms and we have been very pleased with the results. So I would basically separate we have the short term deposits that we believe will continue to grow at 80% of CDI average cost and then we have auto pockets of liquidity that it will be more than sufficient to <unk>.
<unk> with adequate asset liability management as we scale progressively primarily the book of our secure lending closely going out of business.
Great. Thank you may I do a follow up as well you're absolutely right.
When I look at your credit balance and a very nice portion of the interest bearing and growing and then when I look within.
The credit card composition.
Oliver Northern routes at Cumulus are basically flat Q on Q in Reais.
The other small, especially interest went as far as growth and that's a very nice achievement, especially given all the discussions surrounding this line in the revolver.
Elaborate with us and shed some light on how you are being able to grow the others keep that one sort of flat despite the royalty disease.
Would be great. Thank you.
Sure Pedro here.
So.
We from the very beginning.
Built a strategy in credit card to focus on <unk> we.
Never loved their revolving business for the reasons that you know very well, which is a market that has a number of different complexities across the chain and ultimately forces issuers to charge very high interest rates, we never like that and so we decided to build in the beginning our models that look for cross sectors and in fact, if we could.
Have since the beginning and we could have a model that had 100% from sector zero percent of revolvers, we would choose that we would make.
Effectively make money all of your interchange however, it's impossible. The models are not perfect and so you end up having that percentage of revolvers, but.
But they are kept to effectively the minimum and customers that come in and are effectively have a high probability of revolve we wouldn't accept them to be a credit card holder and Thats why you see us having such a smaller percentage of our revolver of 7% versus the average market at 16%.
Now we see that there are other opportunities.
Two.
To use financing that is good for the customer where there is real price elasticity and we can price at a much lower interest rates in our specifically in our case fixed financing over the past few quarters has been.
A great Avenue, where we allow customers to finance their purchases over a number of installments of lower much lower interest rates, creating this portfolio of much longer dated lower delinquency lower interest type of portfolio, which is welcome Natalie much healthier for us and.
Much better for customers. So that is that is effectively the part that we want to grow.
And so that is why to use effectively seem to slide 14, where you see us growing.
That kind of interest bearing balances from 8% to 19%, while trying to maintain revolver to its minimum.
Okay. Thank you thank.
Thank you.
And our next question comes from the line of Eduardo Rosman BTG Pactual.
Yes.
Hi, everyone. Congrats on the numbers I have a question related to the revolving credit card theme in these potential changes in pass allows us whats your take on that should we expect something relevant to happen. If there is a cap shouldn't these be an opportunity for <unk> given its much lower cost to serve you also just mentioned that you have.
Less revolving than peers, so any color here would be would be great. Thanks.
This is <unk>. Thanks for your question. So the discussions around the economics of credit card in Brazil have been going on for years and they have certainly intensified over the past few months.
Involving both the government and many many credit card issuers.
Those discussions are not simple because the topic is really highly complex as you know credit card represents a very big industry in Brazil.
For about 40% of the personal consumption expenditures or PCE of the country and over 20% of the GDP of Brazil.
In 2022, the purchase volume of credit cards accounted for over two 3 million Reais. So it's a very important very large industry.
And any drastic or material changes to its dynamics may have fairly no relevant and material consequences to the economic output I think all of the industry participants the government and the regulators are fully aware of this.
And we are very confident that the industry will provide.
Adequate solution that we even evolve and further the product better.
In our battery co leader I think it is very hard for us at this point in time to draw any high conviction outlook as to what is going to happen over the next few weeks or months.
But we do not expect any drastic changes in the unit economics.
Nor do we actually believe.
That all.
Interest rate cap will be welcomed by many of the industry participants are the regulators given the material negative impact that it may have to the credit availability.
Okay.
Great. Thanks, a lot.
Yeah.
And our next question comes from the line of <unk> <unk> JP Morgan.
Hello, everybody and congrats for another very good quarter I had one question regarding Brazil.
Stability I understood that the focus would be the holding.
When we look to the earnings from Brazil, Brazil was maybe $190 million.
So a good increase.
The $20 million.
But now we see.
<unk>.
<unk>, maybe other markets or maybe they are holding well.
Just wanted to check what is it.
200 <unk>.
And then.
They are holding in Brazil, that's in the previous quarters was over.
Okay.
Okay.
Just checking the cash at the holding at higher rates or something like that.
Judy Thanks, Thanks for the question I think.
Q2 comments here one.
I would be very cautious off no drawing conclusions on the profitability of our Brazilian operations.
By looking at.
Only the figures that we provide to the Brazilian central Bank.
This figures they account only for all of our legal entities that are fully regulated in Brazil. They do not account for 100% of our operations in the country, So I wouldn't necessarily draw.
Much from what is reported in the Brazilian Central Bank.
Second question, though intuitively, yes, I think the way that we operate we have no profitable operations in Brazil, we have profitable operations at the holding company largely as a result of the investment of the $2 $4 billion of cash that we have there and we have operations in Mexico, and Colombia, there are steel.
Posting losses as they are in high growth investment situations.
Thank you Michael I was using your presentation I guess, you still have out there and I was dizzy.
Similar to the reporting basis.
We still have the Brazilian consolidated earnings.
There.
And if I may just a second follow up to here.
Higher income clients.
Hello relevant for.
Our strategy here because.
And those have a very good Sheryl Laurie.
This is a topic, we've discussed with investors, so luxury or thoughts about higher income clients. Thank you.
So look up the high income venturing into the high income sector is one of the company's priority priorities for the 2023 2024.
Periods, and we have invested a good amount of time and resources trying to understand globally. How companies have succeeded breaking into the high income segments in many parts of the globe and we have basically crafted a strategy that is composed by two steps one step is customer acquisition, the second staff as customer awareness.
<unk> I think the first step which is customer acquisition when we look at the past 18 months.
We are fairly well pleased with how many high income customers. We have acquired in the country. If you define a higher income customer is a customer who earns more than 12000 <unk>, we already have over 60% of the high income customers, all Brazil being customers of New bank. So I think the first step of this two steps.
<unk>.
It has been.
So a very successful so far we are now entering into the second staff, which is to deepen the relationship of those customers.
And to be able to increase our share of wallet of them. So if you compare to the demographics of the customer base of New Bank was a customer base of incumbent banks you see that in terms of number of customers. We have a relatively similar breakdown between low income newdow AECOM and high income.
However.
Our share of wallet in the low income and middle income is too much higher than our share of wallet into high income and therein lies the huge opportunity that we have to grow customer monetization in Brazil over the coming one or two years, however, annuity.
The growth into any new kind of a demographic or segments. It's not a it's not a sprint it's a marathon by which I mean, it's not something that are you going to be able to show results in one quarter or two quarters. I think it is a matter of a few years and which we will strengthen our value proposition and progressively grow into this new segment.
Perfect. Thank you and congrats again.
Thanks Julien.
Okay.
And our next question comes from the lineup cargo by <unk> UBS.
Hi, guys. Congratulations on the results very strong results Mike.
My question is about the good surprise us the ROE of 17% that you guys posted this quarter.
Even with excess capital and also with lots of New Mexico, Colombia.
These levels are already higher than most of the incumbents in Brazil in line with our retail.
Business and seems that the bank has a it took sort of a better issuance ratio than peers.
My question is how do you believe new will play.
<unk> in the long term, so that should deliver or the fintech should deliver a much higher roe than.
Than peers or part of these will be shared with clients and consequently, new tend to have a much lower price than peers. So how you guys are likely to play with diesel Peter.
You can see versus peers.
Yes, no great question I think it talks to the heart of the digital banking strategy, we'd be pursuing since the very beginning which similarly to what <unk> seen when you have technology company as fully detailed technology companies competing with.
Traditional companies that are more offline operations, we have the opportunity to use the efficiency of our business model that now you can start really seeing especially around the FDA.
Operating efficiency on behalf of our customers. So that we provide a product that has a higher quality and lower cost, allowing us to win more share.
So you start creating a bit of a flywheel, where you gained share you gain scale that scale gives you lower cost to serve you then go back and pads that efficiency again to the customer via better products and even lower pricing and you have these reinforcing flywheel, we expect to do that.
In banking, so we part of our new Sheryl value proposition west charge cero fees. So even since the beginning we started already charging.
No fees on that site and that meant an opportunity to compete on price.
But as we grow and we get more data in our models mature in our cost of customer served with of course, even lower we can then start doing both lower fees and lower prices in credit products.
Specifically to your question, we think we're going to be doing both we will use the advantage of the business model to both gain share.
As well as ultimately see a higher return on equity than traditional non traditional incumbents. Given ultimately this cost structure advantage is very strategic and it's going to be hard for competitors to match that cost structure advantage.
In a short period of time.
No very clear if I could do a follow up follow up my follow up would be he got into artificial intelligence.
If you guys are already using these and.
Were these shooting improve the bank's operation so it will be more on the cost more on the Oh.
On the asset quality, so how this should improve the operations of the bank.
Yes, so we have been actively active users of.
Artificial intelligence already for a while we've also been investing a lot in understanding how specifically large language models can have different applications for us, we think theres real application everywhere from.
Obvious uses around <unk>.
Providing better customer service at lower cost or cost efficiency, so even applications around fraud and commodity laundry.
In defence we're.
Getting very excited about the type of applications that we can see that but then especially also on the customer facing front. So.
Reinventing the user experience for consumers one way that we've talked in the past is that when we started the company. We saw the smartphone as a way to put a bank in every consumers back pocket. We think AI is going to be the opportunity to put a bank and a banker and every consumers back pocket and that is going to really be the enabler.
<unk> democratizing access to best financial services products to them.
95% of the population that even today don't have great access to the best products. So we're big believers on the different avenues of opportunity that this technology opens up both on the offense both on the user experience as well as a lever to increase even more efficiency of the model.
Thanks, and congratulations again.
Thank you.
And our next question comes from the line of Jeff Elliott of autonomous.
Hello, Thanks very much.
Taking the question.
I wanted to ask about Mexico, clearly quite a different credit card market from Brazil, and I imagine the revolving part of the business is much more important.
Current economics.
How are you seeing credits in Mexico.
Can you give us a feel for how credit policy has been performing maybe a sense of how what you have seen that compares with Brazil. Thank you.
Hi, Jeff.
Use of thank you for the question, yes, you're right. There are some important structural differences in terms of.
The credit card product in Mexico, how customers view, it and use it tends to be much more of a.
Borrowing vehicle.
Rather than a payment vehicle, which tends to be the predominant.
<unk> in Brazil. So consequently, you see you see a couple of things you see.
Higher.
Interest bearing receivables.
Do you see higher risk as well on net returns are actually comparable if not if not better than in Brazil, maybe the other thing that I would point out with respect to Mexico as the levels of penetration of.
Financial services in general and credit card in particular are much lower than in Brazil, So that will lead to much more of them.
Inclusion play.
And consequently, just higher levels of.
Delinquency, but.
We've been very pleased with what we've seen in Mexico in terms of the traction we've gotten in the market since our entry about three years ago.
And on 4 million customers now having launched our second product we think.
The launch of <unk> is going to be a game changer in terms of being able to approve everybody as a customer in terms of gathering data in terms of building ultimately principality and higher levels of engagement.
So we're quite pleased with the traction so far.
The one point I would add Jeff on on Mexico also is that the fact that Mexico and also their later, Colombia is more of an Unbanked story versus a bank story, which was Brazil.
Creates both a challenge as well as an opportunity or challenge, obviously, because we have to underwrite as we grow to percentage of the population that never had access to credit which means at times youre going to have to slow down a bit retreat radar model accelerate a bit.
And we're totally comfortable with doing that.
We built our models in Brazil, and we tend to actual array with <unk> put a new modeling into production with this the number of different <unk>.
So we'll have to do a little bit we will have to be able to be more careful as we go into these new territory body has done a great opportunity because if we crack the code than we really are the only one in the market that knows how to underwrite 88% of the entire population because the traditional banks have been there for decades and they haven't done it they've continued to provide credit cards.
To a 12% of the population that already have credit cards. So you only get a credit card or if you have a credit card is the safest lowest risk of strategy obviously.
But there is no real differentiation there. So we will take our well took our time and youll see it accelerating in positive times, but ultimately we think it's a really exciting market because we can build a real moat in and how to underwrite and provide credit to affected the majority of the entire country.
Great. Thanks very much.
And our next question comes from the line of Flavio Yoshida at Bank of America.
Hi, everyone. Congrats on the results. So my first question is on.
Payroll loans. So I was wondering if you could if you guys could share some details of the evolution under the CIP operation is it getting better.
Better than expected or the main challenges faced so far and how should we think about the overall NIM and are we four new bank.
Fourth given the fact that payroll loans should have a greater greater relevance.
Total portfolio, especially taking into consideration that payroll loans interest rates are lower than our cards and personal loans as well.
Thanks, Thank you for your questions.
We have launched what we I would say is a partial launch of our <unk> business in Brazil.
We started in late April by loan she only this CRP product.
But it's still without portability right. So I think the main features that are we going to be adding in the second half of the year are fairly important for us to be able to ramp up the product mainly the portability of CRP plus <unk> plus F GTS.
With those three asset classes, we will have on our shelf products that represent the bulk of the secure credit market in Brazil, which is the single largest target of addressable market in the country. So we're super encouraged with the early results.
And what we have seen so far since we started to operate with <unk> back in April as I mentioned is fairly strong signs of product market fit so customers love the <unk>.
Conversion has been better than expected.
And we have been able to have lower than expected operational losses fraud. So we.
We like what we find so far but it's too early to call kind of a Victorian to us it's going to be a longer journey, we don't expect that considering how to Laurent GTS will move the needle in 2023 in terms of loan originations or loan balance, but it will be fairly important for us for the next three to five years.
It represents the largest market in Brazil now it will as you correctly pointed out.
Involve lower net interest margins, which is the essence of the payroll loan business in Brazil.
However, it will not necessarily come.
With much lower roe's because it also draws less regulatory capital and we are confident that given our cost structure, we will be able to deliver growth lower prices to consumer and are still very compelling levels of ROE I think we've mentioned in the prior calls that we are aiming and have an Roe of about 30%.
<unk> of our loan book and we do expect that the combination of all of this product will be able to deliver on that.
Oh, great. Thanks for the very complete answer and my second question's a follow up on you.
Your question so.
So this was the first quarter that we saw a positive result for the holding company without Brazil, and I was wondering if there was any change in the investment strategy and if we should expect further positive results in the coming quarters.
No I think what we have seen is.
Slightly better results in our.
No Treasury operations at the holding company given the two for $2 $5 billion that we have there, but mostly as a result of the more benign markets that we have our investment policy of the holding company has been fairly conservative.
And we expect to continue to be fairly conservative investing in basically.
Very safe and liquid investment assets.
Okay. Thanks, a lot.
And our next question comes from the lineup have filed for that is <unk>.
Hi, everybody good evening and congrats on the numbers I have a question on only relates to capital.
I understand that now you are at for the third quarter you should already have.
All of the regulated entities in Brazil under the same umbrella in terms of capital. So just to have a sense of what would be your basal.
At the current.
Current configuration.
Yes. Thanks, so much for your question so just floor for the <unk>.
Purpose of everyone here.
So we are all on the same page I believe you're referring to the resolution 200 that the Brazilian Central Bank enacted back in the first quarter of 2022, which harmonize the regulatory capital regulations for both payment institutions and financial institutions.
We had.
And dead regulations became effective July one 2023.
And we have now as you correctly pointed out <unk> been operating as a.
Regulatory a financial conglomerate in Brazil, encapsulating, our payment institution and our financial institution.
We are if we look at our financial institution only our Basil ratio is above 20%.
If you were to look at our the whole conglomerate.
Our capital ratio would be closer to 12% in Brazil, compared with the minimum regulatory requirement of $6 75, which is the metric that has been used by this new regulation. So we have almost twice as much capital than we need to operate.
In Brazil.
Okay. That's perfect. Thank you.
Thank you Roger.
And our next question comes from the line of Danielle Vas Credit Suisse.
Hi, everyone.
Or use of and your congrats on the strong results.
My question is practically a follow up on <unk> question there.
There is also.
A potential significant increase in donor Sichuan RBC ratio from July onwards, considering the central bank to 2009 resolution and consequent reduced.
Arguably factors.
Considering the transactional portion of your credit card portfolio. So on the net impacts from the 30% already from the type III Prudential adjustments and these 229.
Would it be correct to assume that your net positive for capital ratios are or have you calculated.
Calculator the impacts already thank you.
No. Thanks for the question I think we are no we are super well capitalize our capital in Brazil far exceeds the regulatory capital requirements that the new regulation and policies on us.
Without mentioning the $2 $4 billion in excess capital that we have in our holding company. So we are fairly comfortably no capitalized to give you.
<unk>.
General sense.
Today, our capital position in Brazil amounts to approximately $2 billion the minimal regulatory debt.
That we have is about one two so that is the buffer that we have to operate as of today.
And our Brazilian operations as you as you have pointed out.
<unk> to be quite profitable generating.
Relevant amount of earnings.
We do expect to continue to have a very comfortable capital position.
So maybe a follow up here.
So we see a good level of payout ratio with also strong profitability of 17% ROE at the holding level. So with this good level of organic buildup is management considering to distribute dividends or somehow we should expect a stronger capital buffer to support increase origination levels port for credit for example.
So at the holding company level.
We have no plans to distribute dividends at this point in time, we do believe that the amount of earnings that we are going to be able to generate in Brazil and later on in Mexico, and Colombia will basically be reinvested in organic growth opportunities that we have we have ahead of us in those three those three geos.
While we may do at some point in time is do distributions from Brazil to the holding company.
And to optimize our capital structure, but we believe that most of the early surplus will be generated and reinvested in the business in the foreseeable future.
Perfect. Thank you.
And our next question comes from the line of Nihon a rollout at HSBC.
Hi, congratulations on the good quarter and thank you for taking my question. My first question is on <unk>.
Look at the ease for both your credit card and your question look portfolio.
But I see that the yields in the last two quarters have been going up.
Are you Brian .
Do you see the pricing up which is leading to high <unk>.
Any other factors playing into that.
And I contrast that with I think what you mentioned if I heard it correctly about the bigger loans that you would like.
Sure.
Cost of advantage in the theater product.
The competitive in terms of pricing for the product is that correct and should we expect.
To get to for the personal loans and credit card products as you gain profitability.
My second question is a quick one on the cost income ratio.
Given the growth you have to deposit product in Mexico, and given to chip in.
Mexico do you expect to accelerate investments in Mexico are you at.
To levels that you have all the fixed costs required to operate in Mexico. Thank you so much.
Now. Thank you for your question a lot of questions. In this one so let me try to slice them a little bit.
In terms of our repricing, our personal loans and credit card business. The answer is no right.
We have basically you operated with no similar pricing levels over the past few quarters, you may have seen a changing the mix of the products within each of them.
And that May have been what actually has driven a little bit more off yields in each of those products in.
In credit cards, what you will see in the effective yield of the total portfolio is the greater relevance of the interest bearing balance as you may see on here on.
On slide 14 of our earnings presentation.
In short no there has not been any any material repricing in our credit cards, our personal loan business in Brazil over the past few quarters I think your second question is on.
On whether we expect to translate the pricing.
Effectiveness that we believe we will be able to implement in <unk> payroll loans into credit cards, and personal loans and I think the general or answer is yes, we do expect to translate additional cost advantages that we acquire into progressively better terms and conditions for our customers throughout.
All of our products. So whenever we see compelling opportunities, we will know flex the pricing muscle.
Accordingly, very analytical manner.
I think the third question is on on.
Oh, sorry, I'll pause here now on pricing to see if I address your question before I go into the efficiency ratio.
So.
Just to clarify on the go.
Loans and fill it got so you would be probably competing on pricing rather than using prices.
These two products in the coming quarters.
Well I don't foresee any material changes to our current pricing policies for the no short in the short term in the next one or two quarters conceptually and in the medium and long term, we do expect to actually use our know better cost advantages.
To leverage pricing muscles and be even more competitive in those markets.
Although as I said up now so as I said earlier, we do our pricing below in the new secured lending type of products that we're launching.
So ultimately it's.
Secured lending what do we call concept now though.
Brian and being meaningful that will decrease the average rate that we're charging across entire portfolio that would also dilute some of the losses delinquency numbers.
We also show for unsecured lending.
Understood. Thank you. Thank you.
And then trying to address your second part of your question, which is on efficiency ratios. So as you note on page 20 of the earnings presentation. We have reached about 35% cost to income.
We do not believe that we are anywhere near our efficiency frontier. We think we can actually continue to improve the efficiency ratio going forward.
Nor do we expect that the additional investments that we're going to we're going to make and Max clinical own view will preclude us from continuing to make investments on those fronts right. So we have already frontloaded quite a lot of the investments that we've made in Mexico, and Colombia, especially in terms of head count and the velocity through which we are going to grow head count.
Over the next let's say 12 months to 24 months, it's probably going to be lower than the velocity through which we grew head count over the prior 24 months.
If I can squeeze in just one last.
Thanks.
Asset quality seems to have turned around and stabilize early delinquencies stabilizing for Brazil.
Seem to be having good momentum in Mexico.
Some of the key.
The challenges are.
Concerns that.
Mindful of in the coming quarters.
They've got a lot of a lot of the challenges or the main challenge that we're all here very much focused on data I know day out is around dose, let's say.
The three key priorities, we've been discussing since the beginning of the year and then a number four I'll go through them quickly.
The first one is secured lending so we launched secured ending Q2, we now really got a seated scaling.
It's a big opportunity for us so and it's all about execution high income as Lego earlier said, it's a marathon not a sprint because it's a competitive space and there is a lot that we need to build to win in that category and to get to the share that we will not be getting so we're putting all hands on deck on trying to.
Put together the great a great value proposition there for that customer segment.
That we already have in the building, which is the good news, but we need to figure out how to increase the share.
And then really cracking new content, finding in Mexico, and Colombia, which are critical aspects to decreased funding cost in both countries get the funding that we need to continue growing in both countries and also accelerate user growth customer growth. So it does have those are the three key strategic priorities.
From the company that we are very much focused on I think beyond that it really is the multi product story. It is it is this evolution that has already taken a couple of years and we need to continue executing on on becoming a full place a full complete having the full complete portfolio of products.
Our financial progress and then beyond as we executed the marketplace strategy, we have integrated already over 150 different commerce partners into our App.
People are being able to make reservations in our App for me I've been able to to shopping our app, we see the opportunity of ours being bigger.
And then a financial services firm, we think opportunity is that consumer technology platform.
Over 85 million customers that have very significant engagement and usage.
To transact in a number of different ways, and we're able to help them.
Even the financial services, so that is going beyond financial services that takes a number of different skill sets and learnings that we are trying to building house and there is a lot of focus in US also executing the core part of the longer strategy of the company.
Perfect. Thank you so much for the answers.
Thank you.
As a reminder, we ask analysts to limit the our interactions to one question and one follow up so we can take all of the questions in the queue.
And we go now to Alex Mark Graf with Keybanc.
Thanks, everyone. I. Appreciate the question, maybe just first would love to hear a bit about how credit limits with them.
The credit card product chain.
Changed kind of on a sequential basis through the year as you look at new cohorts.
Yes, Alex Thanks for the question this is <unk>.
Our approach generally on credit limits as to start with a fairly conservative credit limit.
Also known as the lowering growth strategy for <unk>.
Most customers, especially the customers that tend to be in the middle to.
Higher risk.
Segments of.
The universe and so what you observe is a for a given cohort.
To start pretty low and then expand.
We observed data and good repayment and performance behavior.
So on a given cohort you'll see fairly rapid expansion of credit limits.
But then as new cohorts show up.
They tend to dilute the average.
But in general I would say like the rate at which we're increasing credit limits.
It's been pretty steady.
The last couple of quarters.
And just to clarify that.
<unk> <unk> I guess as part of the question that level of conservatism has that changed materially.
No it really hasnt.
I mean.
As a matter of fact, our general credit philosophy is irrespective of the point at which we are in the cycle, we subject any new credit grants, we have any new cohorts two fairly high requirements in terms of resilience. So typically we expect.
Whether it's our credit card or personal loan cohorts to be able to withstand a doubling of losses and still be above hurdle in terms of returns and NPV positive.
Thank you.
That's what that's what we do.
Throughout the cycle.
And that Hasnt really changed.
Material in the past.
Okay, and then just one quick follow up on the cost to acquire that kind of moving higher in the last several quarters.
I mean, the paid marketing component seems to be stable just wanted to understand kind of what's driving that obviously, it's still very good number but I just want to understand what's taking it to $7 versus what was previously.
Alex what we have seen in customer acquisition cost us all we're being a bit more aggressive in Mexico, and Colombia, as we expand into the juice.
And specially at the beginning when we were operating with no credit cards, only what you will see however in Mexico over the coming quarters is as we launch quint.
Our new our banking account product.
And no meetings and customers are onboard at the customer acquisition cost of Mexico to come down.
What we expect however, going forward as customer acquisition cost to be between five and $10.
And that range is still provides us with what we believe to be a very compelling no LTV to CAC.
Great. Thank you.
And our next question comes from the line of <unk>. Similarly at Moffitt Natus.
Okay.
Hi, guys. Thanks for squeezing me in Greg results here I just wanted to ask about.
Card issue in issuance volumes trends in Brazil, and for you guys.
Obviously, very strong number with 30% year over year growth in purchase volume FX neutral I believe.
Much much better.
Consistently event with Brazil market is doing but.
It is it decelerating at a relatively rapid pace.
And when you look at the Brazil overall numbers kind of apex reports there seems to be significant deceleration. This year as well. So just curious to hear your thoughts and kind of what's going on in the market overall in terms of card issuance in Brazil, maybe some impact from picks.
That you are seeing and then how would that then gets reflected in your and your purchase volume growth and kind of what we can expect in the second half of the year and going forward.
<unk>. Thanks, Thanks for the question I think.
It's very hard to address this question without making reference to the normalization post COVID-19, what we have seen over the past two years I would say 2021 and 2022 in Brazil. It was a very strong recovery from Covid loss.
And in a fairly aggressive expansion of additional credits in the country of additional credit cards in the country and over the past I want to say six to 12 months you've seen.
Deceleration of credit expansion in consumer finance in Brazil, including but not limited to credit cards.
We continue to outpace the industry by by fairly large amount, we have been gaining market.
Market share at a clip of about 40 to 50 basis points per quarter throughout the past quarters.
And we expect that this space is to continue in the coming quarters, even though we do not necessarily target kind of a market share goes but the pace at which we have been able to onboard new customers the pace at which we have been able to mature existing cohorts and cross sell credit cars suggest that.
We will continue to gain market share at good pace in the foreseeable future.
Got it and just maybe a very quick follow up are you seeing any.
Negative impact from picks.
Yes on a card volumes.
Absolutely no I think we have seen.
What we have seen is peaks been a phenomenal kind of.
A payment mechanism in Brazil, but first and foremost what peak has been cannibalizing. Our view is cash so that's the first item that piece.
<unk> has been cannibalizing.
We also have seen some early signs of fixed potentially cannibalizing debit and prepaid cards, but we have not seen any evidence of peaks cannibalizing credit cards.
In fact, if anything what we have seen is a very strong correlation off.
The adoption of peaks and financial inclusion in Brazil, and financial inclusion in Brazil, sometimes comps coupled with the expansion of credit cards.
It's also a relatively similar trend to the one you may have seen in India with Upi, but it's too early to draw any parallels between those two geographies.
Okay.
I would just also reiterate something that Davita spoke about and we spoke about and spoken about in the past, which is first order impacts our portfolio.
<unk> has been on credit has been the rapid adoption of fixed financing using credit card limits and so that's been a big driver of the increase in interest bearing balances for us. So that's been a tailwind quite frankly.
Got it perfect. Thank you guys.
And our last question comes from the line of Jamie Friedman.
Okay. Thank you your <unk>.
<unk> in your prepared remarks, you observe the strength in the debit and prepaid component of the newer cohorts.
And I would just say to slide nine and 10 I'm just wondering as.
That.
Population or that.
Representation increases in your portfolio or are there specific.
Products for financial inclusion that you would think would be better targeted towards that type of population.
Curious about the debit prepaid mix. Thank you.
No. Thanks for the question I think.
If I can draw your attention to slide number 12.
You will be able to see the evolution of credit cards, and prepaid <unk> and <unk>.
As I have noted before.
For the younger and earlier cohorts, you do see a higher preponderance of prepaid cards there.
And we think that there is a good pathway into a consumer credit strategy and signed a bank in which we can start the relationship with a customer with a prepaid card only as we learn more about the customer there no income patterns spending patterns and savings patterns, we can progressively gain no more comfort than offered.
This customer a credit line and our credit card, we usually start the use of mentioned with a relatively low credit lines to low and grow and then as the customer views. He's our whole on copper credit history with us we expand this over time and you can see that the purchase volume follows. This expansion unusually purchase volume can triple.
Within the first 24 months that has been very successful.
In the form of customer engagement, but also in the form of no asset quality and it's a probably a formula that we expect to continue to pursue in the coming in the coming years.
Thank you Michael.
Thank you Jamie.
Okay.
And in the name of the whole <unk> and its management team I'd like to thank you all for the participation in this conference call over the coming days our team we will be responding to the questions sent through our webcast and E. Mail. We also take the opportunity to make our holding our team available to any further questions you might have.
And this concludes our earnings call as you all a good night.
The New Holdings Conference call has now concluded. Thank you for attending today's presentation you may now disconnect.
Yes.
[music].