Q4 2023 Nu Holdings Ltd Earnings Call

Operator: Good afternoon, ladies and gentlemen. Welcome to Nu Hldg's conference call to discuss the results for the fourth quarter of 2023. A slide presentation accompanies today's webcast, which is available on Nu's investor relations website, www.investors.nu in English and www.investidores.nu in Portuguese. This conference is being recorded, and the replay can also be accessed on the company's IR website. This call is also available in Portuguese. To access it, you can press the globe icon on the lower right side of your Zoom screen and then choose to enter the Portuguese Room. After that, select Mute Original Audio.

Good afternoon, ladies and gentlemen, welcome to the New Holdings conference call to discuss the results for the fourth quarter 2023.

<unk> presentation accompanies today's webcast, which is available in news Investor Relations website, Www dot investors Dot GNU in English and W. W. W. E. They should do it is to know in Portuguese this.

This conference is being recorded and the replay can also be accessed on the company's I our website.

This call is also available in Portuguese to access you can perhaps the globe icon on the lower right side of resume screen and then choose to entered the Portuguese room after that select mute original audio.

Operator: To access our Portuguese conference, click on the globe icon on the lower right side of your Zoom screen and select the Portuguese Room option. When accessing the new room, make sure to mute the original audio. Please be advised that all participants will be in listen-only mode. You may submit online questions at any time today using the Q&A box on the web. I would now like to turn the call over to Mr. Jörg Friedman, Investor Relations Officer at Nu Hldg. Mr. Friedman, you may proceed. Thank you very much, Operator, and thank you all for 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.

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Please be advised that all participants will be in listen only mode.

Submit online questions at any time to date using the Q&A box on the webcast I.

I would now like to turn the call over to Mister Europe Freedom, an Investor Relations officer at New Holdings. Mr. Friedman you May proceed.

Thank you very much operator, and thank you all for joining our earnings call today.

I have not seen <unk> Ah copies posted in the results Center section followed Investor Relations website with meal today's call or does he velez are fonder, Chief Executive Officer, and Chairman Yusuf flourish, our president and Chief operating officer.

Operator: With me on today's call are David Veles, our Founder, Chief Executive Officer, and Chairman, Youssef Larache, our President and Chief Operating Officer, Guilherme Lago, our Chief Financial Officer, and Jack Dugal, our Chief Product Officer. Throughout this conference call, we will be presenting non-IFRS financial information, including adjusted net income. These are important financial measures for NU but are not financial measures as defined by IFRS and may not be comparable to similar measures from other companies.

<unk>, our chief Financial Officer, and <unk>, our Chief product officer throughout this call first call, we will be presenting no Fries Foundation information, including adjusted net income. These are important financial measures for new but are not financial measures as defined by F. R. S.

And may not be comparable to similar measures from other companies reconciliations off-hour known as far as financial information to the I F. R. As financial information are available in our earnings press release, unless noted otherwise all growth rates are on that you're very <unk> effects neutral basis.

James Eric Friedman: Reconciliations of our non-IFRS financial information to IFRS financial information are available in our earnings press release. Unless noted otherwise, all growth rates are on a year-over-year FX-neutral basis. I would also like to remind everyone that today's discussion might include forward-looking statements, which are not guarantees of future performance and, therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties and could cause actual results to differ materially from our expectations. Please refer to the forward-looking statement disclosure in our earnings release. Today, our founder, chairman, and CEO, David Veles, will discuss the main highlights of our fourth quarter 2023 results and provide an overview of our company priorities for 2024. Subsequently, Guilherme Lago, our CFO, and Youssef Larache, 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'd like to turn the call over to David. David, please go ahead.

I would also like to remind everyone that today's discussion might include forward looking statements, which are not guarantee of future performance and therefore, you should not put do you rely on some them. This is statements are subject to numerous risks and uncertainties and could cause extra <unk>.

Salt to differ materially from our expectations. Please refer to the forward looking statements disclosure in our energies released today, our founder Chairman and Teal does you fellas, we'll discuss it may highlight to off our fourth quarter 2023 results and provide an overview of our <unk>.

The priority as far 2024 subsequently dilemma liable are cheerful and use <unk>, our president and <unk> will take you through our financial and operating performance farther quieter after which time, we will be happy to take your questions now I'd like to turn the call over to that would be.

Does he please go ahead.

David Veles: Thank you, George. Good evening, everyone. And thank you again for being with us. Q4 2023 marks our second year as a publicly traded company and our 10th year since our foundation. Our mission, dedicated to fighting complexity and empowering people, continues to gain strong momentum, now serving nearly 100 million people in Brazil, Mexico, and Colombia. Meanwhile, our business model, anchored in three fundamental principles,

Thank you George Good evening, everyone and thank you again for being with us today Q.

Q4, 2023 marks or second year as a political at least the company <unk> Fundacion or mission dedicated to fighting complexity and empowering people continues to gain strong momentum now serving nearly 100 million people in Brazil, Mexico, and Colombia, Meanwhile, or business model accurate.

<unk> principles fast customer expansion expanding revenue per customer and efficient operating cost is delivering onto the substantial earnings power <unk>.

David Veles: Fast customer expansion, expanding revenue per customer, and efficient operating costs are delivering on the substantial earnings power we invest in. Our customer-based growth has consistently outpaced our expectations, reaching approximately 94 million customers at the end of the quarter compared to 54 million just three years ago. We are on our way to crossing 100 million customers in 2024, and we plan to continue marching along thereafter towards the development of the largest consumer platform in Latin America. The base of customer net ads in Brazil remains impressive, averaging 1.3 million customers per month, resulting in a total of 87.8 million customers by the end of 2023.

Our customer base growth has consistently of paste, our expectations, reaching approximately 94 million customers at the end of the quarter compared to 54 million just three years ago. We are on our way to cross 100 million customers in 2024, and we plan to continue marching along thereafter towards the development of the largest consumer.

Platform in Latin America.

The base of customer <unk> in Brazil remains impressive averaging 1.3 million customers per month, resulting in a total of 87.8 million customers by the end of 2023 at the same time or growth in Mexico has accelerated with a net out of almost 1 million new customers seem to clutter, reaching a total of 5.2 million <unk>.

David Veles: At the same time, our growth in Mexico has accelerated with a net addition of almost 1 million new customers in the quarter, reaching a total of 5.2 million customers by the end of 2023. This underscores the success of our Q3 decision to increase deposit yield in Mexico, which has accelerated our company-wide flywheel in the country and consolidated Nu as the indisputable leader in the digital banking category in Mexico. Finally, let me share some financial highlights. In the fourth quarter, our revenue surged to $2.4 billion, accelerating sequentially to a 57% year-over-year increase.

<unk> by the end of 2023. This underscores the success of our two three decision to increase deposit yields in Mexico, which has accelerated or a company wide flywheel in the country and constantly <unk> the indisputable leader into digital banking category in Mexico.

Finally, let me share some financial highlights with you in the fourth quarter or revenue searched to $2.4 billion accelerating sequentially to a 57% year over year increase or gross profit surpassed $1.1 billion growing 87% year over year, while the gross margin expanded.

David Veles: Our gross profit surpassed $1.1 billion, growing 87% year-over-year, while our gross margin expanded once again, reaching 47.5% in the quarter. The sequential gross margin expansion boosted our net income, which reached $361 million, while adjusting net income stood at $396 million, reflecting a 229% year-over-year increase. This demonstrates the strength of our business model, capable of combining strong top-line growth with very solid levels of profit. This slide provides a high-level overview of our financial performance trends over the past two years. It underscores our consistent success in expanding the customer base while accelerating revenues and profits. The robust growth of our customer base, driven by the growing cross-selling and up-selling opportunities facilitated by our highly engaged platform, resulted in a more than three-fold increase in quarterly revenues in just two years on an FX-neutral basis, which is translated into an 82% annual compounded growth rate for this.

Once again, reaching 47.5 per cent in the corner the sequential gross margin expansion boosted our net income which reached $361 million, while adjusted net income stood at $396 million, reflecting a 229% year over year increase this demonstrates the strength of our visa <unk>.

<unk> capable of combining strunk top line growth with very solid levels of profitability.

This slide provides a high level overview of our financial performance transfer over the past two years, it underscores or consistent success and expanding the customer base, while accelerating revenues and profitability.

They're robust growth of our customer base, driven by the growing cross selling and up selling opportunities facilitated by are highly engaged platform, resulting in a more than three fold increase in quarterly revenues and just two years went in and fixed neutral basis.

Translated into 82% annual compounded growth rate 40 spirit.

David Veles: The third chart on the slide effectively illustrates our robust pricing and underwriting capabilities, where quarterly gross profit calculated as total revenues minus funding costs, transactional expenses, and credit loss allowances increased by more than fourfold in the same period. Lastly, we believe the combined impact of the aforementioned factors, coupled with the strong operating leverage of our platform and the maturation of our early products in Brazil, has resulted in a significant acceleration in net income growth. This upward trend is evident in the chart on the right, particularly over the past four quarters.

The third chart on the slide effectively illustrates or robust pricing and underwriting capabilities.

Quarterly gross profit calculated as total revenues minus funding costs transactional expenses and credit lost allowances increased by more than four fold in the same period.

Lastly, we believe that combine impact of the aforementioned factors coupled with a strong operating leverage of our platform and I'm a duration of our early products in Brazil has resulted in a significant acceleration in net income growth. This upward trend is evident in the chart on the right, particularly over the past four requires we anticipate this <unk>.

David Veles: We anticipate this compounding effect continuing in the years ahead, driven by the combination of sustained growth and heightened profitability within our plan. Now, I'd like to highlight how our flywheel isn't just driving customer acquisition and data growth but also sustaining strong momentum in our key financial. As our three geographic regions continue to expand, leveraging the inherent operating advantage of our model, we're a holding company that has effectively transformed its potential into profits. In the fourth quarter, Nu Hldg achieved an adjusted net income of $396 million, reflecting an adjusted annualized return on equity of 26%, surpassing the performance of most peers in the region and despite maintaining a considerable excess capital of $2.4 billion in the holding company. If one were to look at our operations in Brazil alone, our return on equity continued to increase and remains about 40%. I'd like to briefly recap how we fared against our priorities in 2020.

Pounding effect continuing in the years ahead, driven by the combination of sustained growth and heightened profitability within our platform.

Now I'd like to highlight how or flywheel isn't just driving customer acquisition and data growth, but also sustaining strung momentum in order to the financial metrics.

Ah So are three geographic region continue to expand leveraging the inherent operating advantage of our motto or holding company has effectively press form it's potential into profit in the fourth quarter holdings achieved and adjusted net income of $396 million, reflecting on adjusted annualized return on equity of 26%.

Surpassing the performance of most piercing the region and despite maintaining a considerable access capital of $2.4 billion in the holding company. If one were to look at our operations in Brazil alone I'll return on equity continue to increase and remains about 40 per cent.

I'd like to briefly recap, how we felt against her priorities in 2023.

David Veles: At the beginning of last year, we communicated our top three priorities for the year. The first was to scale our lending business in Brazil, both unsecured and secured. The second was to grow our share of wallet within the upmarket segment in Brazil. And the third was to ramp up local currency deposits in Mexico and Colombia.

Getting all of last year, we communicated or top three priorities for the year. The first supposed to scale or lending business in Brazil, both unsecured and secured the second was to grow her share of wallet within the market segment in Brazil, and the third was to ramp up local currency deposits in Mexico and Colombia.

David Veles: As you can see in the first part of the slide, we doubled our origination of personal loans over the past year, from almost 1 billion in the fourth quarter of 2022 to 2 billion in the fourth quarter of 2022. Currently, Nubank has an estimated market share of new originations in unsecured personal loans of approximately 22%, increasing from 12% at the end of last year. In addition, we launched our initial CIAPA public payroll loan product in April 2023, followed by FGTS in August 2023, and then ENSS payroll in October 2023. As of Q4'23, 10% of our personal loan origination was already derived from secure lending lines.

As you can see the first part of the slide with doubled or origination of personal loans over the past year from almost 1 billion in the fourth quarter of 2022 to 2 billion in the fourth quarter of 2023.

Currently no bank has an estimated market share of new originations, an unsecured personal loans with approximately 22 per cent increasing from 12% from the end of last year. In addition, we launched or initial <unk> public payroll loan product in April 2023, followed by F. G. T. S. In August 2023, and then.

N F S payroll cover of 2023 <unk>.

Q for twenty-three 10 per cent of our personal loan origination what's we're ready derived from secure learning lines much more will come in 2024, but we're also very pleased with our development and scaling personal loans in Brazil over the past four quarters.

David Veles: Much more will come in 2024, but we're overall very pleased with our development in scaling personal loans in Brazil over the past four quarters. Now, let's delve into our second priority, gaining share of wallet within the upmarket segment in Brazil. It is an effort that will take time and pay off over the long haul.

That step into our second priority gaining share of wallet within the up market segment in Brazil give you some effort that will take time and pay off over the long haul. We believe we're well positioned to competing and winning the second 2023 served as a foundation for these long term journey, we have absorbed a substantial progression you know our segmentation.

David Veles: We believe we're well positioned to compete and win in this. 2023 has served as the foundation for this long-term journey. We have observed a substantial progression in our segmentation effort, with an accelerated growth in market share of principality. Additionally, we have rolled out numerous features and products across all dimensions of our platform tailored to the segment, such as in banking, credit, and investments. Notably, our UV credit card purchase volume expanded from $0.5 billion in Q4 2022 to $1.1 billion in Q4 2023, a 104% year-on-year growth, while UV customers doubled in the period, and our brand perception improved materially as a result. Finally, addressing our third priority for the past year, we successfully introduced our deposit account solution in Mexico, Cuentanil, in May.

<unk> with an accelerated growth in market share of Principality. Additionally, we have rolled out numerous feature some products across all dimensions of our platform tailored to the segment such as in banking credit named <unk> offer, notably or UV credit card purchase volume expanding from 0.5 billion in queue for <unk>.

20, 221 from 1 billion in queue for 23, 104% year on year growth, while you'll be customers doubling the period in our brand perception improved materially indistinct. Finally, we have achieved the best industry net promoter score among proceeding in high income customers.

Finally, addressing or third priority for the past year, we successfully introduced or deposit accounts solution in Mexico <unk> in my following newest announcement of inquiries remuneration of these deposits in November we experienced a remarkable outcome within just two months, we quadrupled the level of deposits in the country.

David Veles: Following the news announcement of increased remuneration of these deposits in November, we experienced a remarkable outcome. Within just two months, we quadrupled the level of deposits in the country to an impressive total of $1 billion at the end of 2023, achieving this milestone 3x faster than in Brazil. With a segment of higher-income Mexicans that are attracted by the more aggressive value, We are extremely pleased with the success of this strategy, even though it is a significant investment, as we believe it unlocks the potential of our member-get-member referral program, enriches our credit underwriting models with more data, and enables our company to become self-sufficient in local currency retail development. Self-sufficiency is crucial for scaling consumer finance. We were also granted a financial license in Colombia at the end of December, allowing us to launch Cuenta in Colombia last year. Similarly to our experience in Mexico, we expect our flywheels in Colombia to be propelled by the Quinta.

<unk> 20th Pressey, a total of 1 billion at the end of 2023 and sharing these milestones three ex pastor Denin, Brazil with a segment of higher income Mexicans that are attracted by the more aggressive value proposition.

Extremely pleased with the success of this strategy, even though it is a significant investment we believe it unlocks the potential of our member can remember referral program and reaches for credit underwriting models with more data and enables or a company to become self sufficient in local currency retail deposits. The self sufficiency is crucial for <unk>.

Seeing a consumer finance business. We were also granted financial licensing Columbia at the end of December, allowing us to launch quintet in Colombia last month, Similarly to our experienced in Mexico, We expect a reply Wilson Columbia to be propelled by the <unk>.

Overall, we believe 2023 was the year, we were able to definitely proved to the market with strung numbers that the digital banking motto, we have been building for over a decade is the future of bank. These motto is are only able to acquire insurer tens of millions of customers that scale and extremely low cost.

David Veles: Overall, we believe 2023 was the year we were able to definitively prove to the market with strong numbers that the digital banking model we have been building for over a decade is the future of banking. This model is not only able to acquire and serve tens of millions of customers at scale and extremely low cost but also generates high satisfaction for consumers while producing one of the highest returns on equity for shareholders. We achieved significant progress by getting banking licenses in two new geographies and by launching successful deposit franchises in Mexico. We also grew within new segments, such as high income. Those developments point in the direction that this is a model that goes beyond Brazil and goes beyond mass market consumers. We realize there is still lots to prove ahead, but we continue to be incredibly excited about how early we are in the development of these. Now I'd like to pass the floor to our CFO, Guilherme Lago, who will guide you through our financial numbers. It's over to you, Lago. Thank you, David, and good evening, everyone.

But also generate the high satisfaction for consumers, while producing one of the highest return on equity for shareholders with shaped significant progress by getting banking licences into new geographies and buy lunch and successful deposit franchises in Mexico. We also grew with a new segment. So just hang those developments pointing the direction.

<unk> that this is a motto that goes beyond Brazil and goes beyond mass market consumers, we realized there's still us to prove ahead, but we continue to be incredibly excited about how early we are in the development of these models.

Now I'd like to pass the floor tour CFO will give you a managua, who will guide you through our financial numbers over to you <unk>.

Thank you <unk> and good evening everyone.

Before starting the discussion around or ear and results and to better frame <unk> financial key performance indicators I would like to recap the three key elements of our simple and powerful available generating strategy thirst, we continue to expand our customer base and the three.

Guilherme Lago: Before starting the discussion around our year-end results and to better frame our operating and financial key performance indicators, I would like to recap the three key elements of our simple and powerful value-generating strategy. First, we continue to expand our customer base in the three markets where we operate, quickly turning new customers into active ones. Second, we are focused on increasing the average revenue per active customer, or RPAC, through effective cross-selling and up-selling. And third, delivering growth while maintaining one of the lowest cost operating platforms in the industry. Let's delve deeper into our fourth quarter results to understand the evolution of each one of these pillars.

Markets wherever you operate quickly transforming new customers into active once second we are focused on increasing the average revenue correct, if customer or are back through effective cross selling and upscaling initiatives and third delivering grove, Wyoming to any one of the lowest cost of operating platform.

In the industry.

Let's delve deeper into our fourth quarter results to understand the evolution of each one of <unk>.

Let's start with customer physician during the fourth letter we once again experience a note or for the expansion of 26% of our customer base year on year as we welcomed nearly 5 million new customers, bringing our total 293.9 million.

Guilherme Lago: Let's start with customer acquisition. During the fourth quarter, we once again experienced a noteworthy expansion of 26% of our customer base year-on-year as we welcomed nearly 5 million new customers, bringing our total to 93.9 million customers at year-end. Brazil continues to deliver a high monthly net addition of almost 1.3 million customers, with a significant portion acquired through cost-effective organic channels. In Mexico, our customer count increased by almost 1 million, crossing the 5.2 million mark. And in Colombia, we are now serving more than 800,000 customers. As mentioned earlier by David, back in December, we received regulatory approval to operate in Colombia as a financing company, allowing us to launch Quanta in the country.

Customers at the ear and Brazil continues to deliver a high monthly met edition of almost 1.3 million customers with a significant portion acquired through cost effective organic channels in Mexico, our customer account increased by almost 1 million crossing the 5.2 million Mark and.

In Columbia, we are now serving more than 800000 customers as mentioned earlier by the V back in December we received the regulatory approvals to operate in Colombia is a financing company, allowing us to launch <unk> in the country with his milestone we expect to onboard even more customers in Cologne.

Which will lead us to federal Grill.

Guilherme Lago: With this milestone, we expect to onboard even more customers in Colombia, which will lead us to further growth. Now, more important than the process of onboarding customers is the ability to effectively activate and retain them. Our active customer base increased by 27% year over year, with the monthly activity rate posting another sequential quarterly increase now reaching 83.1%. We believe that this outcome highlights our ability to effectively engage our customers on our platform. Now turning our attention to revenue expansion. The first chart highlights that Nu has established primary banking relationships with around 61% of our active customer base, up nearly two percentage points in comparison to last quarter. As more customers choose Nu as their primary bank, the more products they tend to utilize, generating higher RPEX. These two effects can be seen in the following chart.

No more important than the process of Onboarding customers is the ability to effectively activate an <unk> power active customer base increased by 27% year over a year with the monthly activity right posting and Notre sequential clerkling trees now reaching E three point.

And 1%, we believe that this outcome highlights our ability to effectively engage our customers on our platform.

Now turning our attention to revenue expansion. The first chart highlights the new has established primary bank in relationships with around 61% off our active customer base up nearly two percentage points in comparison to last quarter is more customers choose new is.

Your primary bank the more proud is the 10th Utilise generating higher our bags the shoe effects can be seen in the following chart.

Guilherme Lago: The second chart illustrates our successful cross-selling strategy, introducing new products to our customers and establishing ourselves as their primary banking partner. Our active customers are consuming on average 4 products on our platforms, versus an average of 3.8 products a year ago. The third chart shows how our expanding customer engagement, as demonstrated in the first chart, combined with our growing product cross-sell capabilities, as shown in the second chart, is compounding to produce increasingly positive results. Our monthly RPEC increased to $10.6, while our more mature cohorts are already generating a monthly RPEC of $27.

The second chart illustrates are successful cross selling strategy, introducing new products to our customers and establishing ourselves as their primary banking partner.

<unk> customers are consuming on average four proud us on our platforms versus an average of 3.8 products are year ago.

The third chart shows how are expanding customer engagement as demonstrated in the first chart combined with <unk>, drawing Prodded Cross Hill capabilities S. Sean and the second chart is compounding to produce increasingly positive results our monthly <unk> increase to 10.6 dollars while.

Or a more mature cohorts are already generating a monthly or pack of $27 decrease in our tech has resulted in another quarter of solid revenue growth as presented in the Max is light.

Guilherme Lago: The increase in RPEC has resulted in another quarter of solid revenue growth, as presented in the next slide. Our monthly RPEC has continued to grow steadily, expanding by 23% year over year. We remain confident that we still have untapped potential for further RPEC growth, moving us closer to realizing what we believe is our full RPEC potential. As shown in the second chart, our revenues reached a new record high of $2.4 billion, up 57% year-over-year, as the increase in active clients combined with higher RPECs continue to drive sustained top-line growth. Now, turning our attention to our cards. Purchase volumes increased 29% to $32.6 billion in the fourth quarter.

Our monthly <unk> has continued to grow sadly expanding by 23% year over year, we remain confident that we still have untapped potential for foot or art <unk> moving is closer to realizing what we believe is R. <unk>.

As shown in the second chart, our revenues reach of the new record high of $2.4 billion up 57% year over year as being queasy inactive clients combined with higher or peg continued to drive sustained top line growth.

No turning our attention to our cards business purchase volumes increased 29% to $32.6 billion in the fourth letter for the full year purchase volumes reach it more than $111 billion up 37% over 2022.

Guilherme Lago: For the full year, purchase volumes reached more than $111 billion, up 37% over 2022. This strong performance underscores the power of our product cross-sell, up-sell, and customer engagement capability. The chart on the right depicts the correlation between purchase volumes and the aging of customer cohorts. Most of our purchase volumes originate from our more established customer cohorts, characterized by higher monthly spending compared to recent cohorts. While there is an initial disparity between newer and older cohorts, both show a clear upward trend in consumption over time. Thus, effectively, when we look at a constant initial risk basis, there is a clear uptrend in the spending patterns of our cohorts. We believe the compounding effect of integrating millions of new customers each quarter, coupled with the gradual shift to higher spending patterns, will continue to fuel future growth in purchase volume.

There's a strong performance underscores the power off our prodded cross-sell upsell and customer engagement capabilities.

Charged on the right the pizza the correlation between purchase volumes and the agent of customer cohorts most of our purchase volumes originate from our more stablish customer cohort characterized by high your monthly spending compared to recent cohorts wild there is an initial disparity between newer and older cohorts bove.

Sure clear up worse trends in consumption overtime effectively when we look into a constant initial risk basis. There is a clear uptrend in this bedding patterns of our cards customers. We believe the compounding effect of integrating millions of new customers each quarter, coupled with the gradual shift.

To hire spanning patterns will continue to view the future growth of purchase volumes.

Guilherme Lago: We believe we currently hold a 13.8% share of the credit card market in Brazil, in terms of purchase volumes, up 150 basis points from a year ago. As our market presence is strengthened, our confidence in capturing additional share in the future grows. This confidence is rooted in the steady pace of customer acquisition and their strengthening relationships with us. Our consumer finance portfolio, comprising credit cards and personal loans, posted another increase this quarter, up 49% year-over-year to $18.2 billion. This growth was boosted by expansions in both product categories. The credit card portfolio expanded by 44% year over year to $14.5 billion.

We believe we currently hold the 13.8% share of the credit card market in Brazil in terms of purchase volumes up 150 basis points from a year ago as our market presence is strengthens our confidence in capturing additional share in the future grill. This confidence is rooted.

In the steady pace of customer physician and they're strengthening relationships with us.

Our consumer finest per faulty comprising credit cards, and personal loans posted a <unk> up 49% a year for a year to $18.2 billion. This growth was boosted by expansions in both proud of the <unk> the.

Credit card for fall you expanded by 44% year over year to $14.5 billion. We attribute this grill to the onboard enough new customers to our ecosystem and are low and drill focused approach our personal lump or fall is a highlight this quarter increasing 76% you are.

Guilherme Lago: We attribute this growth to the onboarding of new customers to our ecosystem and our low and grow focused approach. Our personal loan portfolio is a highlight this quarter, increasing 76% year over year and reaching $3.7 billion. Our personal loan cohorts have maintained expected credit behaviors following the same trends observed in the prior quarter, allowing us to increase originations for yet another quarter.

For a year and reaching $3.7 billion personal loan cohorts have maintain expected credited behaviors. Following the same trends observed in the prior quarter, allowing us to increase originations for yet another quarter.

We believe there are significant opportunities to continue to expand our loan book why we seek attractive returns and robust credit resilience as we have previously mentioned this may result in Instinctually hired the link because your rights, but our aim is to ensure that these can be more than offset by a.

Guilherme Lago: We believe there are significant opportunities to continue to expand our loan book while we seek attractive returns and robust credit resilience. As we have previously mentioned, this may result in intentionally higher delinquency rates, but our aim is to ensure that these can be more than offset by additional revenues, resulting in higher risk-adjusted net interest margins. Now, let's take a deeper look at the breakdown of interest-earning loans within our credit card portfolio. We continue to pursue our strategy of increasing the share of credit card loans that earn interest, with special emphasis on PICS and boleto financing. This has driven sustained growth of our interest earning installment balance, which now accounts for 23% of our total credit card loan portfolio. Our goal is to capitalize on the increasing adoption of PICS in Brazil, where we remain the leading provider of PICS services in the country.

Additional revenues, resulting in higher risk adjusted net interest margins.

Now, let's take a deeper look at the breakdown of interest bearing loans within our credit card <unk>.

We continue to pursue our strategy of increase in the share of credit card loans that earn interest with special emphasis on peaks and bullet to financing. This has driven sustained roof off our interest earnings stallman balance, which now accounts for 23% of our total credit card <unk>.

Surely our goal is to capitalize on increasing the adoption of peaks in Brazil, where we remain the leading provider of peak services in the country is off December 20th twenty-three over 35 per cent of our active credit card customers were active users of big financing feature.

Guilherme Lago: As of December 2023, over 35% of our active credit card customers were active users of PICS financing. We believe that this type of financing offers an attractive risk-adjusted rate of return, allowing us to expand the monetization of our credit card business beyond a few generations, while also unlocking substantial value as we fulfill an important customer need. However, we have intentionally not increased our share of revolving receivables, which even compressed sequentially to 6% of our total receivables this quarter.

We believe that this type of financing offers an attractive risk adjusted rate of return, allowing us to expand the monetization off our credit card business beyond fee generations, while also unlocked and substantial value is with full few unimportant customer need however, we having thankfully not increase.

Our sheer off resolving to receivables, which even compress sequentially to 6% of our total receivables this quarter and turn our total IEP balance, including revolving is at 29% of the <unk> compared to 23% of the market.

Guilherme Lago: In turn, our total IEP balance, including revolving, is at 29% of the portfolio this quarter, compared to 23% of the market. Our personal loan portfolio, composed of both unsecured and secured loans, remains resilient and aligns with our expectations for asset quality. Originations doubled year-over-year, reaching R10 billion in the quarter.

Our personal loan portfolio can pose of both unsecured and secure loans remains resilient and a line with our expectations for us at quality origin Nations doubled you over a year, reaching 10 <unk> in the quarter secure personal loans are drawing according to plan with.

Guilherme Lago: Secured personal loans are growing according to plan, with originations in the quarter reaching 10% of the total versus 3% in the previous quarter. Over the past year, we have made substantial progress in broadening our lending product portfolio, introducing new secured and unsecured loans to cater to a wider range of customer needs. On the secure front, we now offer payroll loans for federal public servants and retirees, and FGTS and investment-backed loans for the wider Brazilian population. While these new products may not yet significantly impact origination volumes or the credit portfolio, we believe they lay the groundwork for continued growth and contribute to the development of an even more resilient credit book in the years to come. Note that our credit yield this quarter was affected by the loan mix. As secured personal loans by definition have lower interest rates, an increase in originations of these loans will directly impact the average interest rates.

Originations in the quarter, reaching 10 per cent of the total versus three per cent on the previous quarter.

Over the past year, we have made substantial progress in broadening our lending proud of the <unk>, introducing new secured and unsecured loans to cater to a wider range of customer needs on the secure Trump we now offer payroll loans for photo public service animal diaries N F. G T S <unk>.

Investment back at loans for the wider Brazilian population wild this new products may not have yet significantly impacted origination volumes or the credit per falling you. We believe they laid the groundwork for continued growth and contribute to the developing often even more resilient credit book in the years to come.

Note that our credit <unk> was affected by the loan mix F secure personal loans by definition have lower interest rates and increasing originations of these loans will directly impact the average interest rates the unsecured personal long. So you would however increase marginally quarter over quarter.

Guilherme Lago: The unsecured personal loans yields, however, increased marginally quarter over quarter as we continue to expand eligibility to riskier bands of customers. Moving on to the progress achieved on the funding front, we continue to see a solid trend in the expansion of our deposit base, which increased 38% year-over-year, reaching $23.7 billion at the end of. This represents a significant step towards our goal of developing one of the strongest local currency retail deposits franchises in the region, bolstering our ability to support our consumer finance operations across the three geographies where we operate. In Mexico, we are experiencing significant growth in Nu Cuenta. By the end of the fourth quarter, we had accrued over $1 billion in deposits.

<unk> as we continue to expand eligibility to risk your bands of customers.

Moving onto the progress achieved on the funding front, we continue to see a solid trends in the expansion of our deposit base, which increased 38% year over a year, reaching $23.7 billion at the end of the year. This represents a significant step.

Towards our goal of developing one of the strongest local currency retail deposits franchise in the region bolstering our ability to support our consumer financial operations across the three geographies, where we all price.

In Mexico, we are experiencing significant <unk> by the end of the fourth quarter, we had accrued over $1 billion in deposits given our growing presence in Mexico. We have decided that from now on we will show our cost of deposits as a percentage that her mind by the ratio between.

Guilherme Lago: Given our growing presence in Mexico, we have decided that, from now on, we will show our cost of deposits as a percentage determined by the ratio between the interest income paid to customers and the interbank rates of the countries, namely TI for Mexico and CDI for Brazil. Even taking into account this calculation, our cost of deposits for this quarter stood at 80% of the interbank rate, in line with our expectations. This consistently low cost of deposits highlights our progress in harnessing the value of our liability franchise. Our loan-to-deposit ratio, or LDR, stood at 34% versus 35% in the previous quarter, with deposit growth showing sequential acceleration. We are very confident that there is still a lot of room for additional balance sheet optimization ahead of us. Our Net Interest Income, or NII, increased 85% year-on-year, reaching a new record high of $1.3 billion in the quarter.

The interest income pay to customers in the interbank rates of the countries, namely T for Mexico, and CD I for Brazil, even taken into account. This calculation our cost of deposits for disk water. He stood at 80% of the interbank rate in line with our expectations. This consistently.

Low cost of deposits highlights our progress in harnessing the value of our liability franchise.

Our loan to deposit ratio or L. D. R. U stood at 34% versus 35% in the previous quarter with deposit grill, showing sequential acceleration. We are very confident that there is a <unk> a lot of room for additional balance sheet Tokenization ahead of us.

Our net interest income or NII increased 85% year on year, reaching a new record high of $1.3 billion in the quarter. We believe that the continued growth of our credit card and personal loss per fall you was the key driver of these expansion we delete.

Guilherme Lago: We believe that the continued growth of our credit card and personal loans portfolio was the key driver of this expansion. We delivered a net interest margin, or NIM, of 18.3%, representing a drop of 0.5 percentage points compared to last quarter but an increase of 5 percentage points in comparison to one year ago. This decrease was mainly attributed to an impact of our collections strategies associated with, but not limited to, Desenhola, which affected two different lines of our P&L in opposite directions with a virtually neutral effect on our gross margin and net income, but with a negative impact on our NIM. Customer discounts on the renegotiated portfolios are booked into the other interest expenses line, so they are captured in our NIM. This line was negatively impacted by 60 to 70 million dollars, representing a 90 basis points impact on our NIM.

<unk>, a net interest margin or NIM of 18.3%, representing a drop off 0.5 percentage points compared to less water, but an increase of five percentage points in comparison to one year ago.

This decrease was mainly attribute it to wanting pack of our collections has tragedies associated with but not limited to doesn't hall up which affect the two different lines are far P&L in opposite directions with virtually neutral effect on or a gross margin and net income, but with a negative and <unk>.

<unk> on our name customer discounts on their renegotiate it <unk> are booked into the other interest expanses line. So are captured in our name. This line was negatively impacted by $60 million to $70 million, representing a 90 basis points in the packed on our NIM without.

Guilherme Lago: Without this, our NIM would have achieved 19.2 percent, an increase of 40 basis points quarter over quarter. The P&L line that was positively impacted by a similar amount was recoveries, which is booked deducting the credit loss allowance, so captured in the risk-adjusted net interest margins, which, as Youssef will explain next, continue to evolve favorably. Looking ahead, irrespective of the direction of interest rates, the main lever for future NIMS should be the progression of the company's loan-to-deposit ratio, as our excess deposits are basically invested in public bonds, the remuneration of which is much lower than that of our credit product. Moving to the third pillar of our strategy, maintaining a low cost to serve. We strongly believe that our main competitive advantage is maintaining a low cost to serve, which we aim to keep at or below the $1 level for the foreseeable future.

<unk> our name would have achieved 19.2 per cent, an increase of four P basis points quarter over quarter.

P&L line and it was positively impacted in a similar amount was recoveries, which is booked deducting. The credit loss allows so captured in the risk adjusted net interest margin, which adds Yousef will explain next continue to evolve favorably looking ahead irrespective off the direction of interim.

<unk> the main lever for future names should be the progression of the company's loan to deposit ratio as our excess deposits are basically invested into public bonds. The remuneration of which is much lower than that of our credit products.

Move into the third dealer with our strategy maintaining a low cost to serve we strongly believe that our men competitive advantage is maintaining a low cost of surf, which we aim to keep at or below the one the other level for the foreseeable future in the fourth quarter of 2023.

Guilherme Lago: In the fourth quarter of 2023, we successfully realized this goal with a cost-to-serve per active customer standing at $96 million. This figure currently remains unchanged on an FX neutral basis when compared to a year ago, while our RPEC increased by 23%, demonstrating the strong operating leverage of our business model. Our gross profit reached a new quarterly record high, surpassing $1.1 billion, reflecting an 87% year-over-year increase.

We successfully realized this go with a cost to surf proactive customer standing at 90 cents. This fieger currently remains unchanged unaffected neutral basis, when compared to a year ago, while our our packing tweeze by 23% the most trading the strong operating leverage off our business model.

Our gross profit reach of the new Clerkly record high surpass in $1.1 billion, reflecting an 87% you over a year increase. Moreover are gross profit margin expanded nearly five percentage points to four.

Guilherme Lago: Moreover, our gross profit margin expanded nearly five percentage points to 47.5%, highlighting the margin expansion that began in the third quarter of 2022. Our gross profit margin continues to be positively impacted by ongoing improvements observed in our net interest margin and cost of risk. But the movement this quarter is also amplified by the positive seasonality relative to the purchase volumes of cards, which increased interchange revenue.

7.5 per cent highlighting the margin expansion that'd began in the third quarter of 2022 or a gross profit margin continues to be positively impacted by ongoing improvements observed on our net interest margin and cost of risk, but the movement. This quarter is also amplified by the positive seasons.

<unk> relative to the purchase volumes of cards, which increased interchange revenues.

Guilherme Lago: Looking ahead, we expect annualized gross margins in 2024 to normalize to similar levels in 2023 as our investments in Mexico and Colombia are offset by margin expansions in Brazil. After that, we expect the expansion trend to resume and gross margin to gradually grow towards 50%. We are fully committed to maintaining operating leverage as a key element of our strategy. During the fourth quarter, our efficiency ratio stood at 36%, an increase in comparison to the previous quarter due mostly to two factors.

Luke and a half we expect annualize gross margins in 2024 to normalize to similar levels of 2023 S. Our investments in Mexico, and Colombia are offset by the margin expansions in Brazil. After that we expect the expansion trying to resume and gross margin to gradually.

Grilled towards 50 per cent.

We are fully committed to maintaining operating leverage is a key element of horseradish during the fourth letter <unk> ratios to the 36% an increase in comparison to less clutter due mostly to two factors thirst, we invested more on branding efforts.

Guilherme Lago: First, we invested more in branding efforts as we advance our strategy into the high-income segment in Brazil and as we progress in Mexico. Those efforts are linked to the company's priorities for 2023, and we are pleased with the solid developments achieved. It is important to mention that marketing expenditures were below the historical average during the first half of 2023.

As we advance our strategy into the high-income segment in Brazil N. As we progress in Mexico. Those efforts are linked the company's priorities for 2023, and we are pleased with the solid develop is achieved important to mention that marketing expenditures were below historical average during the first half of 2002.

Three three so in part the ryzen expenses disc water, what already expected and previously communicated second cloud expenses rose driven by higher data usage from increased transactions and customers activity specially during the holiday season. We believe this course will be reversed.

Guilherme Lago: So, in part, the rising expenses this quarter were already expected and previously communicated. Second, our cloud expenses rose, driven by higher data usage from increased transactions and customers' activity, especially during the holiday season. We believe the results will be reversed in the subsequent quarters.

The subsequent quarters, despite the higher efficiency ratio in the quarter deficiency ratio for the full year of 2023 remain strong achieving 36% and improvement of 19 percentage points when compared to the previous years, we believe that our level of efficiency positions new.

Guilherme Lago: Despite the higher efficiency ratio in the quarter, the efficiency ratio for the full year of 2023 remains strong, achieving 36 percent, an improvement of 19 percentage points when compared to the previous years. We believe that our level of efficiency positions Nu as one of the most efficient companies in Latin America. We are also confident that we can achieve more improvements in operating leverage as we continue to scale the business by expanding our customer base, increasing product upselling and cross-selling, and introducing new products. Finally, we delivered another quarter of profitability, with a net income for the fourth quarter of $361 million, increasing almost 5x on an FX-neutral basis compared to the previous year. These strong and positive results serve as evidence of the effectiveness of our strategy and business model. Adjusted net income, in turn, reached $396 million in the quarter.

Is one of the most efficient companies in Latin America.

We are also confident that we can achieve more improvements and operating leverage as we continued to scale the business by expanding our customer base, increasing proud up sailing and <unk> and introducing new products and features.

Finally, we delivered another quarter of profitability with a net income for the fourth letter of $361 million increase in almost five acts on and affects neutral basis compared to the previous year, There's a strong and positive results serve as evidence.

Of the effectiveness of our strategy and business model adjusted net income in turn reached $396 million in the quarter.

Guilherme Lago: While we are satisfied with the results we have achieved to date, let me reinforce that we manage our business with a strong emphasis on long-term value creation. Therefore, our strategy may involve making additional short-term investments to further uncover long-term value creation opportunities. This fourth quarter and 2023 as a whole serve as clear evidence of our sustainable cost advantage. First, we successfully added around 5 million customers this quarter while keeping what we believe to be one of the lowest costs to acquire among consumer fintechs and banks on a global scale. Second, we maintain our cost to serve consistently low, below the $1 threshold, which we estimate to be approximately 85% lower than that of incumbents, making Nu one of the most efficient financial services companies in Latin America.

Why we are satisfied with the results we have achieved to date lemme reinforced that we manage our business with a strong emphasis on longterm value creation. Therefore, our strategy may involve making additional short term investments to further in colver longterm value creation opportunities.

This fork water and 2023 is a whole serve as a clear evidence of our sustainable cost advantages first we successfully added around 5 million customers. This water, while keeping what we believe to be one of the lowest cost to acquire among <unk>.

<unk> syntax and banks on a global scale second we maintain our cost to surf consistently low below the one dollar threshold, which we estimate to be approximately 85 per cent lower than that of incumbents, making new one of the most efficient financial services companies in Latin America third.

Youssef Larache: Third, regarding cost of risk, we have effectively managed credit risk, outperforming competitors on an apples-to-apples basis in terms of delinquency rates, even in the face of a more challenging backdrop. And lastly, on cost of funding, we maintained it at 80% of the blended interbank rates of Brazil and Mexico, while significantly increasing deposit volume, thus closing the negative gap against incumbent banks and widening the positive gap over consumer fintechs. We are very pleased with the results achieved this quarter and for the full year of 2023. We remain confident in our capacity to innovate and scale top-notch products, expand internationally, and continue to operate at low cost. Now, I'd like to hand the call over to Yousef, our President and Chief Operating Officer, who will walk you through some key highlights of our asset quality. Thank you, Lago. Good evening, everyone.

<unk> regarding cost of risk, we have effectively manage credit risk outperforming competitors on an apples to apples basis in terms of delinquency rates, even in the face of a more challenging backdrop and lastly on cost of funding we maintain it at at 80% of the blended interbank.

<unk> y O significantly increase in deposits volume disclosing the negative gap of gas and come in banks and widening the positive gap over consumer <unk>.

We are very pleased with the results achieved this water and for the full year of 2023, we remain confident in our capacity to innovate and scale topnotch product expanding internationally and continued to operate in low cost us.

Now I'd like to hand, the call over to Yusuf, our President and Chief operating Officer, who will walk you through some key highlights off our asset quality.

Thank you Michael good evening everyone.

Youssef Larache: I will now take you through some of the highlights of asset quality and credit portfolio health for the fourth quarter of 2022. Let me begin with NPL. Our leading indicator, NPL 15-90, declined slightly on a sequential basis to 4.1%, in line with our expectations. Our NPL 90-plus ratio remains stable sequentially at 6.1%, also in line with our expectations. Recall that this ratio exhibits a stock behavior as loans move through the delinquency buckets rather than a flow behavior. We maintain our strategy of not selling any credit receivables, so our NPL rates require no abstention.

Now take you through some of the highlights of acid quality and credit portfolio health for the fourth quarter of 2023.

Let me begin with N P L trends.

Are leading indicator N P. L 15 to 90 declined slightly on a sequential basis to $4 one per cent in line with our expectations.

R. N P. L 90, plus ratio remains stable sequentially at $6 one per cent also in line with our expectations.

Recall that this ratio exhibits a stock behavior is loons move through the delinquency buckets, rather than he flew behavior, we maintain their strategy of not selling any credit receivables. Therefore R. N P L rates required to address ma'am.

Youssef Larache: And as Lago mentioned earlier, and we shared last quarter, looking ahead, we see meaningful opportunities to continue to expand our credit portfolio while seeking attractive returns and robust resilience. We anticipate that part of that growth will come from expanding down the credit spectrum. And while this may result in intentionally higher delinquency rates, our goal is to ensure that this will be more than offset by additional revenues, leading to even higher risk-adjusted margins as we expand. These two charts provide information about renegotiations in our Brazil credit portfolio. As you can see on the left-hand chart, around 9.6% of balances had been renegotiated by the end of Q4 2023, in comparison to 9.4% in the prior quarter. Furthermore, following the trend of previous quarters, more than half of these were for loans that were current or less than 15 days late at the time of renegotiation. Moreover, 88% of the renegotiations were for loans less than 90 days past due at the time of renegotiation. This goes to show that renegotiations have a limited impact on NPL rates.

And as Michael mentioned earlier, and we've shared last quarter. Looking ahead, we see meaningful opportunities to continue to expand our credit portfolio, while seeking attractive returns and robust resilience levels. We anticipate that part of that growth will come from expanding down the credit spectrum and while this may result in intentionally higher delinquency rates are go.

Is to ensure that this will be more than offset by additional revenues, leading even higher risk adjusted margins as we expand.

These two charts provide information about renegotiations in our Brazil credit portfolio as you can see on the left hand sharp around 9.6 per cent of balances had been renegotiated by the end of 242023 in comparison to 9.4% in the prior quarter <unk>.

Following the trend of previous quarters more than half of these were for a loan that were current or less than 15 days late at the time of renegotiation. Moreover, 88 per cent of renegotiations were for a loan lifted 90 days past due at the time of read negotiation. This goes to show that renegotiations have a limited impact on N P. L right.

On the right hand chart, you can see that we maintain a comfortable level of provision coverage above the 90, plus the balances of a renegotiated portfolio at 243.5 per cent.

As we mentioned on previous occasions, the growth of our portfolio is what has been driving the bulk of the increase in her credit provisions. This is because we frontload provisions at loan origination in accordance with Ifr's nine standards. This quarter. However, we have incurred a lower credit loss allowance expensive than last quarter at 500.

Youssef Larache: On the right-hand chart, you can see that we maintain a comfortable level of provision coverage above the 90-plus balances of our renegotiated portfolio at 243.5%. As we mentioned on previous occasions, the growth of our portfolio is what has been driving the bulk of the increase in our credit provisions. This is because we front-load provisions at loan origination in accordance with IFRS 9 standards. This quarter, however, we incurred a lower credit loss allowance expense than last quarter, at $592 million.

$92 million. This is mainly driven by higher credit card and personal loan recoveries as a result of the <unk> hold on government sponsored debt renegotiation program as well as collections initiatives, we implemented to capitalize on it we estimate the size of this impact to be around $60 million to $70 million in the fourth quarter credit loss allowance expense.

<unk> explained earlier this is virtually neutral to earnings as these higher recoveries are offset by discounts that are captured in the other interest expense line item and which negatively impacted our net interest margin in the corner.

Youssef Larache: This was mainly driven by higher credit card and personal loan recoveries as a result of the Desinhala government-sponsored debt renegotiation program, as well as collections initiatives we implemented to capitalize on it. We estimate the size of this impact to be around 60 to 70 million dollars in the fourth quarter. As Ligo explained earlier, this is virtually neutral to earnings as these higher recoveries are offset by discounts that are captured in the other interest expense line item and which negatively impacted our net interest margin. However, risk-adjusted net interest margin was not impacted by these two offsetting dynamics and continued to expand, reaching 10.2% in the quarter, up 120 basis points sequentially.

Risk adjusted net interest margin was not impacted by these two are sitting dynamics and continue to expand reaching 10.2% in the quarter up 120 basis points sequentially.

This again is a reflection of our pricing for risk in pursuit of resilient returns as we underwrite credit.

In conclusion, we are pleased to report another strong set of results disorder, which reflect the progress we've made in the track record. We've built over the years are healthy asset quality and robust returns reflect their effective risk based pricing approach and superior credit underwriting capabilities. We're thrilled about the prospects for continued growth and are confident that we will.

Maintain and expand a strong track record of delivering superior returns going forward.

I'm, having a shared these data and perspectives on credit and asset quality, Let me now turn to call back to our founder of C. U that'd be <unk> for his concluding remarks.

Youssef Larache: This, again, is a reflection of our pricing for risk and pursuit of resilient returns as we underwrite. In conclusion, we are pleased to report another strong set of results this quarter, which reflect the progress we've made and the track record we've built over the years. Our healthy asset quality and robust returns reflect our effective risk-based pricing approach and superior credit underwriting capabilities.

We'd like to you.

As I mentioned earlier, we believe we're in the very early innings of a full transformation of financial services in Latin America and globally with already close to 100 million customers in Latin America, but owning less than five per cent of the financial services revenue into continent within it's imperative we <unk>.

Continue investing significantly and responsibly and growth and expansion versus trying to optimize short term earnings to.

Youssef Larache: We are thrilled about the prospects for continued growth and are confident that we will maintain and expand the strong track record of delivering superior returns going forward. Now, having shared these data and perspectives on credit and asset quality, let me now turn the call back to our founder and CEO, David Velez, for his concluding remarks. David, back to you.

To get to that appointment or on how much. We're currently investing in 2023 or operations in Mexico, and Colombia accounted for only 6% of our constantly data revenues represent the nearly 21 per cent of our headcount.

The end of two 423, approximately 42% of our operational personnel was allocated to growth and long should projects, which were not yet operating at scale or not operating at all.

David Veles: As mentioned earlier, we believe we are in the very early innings of a full transformation of financial services in Latin America and globally. With already close to 100 million customers in Latin America but owning less than 5% of the financial services revenue in the continent, we think it's imperative we continue investing significantly and responsibly in growth and expansion versus trying to optimize short-term. To give two data points around how much we're currently investing, in 2023, our operations in Mexico and Colombia accounted for only 6% of our consolidated revenues but represented nearly 21% of our total revenue. Since the end of Q4'23, approximately 42% of our operational personnel was allocated to growth and moonshot projects, which were not yet operating at scale or not yet operational at all. In 2024, we will double down on our investments in new products and features, and we will double down on our investments in Mexico and Colombia.

In 2024, where will double down and our investments in new products and features and we will double down on our investments in Mexico, and Colombia, while we believe we will continue to operate with healthy levels of profitability. The opportunities. We have ahead of US are so compelling that we believe it is time for planting not for harvesting.

We find ourselves, particularly exciting moment, where the landscape of the Latin American financial services industry has undergone rapid transformation the emergence of new players like new coupled with technological advancements and evolving prop competition regulatory frameworks for Sanchez with unprecedented opportunities. Moreover, new distinctive position.

Costing exceptional access to capital and talent in the Latin American region set the stage for potential success. This opportunity is hours <unk>.

I would like to add a lining our priorities for 2024 as well as how we believe we should be graded by the market against these objectives.

Or first priority is to scale, Mexico building on the launch of <unk> and the initiation of the positing customer scanning last year success in 2024 entails substantial growth in our customer base in the country continued expansion of our deposit base and accelerate Greg credit growth, possibly with new products <unk> credit card.

David Veles: While we believe we will continue to operate with healthy levels of profitability, the opportunities we have ahead of us are so compelling that we believe it is time for planting, not for harvesting. We find ourselves at a particularly exciting moment when the landscape of the Latin American financial services industry undergoes a rapid transformation. The emergence of new players like Nu, coupled with technological advancements and evolving pro-competition regulatory frameworks, presents us with unprecedented opportunities.

Finale with plan to launch a number of new products and features reinforcing cashing in cash out solutions, along with ramp up in primary banking customers.

Or second priority to ramp up secured lending in Brazil. Following the successful launches a fair lending for federal in public service in April 2023, and for pension near San <unk> October 2023, we are reaching approximately 50 per cent of the total addressable marketing, Brazil today operating with interest rates at 20 to 30 per cent <unk>.

Mount compared to the industry average thanks to a fully digital direct to consumer distribution. We have recently introduced the portability functionality. These features enables us to bring credit from our backs and refinance those at lower rates success for 2024 entails expanding our <unk> solution for all eligible customers, adding new.

David Veles: Moreover, Nu's distinctive position, boasting exceptional access to capital and talent in the Latin American region, sets the stage for a potential This opportunity is ours. I would like to end by outlining our priorities for 2024 as well as how we believe we should be graded by the market against us. Our first priority is to scale. Building on the launch of Quentanil and the initiation of deposit and customer scaling last year, success in 2024 will entail substantial growth in our customer base in the country, continued expansion of our deposit base, and accelerated credit growth, possibly with new products beyond. Additionally, we plan to launch a number of new products and features, reinforcing cash-in and cash-out solutions, along with a growth in primary banks. Our second priority is to increase secure lending in Brazil. Following the successful launches of payroll lending for federal and public servants in April 2023 and for pensioners and retirees in October 2023, we are reaching approximately 50% of the total addressable market in Brazil, operating with interest rates at 20 to 30% discounts compared to the industry average, thanks to our fully digital direct-to-consumer. We have recently introduced portability functionality.

Contracted tap into more than 70 per cent of the tunnel addressable market by year end and running out the anticipation of fcats product for an entire customer base with this initiatives. We aim at secure lending representing a meaningful portion of our total personal loan origination by the end of 2024.

Priority number three is to continue advancing into the hiring <unk>, Brazil, we have refine our segmentation effort by <unk>, two new thresholds Super core encompassing customers with monthly income between five and 12000, <unk> and high income encompassing customers with monthly income above 12000 <unk>.

In Brazil, we already sharp over 70% of Super Court customers and 60 per cent, Ohio customers existing into Mark <unk> four main opportunity is to increase or share of wallet. Among the customers, we already having side of our customer base success for 2024 and tails further expanding our base of will take a hit the customers and increase.

Their usages of our products launching more products and services standard for these individuals and growing the number of our primary bank accounts within the seconds.

Finally, or fourth priority is making the concept of the multiplatform tangible and concrete for our customers. The nowak of the future is a multi country consumer technology platform that provides products and services in financial services and beyond and we believe that a compounding effects real time payments opened banking and <unk>.

David Veles: These features enable us to bring credit from our banks and refinance those at lower costs. Success for 2024 entails expanding our portability solution for all eligible customers, adding new contracts to tap into more than 70% of the total addressable market by year-end, and rolling out the anticipation of FGTS products for the entire country. With these initiatives, we aim at secure lending representing a meaningful portion of our total personal loan origination by the end of 2020. Priority number three is to continue advancing into the higher income segment in Brazil. We have refined our segmentation effort by establishing two new thresholds.

A I R et cetera for us in this strategic direction, and we want 2024 to Mark an inflection point in the products and services will launch leveraging these technologies success in 2024 entails launching several new products and feature store customers. They will continue to increase our value proposition, while using technology to increase even more or operating.

Leverage we <unk>, we buy your questions. Thank you for your attention and participation.

We will now start the Q and a session for investors and analysts if you wish to ask a question. Please click raise your hand. If your question is answered you can exit the queue likely can put your hand down.

Please limit yourself to one question and follow up.

If you have Friday questions. Please re entering the queue.

David Veles: Supercore, encompassing customers with a monthly income between five and 12,000 Reais, and High Income, encompassing customers with a monthly income above 12,000 Reais. In Brazil, we already serve over 70% of Supercore customers and 60% of High Income customers existing in the market. Hence, our main opportunity is to increase our share of wallets among the customers we already have inside our... The success for 2024 entails further expanding our base of ultravioleta customers and increasing their usage of our products, launching more products and services tailored for these individuals, and growing the number of our primary bank accounts within the U.S. Finally, our fourth priority is making the concept of the money platform tangible and concrete for our customers.

You may submit online questions at anytime today, using the queue any box on the webcast.

I would now like to turn the call over to Mister E like Friedman Investor Relations out here.

Thank you very much for radar.

And then they are going to start date, Kenny session with a question posed by <unk> query from Morgan Stanley.

Hi, everyone. Thanks for the opportunity to ask questions and congrats on the great numbers for the quarter and the year I wanted to ask about payroll loans and if you can give us some flavor of.

How are you winning payroll rose that'd be that'd be that'd be set up at the very end of your offering fries that are well below what the incumbents are offering.

<unk> is is just across the board for all the clients are you seeing some sensitivity on prices where people are just switching their pedro loans to you because you have a better user experience or or is every single client really call me and got a much lower rate and that seems to be the the reason they're moving.

David Veles: The New Bank of the Future is a multi-country consumer technology platform that provides products and services in financial services and beyond, and we believe that the compounding effects of real-time payments, open banking, and AI are accelerants for us in this strategic direction. And we want 2024 to mark an inflection point in the products and services we launch, leveraging Success in 2024 entails launching several new products and features to our customers that will continue to increase our value proposition, while using technology to increase even more of our operating revenue. With that, we invite you.

<unk> is it.

Payroll loans to people that they didn't have a favorite alone or are you refinancing payroll loans are those refinancing mainly coming from government banks, which normally tend to have a lot of the government payrolls or you'll also seeing some refinancing <unk>.

Being from the private <unk>.

The payroll lending as well are you seeing the payroll payment being deposited to you as well.

That would be my first question and if you don't mind I would.

Operator: Thank you for your attention so far. We will now start the Q&A session for investors in Nano. If you wish to ask a question, please click on Raise Your Hand. If your question is answered, you can exit the queue by clicking on Put Your Hand Down.

My second question about one of your priorities for 20 to 24, that'd be <unk>, new products for the Super core client base, meaning sort of like that.

<unk>, what what type of programs are you talking about there. Thank you.

James Eric Friedman: Please limit yourself to one question and a follow-up. If you have further questions, please re-enter the queue. You may submit online questions at any time today using the Q&A box on the webcast. I would now like to turn the call over to Mr. Jörg Friedman, Investor Relations Officer. Thank you very much for your questions.

Hey, This is <unk> Chief products Officer, Let me answer your first question and and and get into some of what you were asking around.

Are secured loan business and strategy.

A couple of a couple of key points that I would make first of all about.

Jag Dugal: And we are going to start the Q&A session with a question posed by Jorge Currie from Morgan Stanley. Hi everyone, thanks for the opportunity to ask questions and congratulations on the great numbers for the quarter and the year. I wanted to ask about payroll loans and if you could give us some flavor of how you are winning on payroll loans.

Equal volumes of our secured loan origination in Q4 came from F. G T S.

So it's just loans against the social security savings of customers.

And then from <unk>, particularly the federal employees Yappy and the retirees.

The Formula we are following in terms of why customers are coming to us is.

Jag Dugal: Evidently, it was said at the very end that you're offering prices that are well below what the incumbents are offering. Is this just across the board for all the clients? Are you seeing some sensitivity on prices where people are just switching their payroll loans to you because you have a better user experience, or is every single client really coming at a much lower rate and that seems to be the reason they're moving? Are you lending to people that didn't have a payroll loan or are you refinancing payroll loans? Are those refinancing mainly coming from government banks, which normally tend to have a lot of government payrolls, or are you also seeing some refinancing coming from private sector banks and on payroll lending as well? Are you seeing the payroll payment being deposited to you as well?

Is very specific and will be familiar to you as someone who has followed the company for a long time.

We offer a dramatically simplified digital mobile experience hundred percent 100 per cent mobile.

Because we are able to offer that service direct to consumer, making our cost helping to make our cost very low that allows us.

As divvied talked about to offer a significantly lower price than the market average and that's a pretty powerful flywheel for our customers come both for the simplicity of the experience and also for the for the superior price and we have found this to be a market where consumers are.

R.

Jag Dugal: That would be my first question, and if you don't mind, I would like to add a second question about one of your priorities for 2024. David mentioned new products for the super core client base, meaning sort of like the high net worth individuals. What type of products are you talking about there? Thank you. Jorge.

Are very price sensitive.

Another aspect of your question was our customers switching from from other other places.

A couple of key points to make her all of the customers to which we are offering. These secured loans are current new bank customers. So we are we are fishing in the in in our own fishbowl not out in the open sea.

And another key factor to keep in mind in terms of our Q Q for results.

Jag Dugal: Let me answer your first question and get into some of what you're asking about our secured loan business and strategy. There are a couple of key points that I would make. First of all, about equal volumes of our secured loan origination in Q4 came from FGTS. Social Security Savings of Customers, and then from Consignado, particularly federal employees, SIAPI, and retirees. The formula we are following in terms of why customers are coming to us is very specific and will be familiar to you as someone who has followed the company for a long time. We offer a dramatically simplified digital mobile experience, 100% mobile, because we are able to offer that service directly to the consumer, helping to make our costs very low.

Is our product and and processes around portability of these loans, which is an important factor in this market are still in their very early stages and so essentially all of the loans that we that we originated in Q4.

<unk> <unk>, new new loans from customers and so hopefully.

Hopefully that gives you a a a a real sense of first of all how relatively early in our in our roadmap and in our evolution of this business we are.

And what are the key drivers for the early success and therefore, the drivers of of our optimism about about how.

But how well we can grow. This go this business in 2024 has to be talked about.

And I would just add one of <unk>.

Jorge I think ultimately the same <unk> kind of the same received that we'd been following in every single product.

Jag Dugal: That allows us, as David talked about, to offer a significantly lower price than the market average. And that's a pretty powerful flywheel where customers come both for the simplicity of the experience and also for the superior price. And we have found this to be a market where consumers are very price sensitive. Another aspect of your question was, are customers switching from other places? A couple of key points to make here. All of the customers to which we are offering these secured loans are current New Bank customers. So we are fishing in our own fishbowl, not out in the open sea.

And it is a following technology distribution or direct to consumer distribution.

Enables us to create a product that is better for customers a lower cost.

And what email do we measured died my M. P. S. In this category, we're ready measuring N P. S upwards of 80, which would it be by far the best <unk> product in the market today, so that tends to be the leading indicator for growth and that's what we've seen over the past six months that we'd be starting to roll out.

It's traditionally a very offline experience. It takes several weeks there was a lot of fraud associate it sometimes with <unk> with you offline processing paperwork and so by <unk> offering <unk>, because I'm gonna distribution, we're able to simply better product, a lower price and consumers tend to tend to understand that.

David Veles: And another key fact to keep in mind in terms of our Q4 results is that our product and processes around portability of these loans, which is an important factor in this market, are still in their very early stages. And so, essentially, all of the loans that we originated in Q4 were new loans from customers. And so hopefully that gives you a real sense of, first of all, how relatively early in our roadmap and in our evolution of this business we are and what are the key drivers for early success and therefore the drivers of our optimism about how, about how well we can grow this business in 2024 as VTOL. Now we just had one Jorge, I think ultimately it is the same kind of the same receipt that we've been following in every single product. And it is the following technology distribution or direct to consumer distribution enables us to create a product that is better for consumers at a lower cost. And ultimately, we measure that by NPS. In this specific category, we're already measuring NPS upwards of 80, which would be by far the best rated product in the market today.

That obviously that equation.

Your second question to your favorite question on an additional products for <unk>.

Which is a segment or if I can ask <unk> lower income segment of the high income.

We are preparing to investigate <unk> in software related solutions, we think we don't necessarily.

Competed well in the offline world, where there are branches required and we always said that if you need cash if you need offline distribution, where narwhal positions are to compete we are well positioned to compete when software becomes a differentiating factor and there is a fair amount of differentiation, we can do with software.

For this product I want a specific example is we're rolling out.

What what we call your household controls where consumers are able to now enable their children enabled different people in your household to have a number of different cards to <unk> shaved jointly and that type of product shalwar pretty significant pain for these households, we tend to see use cases, where.

David Veles: So that tends to be the leading indicator for growth, and that's what we've seen over the past six months that we've been starting to roll out. It's traditionally a very offline experience.

The main person in the household got a new phone card, but then gave that card to their younger son or to the driver. So it's being used but it is not being used as the primary card by adding a number of <unk> software capability, which by the way are relatively hard to program. We think we're gonna be able to solve.

David Veles: It takes several weeks. There is a lot of fraud associated sometimes with the offline processes, and a lot of paperwork. And so by just offering that direct-to-consumer distribution, we're able to simply offer a better product at a lower price. And consumers tend to understand that, obviously, that equation. To your second question on additional products for Super Core, which is a segment or effectively a higher segment or a lower income segment of the high income segment, we are preparing to invest significantly in software-related solutions. We think we don't necessarily compete well in the offline world where there are branches required, and we always said that if you need cash, if you need offline distribution, we're not well positioned there to compete.

A big pain point for consumers and happens to also have sort of network effects that we that we tend to like a lot. So just <unk>.

<unk> theme of social there is a number of themes that we will be implementing this year that we think will significantly improve the value proposition and allow us to play in an environment of software and online where we think we can win versus necessarily competing with <unk> in areas or regions, where we don't.

Really have I possibility of offer of competing.

David Veles: We are well positioned to compete when software becomes a differentiating factor, and there is a fair amount of differentiation we can do with software for this product. One specific example is we're rolling out what we call your household controls, where consumers are able to now enable their children, enable different people in their household to have a number of different cards to save jointly, and that type of product solves a pretty significant pain point for these households. We tend to see use cases where the main person in the household gets a new bank card but then gives that card to their younger son or to the driver. So it's being used, but it's not being used as the primary card by adding a number of software capabilities, which, by the way, are relatively hard to program.

Thanks for the detailed explanations and congrats again.

Thank you <unk>.

And our second question comes from the line of <unk> Goldman Sachs.

Hi, <unk> hi, good evening, everyone. Thank you for the call and thank you my question.

<unk> you mentioned that you expect gross margin I guess to be relatively stable <unk> given the investment that you're making <unk>. Just I was hoping if you can clarify a little bit.

Uhm because provisions to be higher as you go.

The loan portfolio interest expenses that you're going deposits in Mexico, where you wouldn't want them reading at a higher rate.

Transactional expensive just to understand what's gonna keep that I'm close margin somewhat stable wish this year and then just one second point to clarify the renegotiate it did.

David Veles: We think we're going to be able to solve a big pain point for consumers and it happens to also have certain network effects that we tend to like a lot. So, like that theme of social, there are a number of themes that we will be implementing this year that we think will significantly improve the value proposition and allow us to play in an environment of software and online where we think we can win versus necessarily competing with incumbents in areas or in regions where we don't really have a possibility of competing. Thanks for the detailed explanations and congrats again, David.

Discount that impacted margin and provision this quarter is that all a one time thing or should we expect that going forward as well or does that reverse next quarter.

<unk>.

You too. Thanks, so much for for your question, let me try to address both of them I think first on the gross margin we will largely C.

Two effects and through all 2024, and our expectations number one hour Brazilian operations are expected to continue to post expanding no uhm net interest margins and expanding risk adjusted net interest margins, primarily as we continue to grill the size of our credit book.

Lago: Thank you, Jorge. And our second question comes from the line of Tito Labarta, from Goldman Sachs. Hi. Hi. Good evening, everyone.

Lago: Thank you for the call. And thank you for my question. Lago, you mentioned that you expect gross margin, I guess, to be relatively stable this year, given the investments that you're making. Just so you can clarify a little bit, is this because you expect provisions to be higher as you grow the loan portfolio, is it interest expenses as you're growing deposits in Mexico, where you're remunerating at a higher rate, is it transactional expenses, just to understand what's going to keep And then just one second point to clarify: the renegotiated discounts that impacted margin and provisions this quarter, is that a one-time thing, or should we expect that going forward as well, or does that reverse next quarter? Thank you.

<unk> optimize our balance sheet from the <unk>.

Her hand, we do expect to make additional investments and is that'd be mention to double down our resource locations to Mexico and Colombia.

And those are markets that are less mature than Brazil, and therefore, the faster we grow in those market, especially given the expected credit lost provisioning, we will have to make additional no investments in terms of a P&L.

Combination of those two effects, explaining margins in Brazil, and additional investment to Mexican Columbia are largely to be upset and therefore, we do not expect our no gross profit margins to to evolve materially away from the ZIP code, where it was in in 2023.

Lago: Ito, thanks so much for your question. Let me try to address both of them. I think first on the gross margin, we will largely see two effects throughout 2024 in our expectations. Number one, our Brazilian operations are expected to continue to post expanding net interest margins and expanding risk-adjusted net interest margins, primarily as we continue to grow the size of our credit book and optimize our balance sheet. On the other hand, we do expect to make additional investments, and as Avi mentioned, to double down on our resource allocations to Mexico and Colombia, which are markets that are less mature than Brazil.

So that's the first the first question. The second question on the collections. We do have just to recap the explanation in which we had on one hand.

Additional discounts that we provided to our consumers order of magnitude $60 million to $70 million on the other hand additional recoveries that we had also in relatively similar amounts of $60 billion to $70 billion, which war neutral two hour P&L a neutral too gross profit.

Although <unk> has announced that he will continue through all the first water off 2024, we do expect that most of this in fact would have been seen in the fourth quarter of 2023. So we will likely see some additional impact of this detailed through all the first water, but in that much less pronounced manner.

Lago: And therefore, the faster we grow in those markets, especially given the expected credit loss provisioning, we will have to make additional investments in terms of P&L. The combination of those two effects, expanding margins in Brazil, and additional investments in Mexico and Colombia, is largely to be offset. And therefore, we do not expect our gross profit margins to evolve materially away from the zip code where they were in 2023. So that's the first question.

Then in the first one and then the.

Four four of 2023.

Okay. That's <unk>. Thank you for that if I can ask just one follow up yeah, just to clarify on the additional investments in Mexico, and Colombia will those come sort of below the gross margin or the gross profit line. So would that impact operating expenses I guess, how how how do you think about efficiency.

Lago: The second question on collections: we do have, just to recap, the explanation in which we had, on the one hand, additional discounts that we provided to our consumers, order of magnitude 60 to 70 million dollars. On the other hand, additional recoveries that we had, also in relatively similar amounts of 60 to 70 billion dollars, which were neutral to our P&L and neutral to gross profit. Although Dysenhola has announced that it will continue throughout the first quarter of 2024, we do expect that most of this impact would have been seen in the fourth quarter of 2023, so we will likely see some additional impact of this Tito throughout the first quarter, but in a much less pronounced manner than in the fourth quarter of 2023. Okay, that's very clear, Lago. Thank you for that.

Yeah for for 2024.

<unk> color on that yeah.

Yeah. So I think most of the investment in Mexico, and Colombia, Tito will come a bowl the gross profit line, namely <unk> and interest expenses as we basically increase the gridspace alfaro interest, earning acids and as we increase the volume of deposits in those countries would.

We do expect efficiency ratio not only for Brazil, but also in a consolidated basis.

To post continues improvements 12, 2024 and beyond.

Okay. That's very quick thank you log.

And congrats on the results.

Thanks for you too.

And our next question comes from the line of <unk> at <unk>.

Hi, everybody. Good evening, thanks for the opportunity My question is related to Mexico.

Lago: If I can ask just one follow-up question, just to clarify. So on the additional investments in Mexico and Colombia, will those come sort of below the gross margin or the gross profit line? So will that impact operating expenses? I guess, how do you think about efficiency, you know, for 2024, if you can get some color on that?

Give us a little bit more color or the profile clients that you're attracting the country clearly right like you're attracting clients by having a high remonstration on deposit fill it already mentioned this up probably higher in your checking more the higher income segments.

You disclose that you have 5.2 million client Mexico can you.

Tell us how many credit cards outstanding and heavy Mexico, and then finally, you still related to Mexico right.

David Veles: Yeah, so I think most of the investments in Mexico and Colombia Tito will come above the gross profit line, namely in CLA and interest expenses, as we basically increase the growth pace of our interest-earning assets and as we increase the volume of deposits in those countries. We do expect the efficiency ratio, not only for Brazil but also on a consolidated basis, to post continuous improvements throughout 2024 and beyond. Okay, that's very clear. Thank you, Lago, and congratulations on the results. Thanks, Tito. And our next question comes from the line of Mario Pieri at VOA. Hi everybody. Good evening.

The choice of when they're writing deposits of 15% <unk> when did traditional banks are probably been on the rating clients around 70% of market rates. So you've been moderation is probably.

Twice as large as the traditional bank. So just wanted to get an understanding you know how how did you come up with this 50% is there room for the Rachel for the right to increase and then finally, you'll Mexico. If if he can disclose any any data on.

David Veles: Thanks for the opportunity. My question is related to Mexico. Can you give us a little bit more color or the profile of clients that you're attracting in the country? Clearly, right, like you're attracting clients by having a high remuneration on deposits. So I would imagine these are probably higher in, you're attracting more the higher income segments. You disclosed that you have 5.2 million clients in Mexico. Can you tell us how many credit cards outstanding you have in Mexico?

Long book bear or a what kind of <unk> that'd be great. Thank you very much.

Hi, Mario that'd be here. Thank you for for the question.

So since we started Mexico about three years ago, I would say we've seen.

About a 50, 50% split between bank customers and Unbanked customers, it's been fairly even.

Remember that Mexico has only about 12% credit card penetration so lillie.

David Veles: And then finally, still related to Mexico, right, the choice of remunerating deposits of 15% when the traditional banks are probably remunerating clients around, you know, 70% of market rates. So your remuneration is probably twice as large as the traditional bank. So just wanted to get an understanding of how you come up with this 15%.

<unk> majority of the country is completely wide open for US we tend to begin as a strategy. These with similar in Brazil to target more high income at the beginning and then eventually there is a bed of decreased or mass market and and that's that's shaped this will happen faster in Mexico to defeat.

50, 50 per cent played that I that I've been mentioned.

David Veles: Is there room for the ratio, for the rate, to increase? And then finally, Mexico, if you can disclose any data on the loan book there or what kind of NPLs you're seeing, that would be great. Thank you very much. Hi Mario, David here.

When we decided to increase the yield in Mexico, a couple of months ago. The the reason why we did that is we we saw an opportunity to <unk> the deposit product, even more attractive to consumers and accelerate the flywheel grilled that we were having their <unk>.

David Veles: Thank you for the question. So since we started in Mexico about three years ago, I would say we've seen about a 50-50% split between banked customers and unbanked customers. It's been fairly even.

And that decision, while it's definitely expensive. It's a big investment is paying for itself actually fairly quickly we're seeing an improvement in the type of customer segmentation that we're having we're now seeing many more Mexican high income Mexicans coming in that I used to have.

David Veles: Remember that Mexico has only about 12% credit card penetration. So literally, the vast majority of the country is completely wide open for us. We tend to begin as a strategy, this was similar in Brazil, to target more high income at the beginning, and then eventually, there is a bit of a decreased or mass market. And that shift tends to happen faster in Mexico to the 50-50% split that I've mentioned. Now, when we decided to increase the yield in Mexico a couple of months ago, the reason why we did that was we saw an opportunity to reposition the deposit product even more attractive to consumers and accelerate the flywheel growth that we were having there. And that decision, while it's definitely expensive, it's a big investment, is paying for itself actually fairly quickly.

Beneficial impact to credit quality.

That's also adding a different type of customer bad ones, you put a deposit it creates a pretty important.

Data point for us, which allows us to take into account in terms of acceptance of the credit card application and even within limits. So we're able to increase limits a bit faster driving you need economic faster.

Obviously it brings the deposits that we need to be able to really fond of business as as you remember we start up a modem liner.

Where the biggest execution risk that we have is not having funding figure out and we have to depend on other banks.

To find ourselves that risk his gun. It literally went away in three months off of Disney would yield we surpassed significantly any projections that we had on deposit so in a way we have removed one of the one of the big Explication reached that we had for Mexico and that's why it was one of our number three priority.

David Veles: We're seeing an improvement in the type of customer segmentation that we have. We're now seeing many more Mexican high-income Mexicans coming in, and that is having beneficial impacts on credit quality. That's also adding a different type of customer that once you make a deposit, it creates a pretty important data point for us, which allows us to take into account in terms of acceptance of the credit card application, and even within limits. So we're able to increase limits a bit faster, driving unit economics faster.

These are talking sorry for 2023.

So so <unk>. It is it is a big investment that we decided to do for customers, but he's paying off handsomely any has position puts us in a very different trajectory in terms of growth and momentum in a market that we think is is very significant for us.

David Veles: Obviously, it brings the deposits that we need to be able to really fund the business. As you remember, we started as a monoliner, where the biggest execution risk that we had was not having funding figured out, and we had to depend on our banks to fund ourselves. That risk is gone. It literally went away in three months of this new yield.

I think I'll save versus the banks you you are I think you've been very generous with competitors in Mexico. When you actually look at some of the biggest embedded incumbents they actually pay Cyril most.

David Veles: We significantly exceeded any projections that we had on deposit. In a way, we've removed one of the big execution risks that we had for Mexico, and that's why it was one of our number three priorities or top three priorities for 2023. NetNet is a big investment that we decided to do for customers, but it's paying off handsomely, and it puts us on a very different trajectory in terms of growth and momentum in a market that we think is very significant for us. Last thing I'll say versus the banks, you are I think you're being very generous with competitors in Mexico. When you actually look at some of the biggest incumbents, they actually pay zero. Most customers, especially In fact, they see deposits. Most mass market customers in Mexico are paying the banks to hold their money. They're not even used to the concept of banks paying them for their money.

Most customers, especially mass market they get no money paid by banks in fact, they see deposit.

They they most mass market customers in Mexico are paying the banks to hold their money, they're not even I I used to the concept of banks paying them for their money and it's amazing to see the reaction of customers. Once we start showing them the bank should pay them for their deposits because they're used to paying a lot of fees and base hero.

So it is indeed, a significantly higher and and more attractive other position that incumbents. It would be extremely expensive Frank comments to match and we haven't really seemed in matching so I think that position is very well as as an attractive position. It is important to say that even at 15% where we are.

David Veles: And it's amazing to see the reaction of customers once we start showing them that banks should pay them for their deposits because they're used to paying a lot of fees and paying zero. So it is indeed a significantly higher and more attractive position than incumbents. It would be extremely expensive for incumbents to match, and we haven't really seen them do it.

Are given the economics of the credit card business inside unit economics positive move so it's not that we are making a crazy irrational decision is is a positive you need economic 15 per cent and then as we scaling we get all these deposits and we improve the value proposition of the account.

David Veles: So I think that positions us very well as an attractive position. It is important to say that even at 15%, where we are, given the economics of the credit card business, it's a positive unit economics move. So it's not that we are making a crazy, irrational decision.

With a lot of the software that we're building and a lot of the cashing in cash out and a lot of the missing features then we will get to eventually rationalize a bit of that expense and that's exactly what we did in Brazil. Two years ago. When we went from 100 per cent of C. D. I 280 per cent of C. D. I and we saw the quality of the product improving not not not the.

<unk>.

David Veles: It's a positive unit economics at 15%. And then as we scale and we get all these deposits, and we improve the value proposition of the account with a lot of the software that we're building and a lot of the cash in and cash out and a lot of the missing features, then we will get to eventually rationalize a bit that expense. And that's exactly what we did in Brazil two years ago when we went from 100% of CDI to 80% of CDI, and we saw the quality of the product improve, not decrease.

So that that is sort of the strategy of the product is we won we want to make sure that the protocol quality continues to increase.

Continue to add additional deposit or balance sheet in Mexico will look a bit odd for awhile as it looks at Fort Stevens steel for us in Brazil, with a lot of liabilities, but eventually that's a great problem to have because then we're able to deploy all of the firepower in growing the credit card opportunity, which again is huge.

12% credit card penetration. So so we are we're very excited about tackling that.

Thanks for <unk>, let me follow up them on this deposits are you seeing how sticky or are they are they are you rent Monday, writing them from day, one or you're doing.

David Veles: So that is sort of the strategy of the product; we want to make sure that the product quality continues to increase and continue to add additional deposits, or the balance sheet in Mexico will look a bit odd for a while, as it looks odd even still for us in Brazil with a lot of liabilities. But eventually, that's a great problem to have because then we're able to deploy all of that firepower in growing the credit card opportunity, which again is huge, 12% credit card penetration. So we're very excited about tackling that. Thanks, David. Let me follow up on these deposits then. Are you seeing how sticky they are?

Somebody type of Remonstration like you did in Brazil, you don't <unk> for the first 30 days.

Just the number of total cards stand they didn't have in Mexico now.

So customers need to invest in what we have <unk> <unk>, so customers deposit the account and they do invested in a in a in a small box that we have.

So far the deposits have been very low churn some significant engagement is.

It's up to us to make sure that that engagement continues and then we have a number of different capabilities to do that first one obviously is give me a break critical product and then add a number of different suffer features to make sure that that does the bus each day, so far they're stain and so we feel very good at having the opportunity to to make sure that that.

David Veles: Are you remunerating them from day one, or are you doing some of the type of remuneration like you did in Brazil that you don't remunerate for the first 30 days? And just the number of total cards standing they have in Mexico now? So customers need to invest in what we have called a cajita or a caixinha. So customers deposit money into the account, and they invest it in a small box that we have. So far, the deposits have been very low churn, so there has been significant engagement. It's up to us to make sure that that engagement continues. And then we have a number of different capabilities to do that. The first one, obviously, is to give a great critical product.

That continues to be the case.

Unfortunately in terms of number of just cards, we don't disclose that the number but but yeah, but they you know they they continue to accelerate and we're very happy with those numbers.

Okay. Thank you very much.

Thank you.

And our next question comes from the line of <unk> from your best.

Hi, guys released me.

Yes, we are okay.

David Veles: And then add a number of different software features to make sure that those deposits stay. So far, they're staying. And so we feel very good at having the opportunity to make sure that that continues to be the case. Unfortunately, in terms of the number of just cards, we don't disclose that number.

Thanks for the opportunity My question is about <unk> <unk> by the way they've lied to that you provided is really very helpful.

My question is do you have a very simple <unk>, we got that that's the level of provisions overdose lowest achieve with 44% four Q.

Youssef Larache: But yeah, but they continue to accelerate, and we're very happy with those numbers. Okay, thank you very much. Thank you. And our next question comes from the line of Thiago Batista from UBS. Hi guys, are you listening? Yes, we are. Okay. Thanks. Thanks for the opportunity.

It was 33 <unk> 40 per cent of <unk>.

So if you can comment your strategy overdose, we're gonna go through it alone.

And also if if possible a phone with that this level or 44%.

Youssef Larache: My question is about the renegotiated loans. By the way, the slide that you provided is really very helpful. My question is, doing a very simple calculation, we found that the level of provisions over those loans achieved 44% in this 4Q. It was 33% in 4Q21, and 40% in 4Q22. So, if you can comment on your strategy over those renegotiated loans. And also, if it's possible to assume that this level of 45% is the amount that Nu believes will become losses over those renegotiated loans. Hi Thiago, this is Youssef.

Is the amount that's new believe it will become losses overdose, when they will say to the lungs.

Hi, <unk>. This is <unk>. Thanks for the question. So you are correct and in your calculation of the coverage ratio over total.

Receivables outstanding a renegotiated loans, it's around 40, 45%.

You know the way I would think about it is it will mirror what happens to the total book in terms of Cobra coverage ratios and you can see that evolution on page 34.

The presentation, where you see both a kick coverage ratio over total balance and coverage ratio over N. P. L 90, plus the dynamics there was similar because.

Youssef Larache: Thanks for the question. You are correct in your calculation of the coverage ratio over total receivable outstanding of renegotiated loans. It's around 40-45 percent.

Youssef Larache: You know, the way I would think about it is that it will mirror what happens to the total book in terms of coverage ratio. And you can see that evolution on page 34 of the presentation, where you see both the coverage ratio over the total balance and the coverage ratio over NPL 90 plus. The dynamic there is similar because as loans move through the delinquency buckets and more and more go 90 plus, your coverage ratio of total balance goes up; your coverage ratio of NPL 90 plus tends to be stable or else equal, right? So that same dynamic applies to renegotiated loans, you know, albeit at a higher rate because renegotiated loans just exhibit a higher level of inherent risk, as you can see in the analysis we provided. Okay, thanks. Very clear. Sorry

And uhm loans move through the delinquency buckets and more and more go 90, plus you'll coverage ratio of total balance goes up your coverage ratio of N. P. L 90, plus tends to be stable all else equal right. So that same dynamic applies to renegotiated loans.

You know I'll be at at a higher rate because renegotiate loans just takes it to the higher level of inherent risks cause you can see on the on the analysis we provided.

Okay. Thanks for <unk>.

Sorry, and our next question comes from the line of <unk> <unk>.

Hi, what do you have any thanks for taking my question and well My question is regarding your your investments in the <unk> in Brazil more specifically.

Regarding the <unk> that you made I think that's liable nation during the presentation that the part of the let's say impact on the efficiency racial was regarding the investments in high income segment. So if you could <unk>, besides the Mexico and Colombia.

Lago: And our next question comes from the line of Gustavo Schroeder of Bredes. Hi, good evening. Thanks for taking my question. And well, my question is regarding your investments in the high-income segment in Brazil, more specifically regarding the investments that you have made. I think that Lago mentioned during the presentation that part of the, let's say, impact on the efficiency ratio was regarding the investments in the high-income segment. So if you could, besides Mexico and Colombia, could you give us a little bit of more color on how we should think in terms of these investments in the high-income segments? Because, as you mentioned, it is a target.

Could you give us a little bit of more color on how we should think in terms of a <unk> on the high end comes second because as you <unk>. It is a target and as you you mentioned that is really no that's especially high income segments, they usually it costs higher than.

Lago: And as you mentioned, as you know, especially high-income segments usually cost more than the, let's say, the low-income segments because, I mean, more investments, different necessities or needs. So if you could give us an idea of how these investments, this impact regarding the high-income segment is specific to this quarter, or should we expect further, let's say, impacts on the efficiency ratio regarding this strategy? Thank you. Hi Gustavo, this is

D D, let's say deal a link or segments, because I mean more investments different to necessities are our needs.

So if you could give us up.

It is.

<unk> Ah regarding high income segment is <unk> on just water or should we expect that the for their let's say impacts on efficient racial regarding do you just try to him. Thank you.

<unk>. Thanks for your question <unk>.

Lago: Thanks for your question. I think, in short, no. You should not expect to see any material change in the efficiency trends that we have seen over the past quarters. So, as I mentioned in the opening remarks, in the fourth quarter of 2023, we saw two impacts that drove the efficiency rate 100%, 100 basis points up. It was a higher concentration of marketing expenses in the fourth quarter, and additional investments in technology and data. Those two effects combined accounted for about 170 basis points, and we believe they will be reversed in the coming quarters.

Thinking short no you should not expect to see a material change in deficiency.

Friends that we have seen over to bask waters. So as I mentioned in the opening remarks in the fourth quarter of 2023, we saw to impact the drove kind of efficiency right, 100% 100 basis points up it was higher concentration of marketing expenses and the fourth water and.

Additional investments in technology and data.

Those two effects combine accounted for about 170 basis points and we believe they will be reversed in the coming quarters. So he should take into account those 170 basis points. You will continue to see additional improvements in efficiency ratio. In fact, we already have mid point of the first quarter of 2002.

Lago: So if you take into account those 170 basis points, you will continue to see additional improvements in efficiency ratios. In fact, we are already at the midpoint of the first quarter of 2024, and we've already seen efficiency ratios being driven to the places where we expect them to be, which is lower and better going forward. The main investments that we are doing to increase our share of wallet within the higher-income customers, I would say are largely broken down into two stages. I think in the first stage, which started about 18 months ago, we invested a lot of time and energy in the development of new products and features to acquire high-income customers. And if you define a high-income customer as someone who has an unexpected monthly income above 12,000 Reais, we already have a new bank as of the end of the fourth quarter of 2023; over 60% of those are already customers of the new bank. So the first stage was customer acquisition with very low customer acquisition costs.

The four and we'd be already seen efficiency ratio is being driven to the places where we expect them to to to be which is lower than better going forward demeaning vast months that we are doing to increase our sheriff wallet within the higher income customers I would say are largely broken down.

In two stages I think the first age which is started about 18 months ago, we invested a lot of time and energy in the development of new products and futures to acquire high income customers and if you define a high income customers as someone who has unexpected monthly income about 12000 Gray eyes, we are.

Already have a new bank is off the end of the fourth one of 2023 over 60% of all of those are already customers up in the bank.

So the first stage was customer position with very low customer acquisition cost a second stage is customer Principality <unk> mentioned earlier today, and we will do so through the develop enough of banking payments and investment products. They will be no mature investments in terms of human resources <unk>.

Jack: The second stage is customer principality, building on what David and Jack mentioned earlier today, and we will do so through the development of our banking payments and investment products. These will be no material investments in terms of human resources, but they will not necessarily drive any material change to the cost structure that we have had in Brazil over the past two years. But Jack, I'm not sure if you wanted to add anything about the types of investments and products that we will launch. Yeah, I'll quickly do so, Lago.

Not necessarily drive any material change to the cost structure that we have had in Brazil over the past two years, but.

I'm not sure if you wanted to add anything about the types of investments and products that we will launch yeah I'll I'll quickly do so <unk>. So within the context of what <unk>, just said, which is that we expect our efficiency ratio to not show continued continued.

Jack: So within the context of what Lago just said, which is that we expect our efficiency ratio to not show continued, continued trends in the direction we saw this quarter. We are continuing to invest significantly in existing products and in new products, many of which are geared towards the super core segment, as well as the high income segment. As Lago mentioned, we have a majority of those customers, 70% for the super core, and 60% for the high income.

Continued trends in the direction. We saw this quarter, we are continuing to invest significantly in existing products and the new products many of which are geared towards the super core segment as well as the high income segment is Lago mentioned we.

We have a majority of those customers 70 per cent for the Super core 60 per cent for the high income already as customers of New Bank now how do we drive engagement and principality over over time, a few trends that we're very happy with.

Jack: Already as customers of NewBank, now how do we drive engagement and principality over time? A few trends that we are very happy with show that our flagship product for the high income, our Ultra Violeta credit card, has, over the course of 2023, shown dramatic gains in the net promoter score. We are now the highest net promoter score bank according to Bain for this segment, and that mirrors some of the trends we were tracking internally. And with that growing customer love for the product, which offers them 1% cash back and 200% CDI returns on that cash back, along with other features, we are seeing significant growth in their usage of the card and in their satisfaction with the credit lines that we are giving them, which is all building a flywheel together.

Show that our flagship product for the high income or ultra Violetta credit card has over the course of 2020th ratio and dramatic gains in the net promoter score. We're now the highest net promoter score bank. According to Bang for this segment.

In that mirror some of the trends we were tracking internally.

And with that growing customer love of the product, which offers them one per cent cashback and 200 per cent C. D. I returns on that cashback along with other features.

We are seeing significant growth in their usage of the card and in there in their satisfaction with the credit lines that we're giving them, which is all building a flywheel together another major investment we made in the course of 2023 was to extend a bundle around.

Jack: Another major investment we made in the course of 2023 was to extend a bundle around the flagship card, the Ultravioletta bundle, which has a series of features including a free toll tag, free Wrappy Prime, special customer service lanes for these customers, etc. Around the card and the bundle, we are investing in features and products around banking, around investments, around insurance that will gradually manifest themselves in our product, and we expect will drive an increasingly complete solution for this segment, although those are investments that will layer in through the year, all within the context of what Lago shared, which is that these are accounted for even as we continue to have strong operating. Very clear, just to follow up on this last part of the answer, you mentioned some products that you have already offered to high-income clients, such as some credit products with the intention to, let's say, if understood, accelerate investment in insurance, but could you give us like, are you thinking about investing or offering, like, a mortgage or loans?

The flagship card the ultra Violetta bundle, which is a series of features from a free told tag free Iraqi Prime special customer service Elaine's afford these customers et cetera.

Around the card in the bundle we are investing in features and products around banking around investments.

Around insurance that will gradually manifest themselves in in our product and we expect will drive.

And increasingly complete solution for the segment, although those are investments that will lay.

<unk> through the year all within the context of what level shared which is these are accounted for even as we even as we continue to have strong operating efficiency.

Very clear just just they're very clear just to follow up on on this this last part of it of the answer you mentioned some products that you you you have already offered to two high income clients suggest some some client some some credit broad up sending patients to let's say.

If I, if I understood <unk> insurance, but.

Could you give us like I I I was thinking too to invest or to offer like a mortgage <unk>. All the laws for this high income clients or that that should be more related to these let's say personal laws and and the last one is an insurance yes.

Jack: for these high-income clients, or that it should be more related to these, let's say, personal loans and investments and insurance. Could you give us more specific products that you could offer to high-income clients besides credit and insurance and investments? Yes, for sure. What I would say to you is, as David laid out in terms of our overall strategy, our ultimate aim is to serve these customers with a holistic and complete suite of solutions for them. And so the credit card was the place we started in terms of the ultravioleta card, but we are looking across our suite in looking at our lending products.

If you could give us a more specific it products that you you could you could offer to high income clients. Besides the crowd, that's an insurance and investments.

Yes for sure.

What I would say to you is as divvied laid out in terms of our overall strategy, our our ultimate aim.

Is to serve is disturbed these customers with a holistic incomplete <unk> suite of solutions for them and so the credit card was the place. We started in terms of the ultra reveal that the card, but we are looking across our sweet and looking at our our lending products many of our secured lending products.

Jack: Many of our secured lending products are actually disproportionately used, for example, by high-income customers. We are looking at investments. We are looking at insurance, no doubt, certain lines, certain product lines that we probably won't offer for a while, but we are looking across the entire suite of what we have offered in the mass market. And even beyond that, to start with this customer segment, understand their needs, understand where the highest leverage is for them, and ultimately for us, and build products across the suite.

They're actually disproportionately used for example by by high income customers. We are looking at investments we are looking at insurance there are.

No doubt certain like several product lines that that we.

Probably won't offer for awhile.

But we are looking across the entire suite of what we have offered in the mass market and even beyond that to start with the this customer segment understand their needs understand where the highest leverage is for them and ultimately for us and and building products across the sweet So if <unk> if you look across.

David Veles: So if you look across our product suite, you can rest assured that we are either building or investigating and in discovery for products and features that will serve the. Okay, thank you very much. And our next question comes from the line of Eduardo Rosman at BTG Pactual. Hi everyone, congrats on the numbers. I have a question about regulation in Mexico. Do you believe that there is room for the Mexican regulator to move faster and mimic, you know, some of the big changes the Brazilian central bank did here in Brazil? How important could it be, you know, transforming CODI into something closer to PIX?

Our product suite, you can rest assured that we are.

We are either building or investigating and and and and discovery for products and features that will serve the segment.

Okay. Thank you very much.

And our next question comes from the line of <unk> at <unk>.

Hi, <unk> hi, everyone. Congrats on the numbers I have a question on regulation in Mexico.

Do you believe that there is room for the Mexican regulator to move faster and mimic some of the big changes the President's Central Bank did here in Brazil.

How important it could be an old transforming cody into something like the closest to fix it how can you help you know.

David Veles: You know, how can you help the regulator to understand that that could benefit, you know, the penetration of credit in Mexico, showing, you know, what it was done in Brazil. So it would be interesting to hear your thoughts here. Thanks. Yeah, no, thank you. Thank you for asking the question. So listen, I think the trend is positive. We've been spending a lot of time with regulators. I think the Brazil case has become an unbelievably clear example across Latin America and globally of what a regulator can do to accelerate financial inclusion and bring more competition to a market. And that example is just too hard to ignore for regulators.

The regular there to understand you know that that could benefit you know penetration of credit in Mexico show you know what what it was that in Brazil. So it would be interesting to hear your thoughts here. Thanks.

Yeah no. Thank you. Thank you for your question. So there's <unk> <unk> I think.

That trend is positive we've been spending a lot of time with regulators I think their breath U K is has become Ah Ah number livable clear example, really I croak Latin American globally of what a regulator can do two accelerated financial inclusion and bring more competition too <unk>.

Marked in that example is just too hard to ignore for regulators. So when we went to Mexico about three years ago, Nobody really understood that today when we engage that's very clear cause you said Cody was launch a few years ago. There were a couple of design decisions that.

David Veles: So when we went to Mexico about three years ago, nobody really understood that. Today, when we engage, that's very clear. As you said, COTI was launched a few years ago, but there were a couple of design decisions that didn't really make it successful.

Didn't really make it successful I think regulator is going back at it and trying to make it successful. There is there was real attention and goodwill to see free digital payment system in Mexico again, it's hard to oppose that because the the benefit for society and for the for the country.

David Veles: I think the regulator is going back at it and trying to make it successful. There is real attention and goodwill to see a free digital payment system in Mexico. Again, it's hard to oppose that because the benefits for society and for the country are so clear.

Are so are so clear so what I would say is I I wish it would be a bit faster, but the trend is <unk> is possibly been accelerating and it would be tough to take the opposite view that in five years from now you'll see you'll <unk>, you'll continue to see 12 per cent credit card penetration.

David Veles: So what I would say is I wish it would be a bit faster, but the trend is positive and accelerating. And it would be tough to take the opposite view that in five years from now, you'll continue to see 12% credit card penetration or that five years from now, people will continue to use just cash for everything. The park is going in the direction of full digitalization of the economy.

<unk> with our five years from now people will continue to use just cash for everything that the puck is going in the direction of full digitalization of the economy does one of those friends that you can count on really globally.

David Veles: That's one of those trends that you can count on really globally. Brazil was fast, Mexico, Colombia were a bit slower, but I think we see the momentum accelerating and we're definitely trying to play a very active role on that future to come faster because in a world where finance is digital, in a world of digital payments, in a world of open finance, where there is less inertia from consumers to move, when consumers really own their data and they can transpose it to our institutions, then consumer really wins and competition becomes very powerful, becomes really the possibility to see interest rate coming down, banking costs come down, inclusion goes up. So we think that's where the park is going in Mexico. We think it's accelerating and we're definitely an active part of trying to push that forward. Great.

Brazil was fast, Mexico, Colombia, where a bit slower, but I think we we say they were meant to accelerating and and we're definitely tried to play a very active role on that future to come faster because in a world where finances digital in a world of digital payments you know, we're all off hoping to find out where there is less.

Inertia from consumers to move when consumers really on their data and they can transpose it to our institutions than consumer really wins and competition because very powerful becomes the the <unk> you know really possibility to see interest rates coming down banking costs come down inclusion go shop. So.

So we are we think that's that's where the puck is going to Mexico I, We think it's accelerating and we're definitely an active part of trying to push that forward.

Great. Thanks, a lot <unk>.

David Veles: Thanks a lot, David. Thank you, and our next question comes from the line of Pedro Leduc from Ita. Thank you, guys. Good evening.

Thank you.

And our next question comes from the line of <unk> <unk>.

Thank you guys. Good evening rush on the results I would like to get your help a little bit more on the.

Youssef Larache: Congratulations on the results. I would like to get your help a little bit more on the credit quality or provision expense side. We know this quarter it looked down right from $630 million to $590 million. Of course, you mentioned there the recovery effect. But I would like to get your help a little bit on how much these recovery effects were and get your sense on the underlying credit trends that you're seeing. You know, you did mention that gross margins should continue at this level, at least for the next quarters. So just getting your sense there on how you're feeling on the credit quality side makes you choose where to grow and when. Thank you. Hi Pedro.

Credit quality or provision expense five this quarter it looked down from two 630 million.

594, as you mentioned there the recovery effects, but I would like to get your help a little bit on on how much he's recovering effects <unk> and get your your Samsung on the underlying credit trends that you're seeing.

You've been mentioned that gross margins should continue at this level or at least not for the next quarter.

So I'm just getting a sense there on <unk> on the credit quality side, making you choose where to grow and <unk>. Thank you.

Hi, <unk> some.

On the credit <unk>.

Youssef Larache: On the credit loss allowance expense itself, as Lago and I mentioned in our earlier remarks, the 590 or so million number was impacted favorably by recoveries, in the order of about $60 to $70 million in the quarter, right? So you can do the math of what would have happened without that effect. You know, it would have been around $6.50, $6.60.

Lost allowance expense itself.

And like when I mentioned in our earlier remarks.

The the 590 or so million number was impacted favorably by recoveries.

The order of about 60 to 70 million.

Dollars in the quarter right. So you can do the math and what would have happened without that effect you know it would've been around 650, 660 say it would it be increased by.

Youssef Larache: So it would have increased by an amount that's kind of similar in magnitude to the increase from Q3 to Q4, right? And most of that increase is from growth of the credit book. Now, from a going forward standpoint, I expect maybe a little bit of a residual impact of additional recoveries in Q1, as Vlado mentioned a few minutes ago, but I don't think it will be of the same order of magnitude.

Mountain, that's kind of similar in magnitude to the increase from 2324 right.

And most of that increase.

As some growth of the credit book.

No someone's going forward standpoint.

I I.

Maybe a little bit of a residual impact of there's no coverage in <unk> mentioned, a few minutes ago, but I don't think it will be the same order of magnitude.

Youssef Larache: So I expect the trend to kind of resume looking like prior quarters as we continue to expand the credit book. You know, some of that expansion, as I said last quarter and earlier today, some of that expansion and growth will come from going further down the risk spectrum. So, you know, it might cause higher NPL and, therefore, higher provisions, but we think it will be more than paid for in the form of higher returns and robust resilience. So that's generally how I would think about it. That's great. Thank you so much.

So I expect the transit to kind of resume looking like prior quarters as we continue to expand the credit book.

You know some of that expansion as I said last quarter in earlier today, some of that expansion and growth will come from going further down the risk spectrum. So you know it.

It might cause uhm higher N P O, but we think you'll be and therefore higher provisions, but do you think you will be more than I paid for in the form of of a higher returns and robust resilience Sir.

Generally I would think about it.

That's great. Thank you so much I mean, what a what a second and follow up on this the.

Lago: I mean, what a second and follow up on this. D, of course, your NII post-costal risk and making up for it. You mentioned you hit 23 ROE this quarter. Of course, reinvesting into growth, and I know it's hard to pick apart which business is doing what, but if you could help us maybe with a broad range on how much you're reinvesting at this point from this ROE figure and if this ratio is going to grow or be maintained or even fall a little bit given the others funding it into 2024. Pedro, I believe the best way to address your question is if you take a look at our cost structure. In general, about 55 to 60% of our cost structure is largely payroll related, as he mentioned in his opening remarks.

<unk> of course.

I I post customer risks and making up for it you. You mentioned you hit 23 <unk> of course, reinvesting integral and I know, it's it's harder to pick apart, which which business is doing what no, but if you could help us maybe with a broad range on how much you're reinvesting at this point.

From from the Army finger and if this Rachel is gonna grow or be maintained or fall a bit given the <unk> funding it in 2024.

<unk>.

I believe the best way to the rest of your question is if you take a look at it will cost structure in general.

About no 55% to 60% of our cost structure is largely payroll related.

And does he mentioned in his opening remarks.

Lago: About 40% of our operational headcount is still in growth or moonshot businesses that are businesses that are not yet generating revenues at full capacity or not generating revenues at all. So this just gives you a sense of the allocation of our resources to businesses that are not considered to be our core profit-generating businesses. If we were to optimize for the long term or for the short term, we would be able to post materially better results. But that's not the case. We are in the middle of the planting season.

About 40% off all of our operational head count is this T O in Grove or moonshot business that our business that are nausea, generating revenues that who capacity or not generating revenues at all.

So this just gives you a sense of the location of all resources.

Two business that are not considered to be our core profit generating business. If we were to optimize for to long term for the short term, we would be able to polls materially better results, but that's not the case we are in the in the planting season, we're not into harvesting season. So we do expect into longterm that all.

Lago: We are not in the harvesting season. So we do expect, in the long term, that our ways in both Brazil and on a consolidated basis can expand further. And we are investing heavily in that. And by investing, we are investing primarily in human resources and technology. That's such a great help.

<unk> and <unk> <unk> on a consolidator basis can expand further and we are investing heavily for that and by investing we are investing primarily on human resources and technology.

Oh, great help thank you.

Lago: Thank you, Lago. Thanks, Bill. And our next question comes from the line of Rafael Ferrade from Citi. Hi, guys. Good evening.

Thanks.

And our next question comes from the line of hostile for added from city.

Hi, Yes. Good evening. So my question is related to the the your capital position you you've mentioned the previous work with your capital position was around 4.5.

Lago: So my question relates to your capital position. You mentioned in the previous quarter that your capital position was around $4.5 billion. But in this quarter, it was $5.4.

<unk> was 5.4, so a big jump <unk> earnings so I'd like to understand it.

Lago: So a big jump, quarter over quarter, higher than earnings. So I'd like to understand if there's an adjustment here that explains this big increase in the capital position. Thank you.

An adjustment here that explain just <unk> beach increase <unk> position. Thank you.

Lago: Thanks for your question. No, I think the best way for me to address your question is to draw your attention to all our financial statements, more specifically to explanatory notes, number 32, in which we basically break down our capital positions, regulatory capital positions for Brazil and Mexico, which are two regulated entities. And I think in the slides, what you will see is that for the first time, we are basically adding both Brazil and Mexico, and there you may see a slight increase in the numbers. But by and large, with the capital that we have allocated to our geos that are regulated, Brazil and Mexico, we have about two times the minimum capital that is required in these geos. And if, above and beyond, you also take into account the $2.4 billion of excess capital that we have at the holding company, we would get to nearly three times the minimum regulatory capital. So we believe we are fairly comfortably capitalized. We don't foresee any need to tap the equity capital markets in the near future for our five-year plan, nor do we foresee the need to make any material capitalization in Brazil in the foreseeable future.

<unk>. Thanks for your question No I think the best way for me to address your question as to draw your attention to all of our financial statements more specifically to explain.

Explanatory notes number 32 in which we basically breakdown or a capital positions <unk>, probably kept the position for Brazil, Mexico, which are two related entities and I think in the in the <unk>. What you will see the the first time, we are basically adding bill for zoo in Mexico, and there you may see.

I would like to increase in the numbers.

But by and large with the capital that we have located <unk> that are regulated Brazil, and Mexico, we have about two times the minimum capital that that are required in this juice.

Above and beyond you also take into account the $2.4 billion effects is capital than we have in the holding company, we would get nearly three times the minimum regulatory capital. So we believe we are fairly comfortably capitalize we don't foresee any needs to tap the equity cut the markets and the new.

Your future for our five year plan, nor do we foresee the needs to make any material capitalization.

In in Brazil in the foreseeable future, Brazil is expected to generate enough earnings to.

Lago: Brazil is expected to generate enough earnings to sustain the growth of the business going forward. And our next question comes from the line of Judith Fernandez at J.P. Morgan. Hello, guys. Hi, David, Lago, Jorge.

To sustain the grill fall off the business going forward.

Hello.

And our next question comes from the line a few of these Hernandez J P. Morgan.

Hello, guys side of the Lago <unk>. Thanks for the purchase of asking questions I had no follow up on Mexico in on your deposits French fries, it's pretty breasted $1 billion in Mexico.

David Veles: Thank you for the opportunity of asking questions. I have a follow-up question on Mexico. And on your deposit franchise, it's pretty impressive, $1 billion in Mexico. And again, it has been growing very fast since November. But Davi, I think he addressed some points like the wholesale cost and how the credit cards can make this higher 50% yield still profitable in some sense. But my question is that your deposits are now growing much faster than loans, right? We only have the regulatory data for November.

Again.

Very fast.

November but the V. I I think he address at some point like the wholesale cost and how the credit cards can make you know like these.

50 per cent, you'll just you.

He is too profitable, it's some sense, but my question is that your deposits are now growing much faster than loans right. We just have the regulatory data for November and I think either around $800 million uploading next bill. So now you'll have more deposits and loans.

David Veles: And I think you had around $800 million in loans in Mexico. So now you have more deposits than loans. That basically implies that you kind of have a negative spread here, right? You're paying 15, actually, I think 16.

Basically apply that you kind of have a negative is spread to your right to your face <unk> actually I think 60, right because 50 <unk>, Texas. So my point is above Mexico losses, right, maybe I should get a log of redheads recipes, but I don't know what I think maybe the right strategy, but maybe we could see higher lost <unk>.

David Veles: Because 15 is net of taxes. So my point is about Mexican losses, right? Maybe. I think Log has already addressed this, but I don't know.

David Veles: I think maybe it's the right strategy, but maybe we could see higher losses from Mexico in 24, 25. So I would like to address this by saying if you keep the 15% yield, even if you don't have the same counterpart on loans, basically buy a security from the government around 11, 25. And then I can do a follow-up on this question. Thank you very much.

<unk> 24, 35, so I would like to address the issue of keeping the 50 per cent you.

Even if you don't have the same <unk> you know basically by a security guard with a around 11 25.

And then I can do a follow up some of these questions. Thank you very much.

David Veles: No, great. No, this is a great question. This is the right question. So, we absolutely see this as a way to accelerate credit as well. We always say that, you know, your right leg cannot go faster than your left leg.

Not right now. This is this is a great does the right question. So.

We we absolutely see this as a way to accelerate credit as well, we always say that that.

Your right leg kind of go faster than your left leg, we started effectively only with her right leg just with credit when we launch.

David Veles: We started effectively only with a right leg, just with credit. When we launched deposits, we had a left leg. Now we have the challenge of coordinating ourselves. And it's, and it's a tough problem because, in an ideal world, you would have perfect information and you have the absolute price so that it would build the product that you want; it optimizes that NPV maximization problem. In an ideal world, you can get to that price immediately. We prefer to start high because it's important to create the right impression for consumers, and there tends to be an advantage when you are positioned as the clear category king.

Deposits, we have a laugh lag now we have the challenge of coordinating ourselves and it's.

It's a tough.

Because.

You are not able to <unk> anti fries for perfection the yield yeah ideal world you would have perfect information and you have the absolute.

Pricing so that it would build the product that you want it optimize MPV maximization problem, an idea of where you can get to that price immediately.

We <unk>.

Prefer to start high.

Because it's important to create their writing depression for consumers and there tends to be an advantage when you are position.

Position as declare category King that's why we are striving for in Mexico.

David Veles: That's what we are striving for in Mexico. Once you have that position versus consumers, and you start getting a significant percentage of the market, then a lot of the flywheels really start turning. And so in that sense, you're right that, suddenly, deposits are going faster than credit. But as I said, now we're starting to see second-order benefits.

Once you have that position versus consumers and you start getting significant percentage of the market than a lot of the flywheels really start Turner and so in that sense. You are right that suddenly the policy started going faster to credit, but if they said now we'll start seeing the second order benefit we're seeing higher income Mexicans coming in.

David Veles: We're seeing higher-income Mexicans coming in, which allows us to increase the credit card acceptance rate for our customers. It also allows us to increase limits, which increases IBB for credit cards. It brings in more customers, and net net, we have to spend less on marketing. And so overall, I think this is a big investment for us, they said. We are looking at this investment decision very carefully, optimizing for the long term, as I said. But it will be a continuous calibration of this exercise.

In which allows us to increase credit card acceptance rate.

Or for our customers. It allows us to increase limits, which increases I BB four credit cards. It brings more customers in net net we have to spend less in marketing and so are all I think we are this this is a big investment for us. They said we are looking at these investment disk.

<unk> very carefully optimizing for today pretty long term as I said.

But it will be a continued recalibration off of this exercise and as we go over the next few moss and and really over and over the year will be will be trading off the different sides of that event, but so far. It's it's clearly is paying off really quickly because of the higher particular customers.

David Veles: And as we go over the next few months, and really over the year, we'll be trading off the different sides of that bet. But so far, it's clearly paying off really quickly because of the higher credit card customers, the differentiated income profile, the higher acceptance rate, the higher credit limits, and increased IBB. We are operating with a product in Mexico that we think is more profitable than Brazil, the credit card per se. It has a higher return on equity so far. So there is plenty of economics to be paying a bit higher for the funding right now. No, thank you, David.

Differentiated income per file the higher acceptance rate the higher credit limits increase I'd be be we are operating in <unk> with a with a product in Mexico that we think is more profitable down Brazil. The credit card per se has a higher return on equity. So far so there is plenty of economics too to be paying.

Right now a bit higher on the funding cost.

No. Thank you that I was in Mexico last week and you see breath.

Guilherme Lago: I was in Mexico last week and it's impressive the word of mouth about this deposit strategy. If I may, just a quick one here on the eligible unsecured credit customers for you. I think you have a slide on this 15.5 million, one of the last slides of the presentation. I was checking the third quarter, and you had around 18 million eligible unsecured credit customers in the previous quarter. So it basically implies that this number was down to 3 million. So just checking if you are getting a little bit more risk averse on unsecured credit lending in Brazil or, I don't know, anywhere else. Or if it's just a different accounting on this number because it was down again from 18.1 to 15.5 million eligible customers.

March is deposit strategy Uhm, if I may just a quick one here on the eligible security credit customers for you or have you <unk> I think I have I, just <unk> 50.5 million in one of the lessons slides of the presentation I was checking the third of quieter and you had to like around 18 million eligible let's you choose.

Credit the customers previous card. So so it's basically lies that this number was down 3 million. So just checking if you are getting a little bit more which covers one of the security credit Lady Brazil, or I don't know anywhere else or if it's just a different account to you on this number because it was down again, which from 18.1 60.5 million.

<unk> Ah customer thank you.

Guilherme Lago: Thank you. No, Yuri, I think we are certainly not getting less optimistic with the expansion of unsecured personal loans, and it's just a different accounting for the eligibility of monthly accounting monthly eligible customers, but in general, we are super pleased with the potential that we have in unsecured personal loans. If you take a look at the total unsecured personal market in Brazil, it's the second largest consumer asset class in the country after only payroll loans, and our customers already account for approximately 51 percent of this pool. We have less than seven eight percent of this market, so we will continue to grow and expand originations there threefold. Number one is increasing the eligibility of personal loans to more customers. Number two, progressively increasing the average ticket size, almost resembling the slow growth that we have in credit cards, and number three is to progressively increase also the duration.

No <unk> I think we <unk>, we are certainly not getting.

<unk> optimistic with expansion of of unsecured personal loans and it's just a different accounting of the eligibility of monthly accounting monthly eligible customers.

But in general we're Super pleased with the potential that we have an unsecured personal loans.

Take a look at the bold ones secure personal marketing, Brazil, it's the second largest consumer acid class in the country neck after only piro loans and our customers already account for approximately 51% of this pool, we have less than seven eight per cent of those markets. So we will continue to grow and expand originations there.

Three fold number one please and the eligibility of personal most more customers number two progressively increasing the average ticket sized almost resembling to the the the little girl that we have and credit cards and number three is to progressively increase also the duration.

Guilherme Lago: Our average duration today is about one-third of the average duration of the market, so by flexing those three levers, we believe we will continue to increase originations of unsecured personal loans going forward. That's great. Thank you, Lago, and congratulations. As we have already surpassed 90 minutes of the call, we are now concluding today's call. So, on behalf of Nu Hldg and of our investor relations team, I want to thank you very much for your time and participation in our earnings call today. We are very excited about the opportunities for the year of 2024 and to continue strengthening our position in Brazil, Mexico, and Colombia. Over the coming days, we will be following up with the questions received by our platform and with those that were not able to ask questions tonight. So please do not hesitate to reach out to our team if you have any further questions. Thank you, and have a good night. Goodbye.

I'll ever duration today is about one third of the average duration of the market. So by flexing those three lovers. We believe we will continue to increase originations of unsecured personal loans going forward.

Mmm, that's great. Thank you log on.

As we already surpassed 90 minutes off the call. We are now concluding today's call. So on behalf of <unk> and a flower investor relations team I want to thank you very much for your time and participation in our in east call. Today, we are very excited.

<unk> 2024 and to continue strengthening our position in Brazil, Maxwell Columbia over the coming days, we will be following up with a questions received by our platform and we do that we're not able to ask questions Tonight. So please do not hesitate to reach out to our team if you have any <unk>.

Further questions. Thank you and have a good night.

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