Q1 2024 Nu Holdings Ltd Earnings Call
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Unknown Executive: Youssef Lahrech, Gustavo Schroden, Jorge Kuri, Rafael Frade, Yuri Fernandes, Nu Hldg Good evening, ladies and gentlemen. Welcome to Nu Hldg's conference call to discuss the results for the first quarter of 2024. A slide presentation is accompanying today's webcast, which is available on the News 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.
Speaker Change: Good evening, ladies and gentlemen, welcome to New Holdings conference call to discuss the results for the first quarter of 2024.
Speaker Change: A slide presentation is accompanying today's webcast, which is available in news Investor Relations Web site Www dot investors dot knew in English and Www palm to English do respond to know in Portuguese.
Speaker Change: This conference is being recorded and the replay can also be accessed on the company's IR website.
Speaker Change: This call is also available in Portuguese.
Speaker Change: Access 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 to mute original audio.
Unknown Executive: To access our conference in Portuguese, click on the globe icon at the bottom right 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 a listen-only mode. You may submit online questions at any time today using the Q&A box on the webcast. I would now like to turn the call over to Mr. Jorg Friedemann, Investor Relations Officer at Nu Holdings.
Speaker Change: Parasiticide in a cycle fittings in Portuguese clicking away going into global Allied instead. He originated the slit that Andrew you said is shown on film Portuguese room.
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Speaker Change: Please be advised that all participants will be in a listen only mode. You may submit online questions at any time today using the Q&A box on the webcast.
Unknown Executive: Mr. Friedemann, 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. With me on today's call are David Velez, our Founder, Chief Executive Officer, and Chairman; Youssef Lahrech, our President and Chief Operating Officer; Guilherme Lago, our Chief Financial Officer; and Jag Duggal, our Chief Product Officer.
Speaker Change: I would now like to turn the call over to Mr York Freedom, and Investor Relations Officer at New Holdings. Mr. Freedman you May proceed.
York Freedom: Thank you very much operator, and thank you all for joining our earnings call today.
York Freedom: Marching our earnings release, a copy is posted in the result center section of our Investor Relations website.
York Freedom: With me on today's call are <unk>.
<unk>: <unk>, our founder Chief Executive Officer, and Chairman use.
Speaker Change: You use it Flores, our president and Chief operating Officer, <unk>, <unk>, our Chief Financial Officer, and Jake Dougal, Our Chief product officer throughout this conference call, we will be presenting non <unk> financial information, including adjusted net income these are important.
Unknown Executive: Throughout this conference call, we will be presenting non-IFRS financial information, including adjusted net income. These are important financial measures for NU, but they are not financial measures as defined by IFRS and may not be comparable to similar measures from other companies. 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 basis. I would also like to remind everyone that today's discussion might include forward-looking statements, which are not guarantees of future performance. Therefore, you should not put undue reliance on them.
Speaker Change: Financial measures for new but are not financial measures as defined by <unk> and may not be comparable to similar measures from other companies.
Speaker Change: Reconciliations of our non <unk> financial information to the <unk> financial information are available in our earnings press release.
Speaker Change: Unless noted otherwise all growth rates are on a year over year FX neutral basis.
Speaker Change: 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.
Jorg Friedemann: 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 statements disclosure in our earnings release. Today, our founder, Chen Man, and CEO, David Velez, will discuss the main highlights of our first quarter of 2024. Subsequently, Guilherme Lago, our CFO, and Youssef Lahrech, 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 Davi. Davi, please go ahead.
Speaker Change: These statements are subject to numerous risks and uncertainties and could cause actual results to differ materially from our expectations.
Speaker Change: Please refer to the forward looking statements disclosure in our earnings release.
Speaker Change: To date, our founder Chairman and CEO that develops we will discuss the main highlights of our first quarter 2024.
Speaker Change: Sequence Lee <unk>, our CFO and use of Flores, our president and COO will take you through our financial and operating performance for the quarter.
Speaker Change: After which time, we will be happy to take your questions.
Levy: Now I'd like to turn the call over to Levy does he please go ahead.
Davi: Thank you, Jorg. Good evening, everyone. And thank you again for being with us today. In Q1 2024, we kicked off the year with many ambitious goals aimed at propelling our platform to the next level. As we shared with you last quarter, we're targeting four key priorities for 2024, all aligned with our mission to fight complexity and empower people. First, establish strong momentum in Mexico, which means creating the basis for us to grow sustainably and profitably in the country.
George: Thank you George Good evening, everyone and thank you again for bandwidth us today.
Speaker Change: In Q1 2024, we kick started the year with many additional goals aimed at propelling our platform to the next level.
Davi: Second, ramp up our secure lending initiatives in Brazil. Third, enhance our strategies to further advance in the high-income segment in Brazil. And fourth, launch products and services that leverage technologies such as real-time payments, open banking, and AI that will turn the concept of our consumer technology-driven money platform into a reality for our customers. Beginning this quarter, we will present data points to demonstrate the progress of select priorities.
Levy: As we shared with you last quarter, we're targeting four key priorities for 2024, all aligned with our mission to find complexity and empower people.
Speaker Change: First start with strong momentum in Mexico, which means creating the basis for us to grow sustainably and profitably in the country.
Second ramp up of our secured lending initiatives in Brazil third enhance our strategies to further advancing the high income segment in Brazil, and fourth launched products or services to leverage technologies, such as real time payments open banking and AI that will turn to cautious of our consumer technology, driven monarch platform into a reality for customers.
Speaker Change: This quarter, we will present data points to demonstrate the progress of select priorities.
Davi: During Q1 2024, our business model, anchored in three fundamental principles, fast customer expansion, expanding revenue per customer, and efficient operating costs, showed its strength once again as it generated significant earnings. The growth of our customer base on a net ad basis continues to exceed our expectations, surpassing 99 million customers at the end of the quarter, expanding 67% from the 59 million recorded just two years ago. In fact, we recently announced surpassing the milestone of 100 million customers, becoming the first digital banking platform outside of Asia to cross this remarkable number and operating still in only three countries in Latin America. The rate of customer net adds in Brazil continues to be impressive, averaging 1.3 million customers per month, resulting in a total of 91.8 million customers at the end of the first quarter of 2024.
Speaker Change: During Q1, 2024 or business model anchored in three fundamental principles fast customer expansion expanding revenue per customer and efficient operating cost showed its strength once again generated significant earnings.
Speaker Change: The growth of our customer base on a net basis continues to exceed our expectations, surpassing 99 million customers at the end of the quarter spanning 6% to 7% from the $59 million recorded just two years ago.
Speaker Change: In fact, we've recently announced we're passing the milestone of 100 million customers, becoming the first digital banking platform upside of Asia to close these remarkable number and operating still in only three countries in Latin America.
Speaker Change: The rate of customer net adds in Brazil continues to be impressive averaging $1 3 million customers per month, resulting in a total of $91 8 million customers at the end of the first quarter of 2024 in.
Davi: In parallel, our growth in Mexico has re-accelerated with a net addition of almost 1.5 million new customers in the quarter, reaching a total of 6.6 million customers by the end of Q1. This growth underscores the success of our decision to increase deposit yields in Mexico, which has accelerated our flywheel and solidified New's position as the unrivaled leader in the digital banking category in Mexico. Finally, let me share some financial highlights with you. In the quarter, our revenue surged to $2.7 billion, accelerating sequentially to a 64% year-over-year increase.
Speaker Change: In parallel or growth in Mexico has accelerated with a net add of almost $1 5 million new customers in the quarter, reaching a total of $6 6 million customers by the end of Q1.
This growth underscores the success of our decision to increase the positive yields in Mexico, which has accelerated our flywheel and solidified <unk> position on.
Speaker Change: Unrivaled leader in the digital banking category in Mexico.
Speaker Change: Finally, let me share some financial highlights with you.
Speaker Change: In the quarter or revenues for $2 7 billion.
Speaker Change: Generating sequentially to a 6% to 4% year over year increase.
Davi: Our gross profit surpassed $1.2 billion, growing 76% year-over-year, while our gross margin reached 43.2% in a quarter. Despite the expected contraction of our gross margins this quarter from a seasonal high in Q4 as flagged during our prior earnings call, our net income expanded again quarter over quarter to $307.9 million, while we achieved an adjusted net income of $443 million, reflecting expansions of 160% and 136% year-over-year This showcases the strength of our business model, capable of combining strong online growth with consistently very solid levels of profitability.
Speaker Change: Our gross profit surpassed $1 $2 billion growing 76% year over year, while our gross margin reached 43, 2% in the quarter.
Despite the expected contraction of our gross margins this quarter from a seasonal high in Q4 as flagged during our prior earnings call or net income expanded again quarter over quarter to $379 million.
Speaker Change: While we achieved adjusted net income of $443 million, reflecting expansion of 160% and 136% year over year, respectively.
Speaker Change: This showcases the strength of our business model capable of combining strong online growth with consistently very solid levels of profitability.
Davi: This slide encapsulates our financial performance trends over the past two years, underscoring our momentum and consistent success in expanding our customer base while simultaneously accelerating both revenues and profitability. The robust growth of our customer base, driven by the growing cross-selling and up-selling opportunities enabled by our highly engaged platform, led to a more than three-fold increase in quarterly revenues within just two years on an FX-neutral basis. This translated into a 75% annual compounded growth rate during this period.
Speaker Change: This slide encapsulates our financial performance trends over the past two years underscoring our momentum and consistent success in expanding our customer base, while simultaneously accelerating both revenues and profitability.
Speaker Change: The robust growth for our customer base, driven by the growing cross selling and up selling opportunities enabled by our highly engaged platform led to a more than threefold increase in quarterly revenues within just two years on an FX neutral basis.
Speaker Change: This translated into a 75% annual compounded growth rate for this period.
Davi: The third chart on this slide effectively illustrates our robust pricing and underwriting capabilities for quarterly gross profit calculated as total revenues minus funding costs, transactional expenses, and credit loss allowances increased by almost 4x in the same period. Lastly, 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 led to a significant acceleration in net income growth. This upward trajectory is evident in the chart on the right, especially over the past two years.
Speaker Change: The third chart on this slide effectively illustrates our robust pricing and underwriting capabilities or quarterly gross profit calculated as total revenues minus funding cost transactional expenses and credit loss allowances increased by almost <unk> in the same period.
Speaker Change: Lastly, 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 led to a significant acceleration in net income growth.
Speaker Change: It's upward trajectory is evident in the chart on the right, especially over the past two years.
Speaker Change: We anticipate this compounding effect to persist in the years ahead, driven by the combination of sustained growth and increased profitability within our platform.
Davi: We anticipate this compounding effect to persist in the years ahead, driven by the combination of sustained growth and increased profitability within our platform. Now, I'd like to highlight how our flywheel not only drives customer acquisition and data growth but also sustains strong momentum in our key financial metrics. As we continue to expand in our three markets, leveraging the inherent operating advantage of our model, our holding company has successfully transformed its potential into profit. In the first quarter of the year, Nu Hldg achieved an adjusted net income of $443 million, reflecting an adjusted annualized return on equity of 27%.
Speaker Change: Now I'd like to highlight how our flywheel not only drives customer acquisition and data growth that also sustained strong momentum in our key financial metrics.
Speaker Change: As we continue to expand in our three markets leveraging the inherent operating advantage of our model or holding company has successfully transformed its potential into profits in.
Speaker Change: In the first quarter of the year, who holdings achieved an adjusted net income of $443 million, reflecting an adjusted annualized return on equity of 27% we.
Davi: We believe that this performance surpasses that of most peers in the region, despite maintaining a considerable excess capital of $2.4 billion at the holding level and with two subsidiaries in Mexico and Colombia that are still operating with negative profitability. If one were to look only at our operations in Brazil alone, our return on equity remained well above 40%. As outlined at the outset of this call, we're committed to providing investors and the market in general with updates on our progress regarding our four key priorities for 2024.
Speaker Change: We believe that these performance surpasses that of most pearce into region, despite maintaining a considerable excess capital of $2 $4 billion at the holding level and with two subsidiaries in Mexico, and Colombia that are still operating with negative profitability.
Speaker Change: If one were to look at our operations in Brazil alone or return on equity remained well above 40%.
Speaker Change: As outlined at the outset of this call we're committed to providing investors in the market in general with updates on our progress regarding our four key priorities for 2024 for.
Davi: For this quarter, we have chosen to present KPIs specifically related to our first priority, Mexico. On this slide, we highlight the considerable momentum our strategy in Mexico has achieved, evidenced by the acceleration of our flywheel in the country. Notably, Mexico is already surpassing Brazil in terms of time to achieve different key KPIs for the business.
Speaker Change: For this quarter, we have chosen 2% kpis, specifically related to our first priority Mexico.
Speaker Change: In this slide we highlight the considerable momentum or strategy in Mexico has achieved evidenced by the acceleration of our flywheel in the country.
Speaker Change: Notably, Mexico, we're ready surpassing Brazil in terms of time to achieve different key kpis for the business. This slide was built analyzing quarterly figures in Mexico in Q1, 'twenty for Martin 19 quarters since our launch in Mexico and compares to status of our operations in Brazil at the same point in time.
Davi: This slide was built analyzing quarterly figures in Mexico in Q1-24 marking 19 quarters since our launch in Mexico and compares the status of our operations in Brazil at the same point in time. After just one year since the launch of Cuentanil, Mexico has already surpassed Brazil in both the absolute number of customers and checking account holders, as well as in relative terms when considering market share figures. Equally impressive is the progress of a credit card franchise in Mexico.
Speaker Change: After just one year since the launch of <unk>, Mexico has already surpassed Brazil in both absolute number of customers and checking account holders as well as in relative terms when considering market share figures.
Speaker Change: Equally impressive is the progress for our credit card franchise in Mexico.
Davi: Surpassing the milestone of 3 million credit card customers, we believe our user numbers have outpaced those of some of the top three incumbent banks in the country. Notably, New Mexico has already attained $1.6 billion in credit card purchase volume, representing a 6.1% market share in the country, compared to a 4.3% share in Brazil during the same period. When looking into deposits, we have just crossed the mark of $2.3 billion in retail deposits, more than double the amount at the end of 2023 and representing 1.2% of total deposits in Mexico, compared to the 0.5% we had in Brazil at the same time. The aforementioned KPIs dropped $149 million in total revenues for Mexico this quarter, which compared to $99 million for Brazil at the same time.
Speaker Change: Surpassing the milestone of 3 million credit card customers, we believe or user numbers, how about pace dose of some of the top three incumbent banks in the country.
Speaker Change: Notably New Mexico has already attained $1 6 billion in credit card purchase volume, representing a six 1% market share in the country compared to a four 3% share in Brazil during the same period.
We're looking into deposits, we have just closed the mark of $2 3 billion of retail deposits more than double the amount at the end of 2023, and representing one 2% share of total deposits in Mexico compared to the <unk>, 5%, we had in Brazil at the same time.
The aforementioned Kpis drove $149 million in total revenues for Mexico, this quarter, which compared to $99 million for Brazil in the same timeframe.
Davi: We're thrilled with our performance in the early months of 2024 and are well positioned to achieve the goals we have set for ourselves for the year. The developments we've shared suggest that we are building a model that could be successfully exported, a feat many previously deemed unachievable in consumer finance. While we acknowledge that there are still many hurdles to overcome, we remain incredibly excited about the early stages of this model's development.
Speaker Change: We're thrilled with our performance in the early months of 2024 and are well positioned to achieve the goals we have set for ourselves for the year.
Speaker Change: The developments with shared suggested we are building a model that could be successfully exported our fifth many previously deemed an achievable in consumer finance.
While we acknowledge that there are still many hurdles to overcome we remain incredibly excited about the early stages of these models development having <unk>.
Davi: Having successfully balanced growth and profitability in Brazil, we now aspire to extend these traits beyond our initial borders. Now, I'd like to pass the floor to our CFO, Guilherme Lago, who will guide you through our financial numbers. Over to you, Lago. Thank you, David, and good evening, everyone.
Speaker Change: Essentially balanced growth and profitability in Brazil, we now aspire to extend these trips beyond our initial partners.
Jeremy <unk>: Now I'd like to pass the floor to our CFO, Jeremy <unk>, who will guide you through our financial numbers arterial Lego.
Jeremy <unk>: Thank you Ravi and good evening, everyone as <unk> mentioned, we deliver a strong first quarter in both operating and financial Kpis. Those results were achieved by focusing on our simple yet powerful value generating strategy, which can be summarized.
Guilherme Marques do Lago: As David mentioned, we delivered a strong first quarter in both operating and financial KPIs. Those results were achieved by focusing on our simple yet powerful value-generating strategy, which can be summarized by three guiding pillars. First, focusing on growing our customer base in the three markets where we operate and rapidly converting our new customers into active customers. Second, expanding average revenue per active customer, or RPAC, through both cross-selling and upselling. And third, continuing to deliver high growth while maintaining one of the lowest operating costs in the industry.
Guilherme Marques do Lago: Now, let's delve further into our first quarter results to gain a deeper understanding of the progression of each one of these pillars. I will begin with the results of our customer acquisition. During the first quarter of 2024, our customer base continued to increase at a solid pace. We accelerated customer growth quarter over quarter, welcoming 5.5 million new customers in the first quarter of 2024 for a total of 99.3 million customers at quarter end, a 26% increase year over year.
Jeremy <unk>: By three guiding pillars first our focus on growing our customer base in the three markets, where we operate and rapidly converting our new customers into active customers.
Guilherme Marques do Lago: In Brazil alone, our customer growth pace is at approximately 1.3 million customers per month, with the vast majority still coming from referrals. This not only translates into lower acquisition costs but also ensures faster activation, showcasing the trust and satisfaction our customers have in our service. Our client base in both Mexico and Colombia also experienced strong positive growth. In Mexico, we reached 6.6 million customers this quarter, marking a remarkable 106% year-over-year growth and surpassing last quarter's net addition. Additionally, we now serve more than 900,000 customers in Colombia.
Jeremy <unk>: Second expanding average revenue per active customers were archaic through Gulf cross selling and Upselling and third continuing to deliver high growth, while maintaining one of the lowest operating costs in the industry.
Jeremy <unk>: Now lets delve further into our first quarter results to gain a deeper understanding of the progression of each one of these pillars.
Guilherme Marques do Lago: Once we add customers, our goal is to activate and retain them. Our active customer base has increased by 27% year over year, followed by another sequential quarterly increase in the monthly activity rate, which now stands at 83.2%, up from 82.1% just one year ago. This marks the 10th consecutive increase in this metric.
Speaker Change: I will begin with the results of our customer acquisition.
Speaker Change: During the first quarter of 2020 for our customer base continued to increase at a solid pace, we accelerated customer growth quarter over quarter welcoming $5 5 million new customers in the first quarter of 2024 for a total of $99 3 million customers at quarter end.
Speaker Change: 26% increase year over year.
Speaker Change: In Brazil alone our customer growth pace is at approximately one 3 million customers per month with the vast majority to come from referrals.
Speaker Change: <unk> not only translates into lower acquisition costs, but also ensures faster activation showcasing the trust and satisfaction our customers have in our resources.
Speaker Change: Our client base in both Mexico, and Colombia also experienced strong positive growth.
Speaker Change: In Mexico, we reached $6 6 million customers this quarter, marking a remarkable 106% year over year growth and surpassing last quarter's net additions.
Speaker Change: Additionally, we now serve more than 900000 customers in Colombia.
Speaker Change: Once we add customers our goal is to activate and retain them. Our active customer base has increased by 27% year over year, followed by another sequential quarterly increase in the monthly <unk> rate, which now stands at 83, 2%.
From 82, 1% just one year ago.
This marks the 10th consecutive increase in this metric we believe that this is a testament to our proficiency engaging customers effectively on our platform.
Guilherme Marques do Lago: We believe that this is a testament to our proficiency in engaging customers effectively on our platform. Turning our attention to revenue expansion, the first chart highlights that the new bank has established primary banking relationships with around 59% of our active customer base. The drop of two percentage points in comparison to the fourth quarter of 2023 is mainly associated with less quarter seasonality, considering increased transactionality during the month of December. Nevertheless, the two following charts show an increase in both the number of products per active customer and R. As you can see in the second chart, the number of products per active customer grew from an average of 4 last quarter to 4.1 this quarter, illustrating our successful cross-selling strategy achieved by introducing The last chart shows the combined effect of these two dynamics.
Speaker Change: Turning our attention to revenue expansion. The first chart highlights the new has established primary banking relationships with around 59% of our active customer base. The drop of two percentage points in comparison to the fourth quarter of 2023 is mainly <unk>.
Speaker Change: <unk> with less quarter seasonality, considering increased transaction <unk> during the month of December never.
Speaker Change: Nevertheless, the two following charts show an increase in both the number of products per active customer and art Peck.
Speaker Change: As you can see in the second chart the number of products per active customers grew from an average of four less quarter to four one this quarter illustrating our successful cross selling strategy achieved by introducing new products to our customers and establishing ourselves as they are.
Our primary banking partner.
Speaker Change: The last chart shows the combined effect of these two dynamics by having significant customer engagement as demonstrated in the first chart together with our growing product cross sell capabilities as shown in the second chart. It produces increasingly positive results or monthly.
Guilherme Marques do Lago: By having significant customer engagement, as demonstrated in the first chart, together with our growing product cross-sell capabilities, as shown in the second chart, it produces increasingly positive results. For example, our monthly RPEC increased to $11.4 this quarter, in comparison to $10.6 just one quarter ago. Our more mature cohorts are already generating a monthly RPEC of $27. This reported increase in RPEC resulted in another quarter of solid revenue growth, as presented in the next slide.
<unk> increased to 11 $4. This quarter in comparison to 10 $6. Just one quarter ago are more mature cohorts are already generating a monthly <unk> of $27 does the reported increase in <unk> resulted in another quarter.
Speaker Change: <unk> of solid revenue growth as presented in the next slide.
Guilherme Marques do Lago: Our monthly RPEC grew sequentially and accelerated its year-over-year expansion rate to 30%, reaching $11.4, up from $8.6 just one year ago. As discussed in prior earnings calls, we maintain confidence in further growing RPEC going forward towards its full potential. In the second chart, we illustrate that our revenues hit a new record high this quarter, reaching $2.7 billion, up 64% year over year. Just a year ago, our revenues were $1.6 billion. This growth is driven by an increase in active clients combined with higher RPEC levels.
Speaker Change: Our monthly <unk> grew sequentially and accelerated its year over year expansion rates to 30%, reaching 11 $4 up from $8 $6, just one year ago as discussed in prior earnings calls we maintain.
Speaker Change: Confidence in further growing our path going forward towards its full potential.
Speaker Change: In the second chart, we illustrate our revenues hit a new record high this quarter, reaching $2 $7 billion up 64% year over year.
Speaker Change: Just a year ago, our revenue was $1 6 billion.
Speaker Change: This growth was driven by the increase in active clients combined with higher art Peck levels.
Guilherme Marques do Lago: Now, let's discuss our cards business in more detail. It's important to remember that for cards, purchase volumes are seasonal, higher in the fourth quarter and lower in the first quarter of every year. Historical seasonality analysis shows a drop of 6.9% on average in total purchase volume for the industry.
Speaker Change: Now, let's discuss our cards business in more details.
Speaker Change: Important to remember that for cards the purchase volumes are seasonal higher in the fourth quarter and lower in the first quarter of every year historical seasonality analysis shows a drop of six 9% on average and total purchase volume for the industry.
Guilherme Marques do Lago: However, the sequential reduction in news purchase volume this quarter was only 3.7%, with especially strong performance in credit cards, which contracted only 1.8% on an FX neutral basis versus the historical industry seasonality drop of 5.9%. Compared to the first quarter of last year, our purchase volume was up 30% on an FX neutral basis to $31.1 billion, sustaining its very strong growth path. On the right side, the chart shows how purchase volumes expand as cohorts of customers develop and mature. Older cohorts continue to increase purchase volumes. While an initial disparity does exist between newer and older cohorts, both tend to exhibit an upward trend in consumption over time.
Speaker Change: However, the sequential reduction in news purchase volume this quarter was only three 7% with especially strong performance in credit cards, which contracted only one 8% on an FX neutral basis versus the historical industry seasonality drop off five 9%.
Speaker Change: Compared to the first quarter of last year, our purchase volume was up 30% on an FX neutral basis to $31 1 billion sustaining its very strong growth path.
Speaker Change: On the right side the chart shows how purchase volumes expand as cohorts of customers develop and mature older cohorts continue to increase purchase volumes Wilen initial disparity does exist between newer and older cohorts booth tend to exit.
Speaker Change: An upward trend in consumption over time, we.
Guilherme Marques do Lago: We expect that the compounding effect of adding millions of customers each month, along with the maturation of new customers into historically observed spending patterns, will strongly support the growth of future purchase volumes at Nubank. Talking about purchase volume trends for the industry, we believe NU ended the first quarter of 2024 with a market share of around 15%, including credit, debit, and prepaid cards. As we continue to attract millions of new customers every quarter, and their spending matures over time, our confidence in our ability to capture additional market shares in the future only grows.
Speaker Change: We expect that the compounding effect of adding millions of customers each month, along with the maturation of new customers into historically observed spending patterns.
Speaker Change: Strongly supports the growth of future purchase volumes and new bank.
Speaker Change: Talking about purchase volumes trend for the industry. We believe new ended the first quarter of 2024 with a market share of around 15%, including credit debit and prepaid cards.
Speaker Change: As we continue to attract millions of new customers every quarter and they are spending matures over time, our confidence in our ability to capture additional market shares in the future only growth.
Guilherme Marques do Lago: This quarter, our consumer finance portfolio, comprising credit cards and personal loans, posted another acceleration, growing 52% year-over-year and reaching $19.6 billion. This growth was boosted by expansions in both product categories. The credit card portfolio expanded sequentially, growing by 42% year-over-year to $15.1 billion.
Speaker Change: This quarter, our consumer finance portfolio comprise in credit cards, and personal loans posted another acceleration growing 52% year over year, and reaching $19 6 billion.
Speaker Change: This growth was boosted by expansions in both product categories.
Speaker Change: The credit card portfolio expanded sequentially growing by 42% year over year to $15 $1 billion. This growth was driven by the combined effect of Onboarding, new customers and increasing the share of wallet of existing customers across all segments.
Guilherme Marques do Lago: This growth was driven by the combined effect of onboarding new customers and increasing the share of wallet of existing customers across all sectors. For yet another quarter, our personal loan portfolio was a highlight, increasing 88% year over year and reaching $4.5 billion. Following the consistent trends observed in previous quarters, our personal loan cohorts have continued to exhibit expected credit behaviors, which has enabled us to continue to scale origination. Now, let's move to the breakdown of interest-earning loans within our credit card portfolio. Interest-earning installment balances now account for 26% of our total credit card portfolio, up from 23% last quarter.
Speaker Change: <unk>.
Speaker Change: For yet another quarter, our personal loan portfolio was a highlight increasing 88% year over year, and reaching $4 5 billion.
Speaker Change: Following the consistent trends observed in previous quarters, our personal loan cohorts have continued to execute expected credit behaviors, which has enabled us to continue to skew originations.
Speaker Change: Now, let's move to the breakdown of interest, earning loans within our credit card portfolio.
Speaker Change: Interest, earning stallman balances now accounts for 26% of our total credit card portfolio up from 23% linked quarter.
Guilherme Marques do Lago: The sequential growth was mainly underpinned by the successful expansion of our peaks in boleto financing products. As we previously mentioned, we believe that this type of financing offers an attractive risk-adjusted rate of return, allowing us to further expand the monetization of our credit card business, while also unlocking substantial value as we fulfill an important customer need. This strategy is reinforced by the fact that our share of revolving receivables has not increased, representing 6% of our total receivables again this quarter. Delving Into Our Personal Loan Business Our portfolio, composed of both unsecured and secured loans, remains aligned with our expectations for asset quality.
Speaker Change: This sequential growth was mainly underpinned by the successful expansion of our peaks and will lead to financing products.
Speaker Change: As we previously mentioned, we believe that this type of financing offers an attractive risk adjusted rate of return, allowing us to further expand the monetization of our credit card business. While also unlocking substantial value as we flew few one important customer needs.
Speaker Change: Theres a strategy is reinforced by the fact that our share of revolving receivables has not increase representing 6% of our total receivables again this quarter.
Speaker Change: Delving into our personal loan business, our portfolio composed of both unsecured and secured loans remains in line with our expectations for asset quality.
Guilherme Marques do Lago: Originations reached R$12.3 billion in the quarter, with Secure Personal Loans growing according to plan and Originations reaching R$1.7 billion, almost doubling versus the prior quarter. This represents 14% of the total originated versus 10% in the previous quarter. As discussed in the previous earnings call, we are very pleased to note significant progress in broadening our lending portfolio. We have introduced payroll loans for federal public servants and retirees, FGTS anticipation, and investment-backed loans.
Speaker Change: Originations reached $12 3 billion reais in the quarter with secured personal loans growing according to plan and originations, reaching one 7 billion reais almost doubling versus the prior quarter.
Speaker Change: This represents 14% of the total originated versus 10% in the previous quarter.
Speaker Change: As discussed in the previous earnings call. We are very pleased to note significant progress in broadening our lending portfolio.
Speaker Change: We have introduce payroll loans for federal public servants in our retirees F GTS anticipation and investment back end loans.
Guilherme Marques do Lago: Although still ramping up, this portfolio should contribute to the development of an even more resilient credit book in the years to come. Following the same trend as last quarter, our credit yield was affected by the loan. As secure personal loans have lower interest rates, an increase in originations of these loans directly impacts the average interest rates of our personal loan portfolio. This decrease in credit yield was only partially offset by a slight increase in unsecured lending yield as a result of our continued risk expansion.
Speaker Change: Though still ramping up this portfolio should contributes to the developing often even more resilient credit book in the years to come.
Speaker Change: Following the same trend as last quarter, our credit yield was affected by the loan mix.
Speaker Change: F secure personal loans have lower interest rates and increasing originations of these launched directly impact the average interest rates of our personal loan portfolio.
Speaker Change: This decrease in credit yield was only partially offset by a slight increase in the unsecured lending yield as a result of our continued risk expansions.
Guilherme Marques do Lago: Now, let's review the progress achieved on the funding for. It's important to remember that fourth quarters are seasonally strong in deposits inflows, while first quarters are seasonally weak, representing a historical drop of approximately 4.6%. While we noted an expected decrease in deposits in Brazil, the total for the quarter of our deposit space increased and reached $24.3 billion, representing a 53% year-over-year growth, mainly driven by Mexico, where we are experiencing significant growth in Quantanut.
Speaker Change: Now, let's review the progress achieved on the funding front. It is important to remember that fourth quarters are seasonally strong in deposits inflows, while first quarters are seasonally weak representing a historical drop of approximately four 6%.
Speaker Change: While we noted an expected decrease in deposits in Brazil.
Speaker Change: Total for the quarter of our deposit base increased and reached $24 3 billion.
Speaker Change: Representing a 53% year over year growth, mainly driven by Mexico, where we are experiencing significant growth in <unk>.
Guilherme Marques do Lago: By the end of the first quarter of 2024, we achieved over $2 billion in deposits in Mexico, more than doubling when compared to the previous quarter. Similar to Brazil, this growth represents a very significant milestone towards our goal of developing one of the strongest local currency retail deposit franchises in the region, bolstering our ability to support our consumer finance operations across all of the geographies where we operate. Our cost of deposits, defined as the ratio between the interest income paid to customers and the interbank rate of the respective markets, namely TI for Mexico and CDI for Brazil, was 84% of the interbank rate, very much in line with our expectations.
Speaker Change: By the end of the first quarter of 2024, we achieved over $2 billion in deposits in Mexico more than doubling when compared to last quarter.
Speaker Change: Similar to Brazil. This growth represents a very significant milestone towards our goal of developing one of the strongest local currency retail deposit franchise in the region bolstering our ability to support our consumer finance operations across all of the Geos, where we operate.
Speaker Change: Our cost of deposits defined as the ratio between the interest income paid to customers in the interbank rate off the respective markets, namely tier for Mexico, and CDI for Brazil was 84% of the interbank rate very much in line with our expectations.
Guilherme Marques do Lago: The increase in the cost of deposits this quarter is directly linked to the growth of our franchise in Mexico. We believe 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 40% versus 34% in the previous quarters, with deposit growth accelerating sequentially. We are very confident that there is still a lot of room for additional balance sheet optimization. Net Interest Income, or NII, nearly doubled year-on-year, reaching another record high of $1.6 billion.
Speaker Change: The increase in cost of deposits. This quarter is directly linked to the growth of our franchise in Mexico.
Speaker Change: We believe this consistently low cost of deposits highlights our progress in harnessing the value of our liability franchise.
Speaker Change: Our loan to deposit ratio or LDR is stood at 40% versus 34% in the previous quarters with deposit growth accelerating sequentially. We are very confident that there is a lot of room for additional balance sheet optimization.
Speaker Change: Net interest income or NII, nearly double year on year, reaching another record high of $1 6 billion.
Guilherme Marques do Lago: This was driven by the growth of our credit card and lending portfolios, which collectively have propelled the expansion of our NII and of our net interest margins, or NIM, to new record highs. For the first quarter of 2024, we delivered a net interest margin of 19.5%, representing an increase of 1.2 percentage points compared to the previous quarter and 4.5 percentage points in comparison to one year ago. As we look ahead, and irrespective of the direction of interest rates, we believe that the main lever for future NIMS should be the progression of the company's loan-to-deposit ratio, as our excess deposits are invested in public bonds, the remuneration of which is much lower than that of our credit product. Now, let's turn our attention to the last pillar of our overall strategy, maintaining a low cost to serve.
Speaker Change: This was driven by the growth of our credit card in lending portfolios, which collectively have propel to the expansion of our NII and of our net interest margins or NIM to new record highs.
Speaker Change: For the first quarter of 2024, we believer our net interest margin of 19, 5%, representing an increase of one two percentage points compared to last quarter and a four five percentage points in comparison to one year ago.
Speaker Change: As we look ahead and irrespective of the direction of interest rates, we believe that the main lever for future Nims should be the progression of the company's loan to deposit ratio as our excess deposits are invested in public bonds. The remuneration of which is much lower than those of our credit <unk>.
Speaker Change: <unk>.
Speaker Change: Let's turn our attention to the last pillar of our overall strategy, maintaining a low cost to serve.
Guilherme Marques do Lago: We maintain our conviction that our platform is one of the most cost-effective in catering to customers within our operating markets, with its low cost-to-serve standing as a significant competitive advantage. That is the reason we aim to keep it at or below the $1 level for the foreseeable future. For yet another quarter, we were successful in achieving this goal, with a cost to serve per active customer standing at $0.90. This figure currently remains unchanged on an FX-neutral basis when compared to a year ago, while our RPAC, as mentioned earlier, increased by 30%, demonstrating the strong operating leverage of our business model.
Speaker Change: We maintain our conviction that our platform is one of the most cost effective in catering to customers within our operating markets with its low cost to serve spending is a significant competitive advantage.
Speaker Change: That is the reason we aim at keeping it at or below one butler level for the foreseeable future.
For yet another quarter, we were successful in achieving this goal with our cost to serve per active customer standing at 90.
This figure currently remains unchanged on an FX neutral basis, when compared to a year ago, while our our pack as mentioned earlier increased by 30% demonstrating the strong operating leverage of our business model.
Guilherme Marques do Lago: Our gross profit reached a new quarterly record high of approximately $1.2 billion, a 76% year-over-year increase. As we mentioned during our last earnings calls, we expected annualized gross margins to normalize to levels of 2023 as our investments in Mexico and Colombia are offset by the positive trends expected for Brazil. The sequential drop in gross profit margins in the first quarter was driven by two main factors.
Speaker Change: Our gross profit reached a new quarterly record high and approximately $1 2 billion.
Speaker Change: 76% year over year increase.
Speaker Change: As we mentioned during our last earnings call, we expected annualized gross margins to normalize to levels of 2023, as our investments in Mexico, and Colombia are offset by the positive trends expected for Brazil.
Guilherme Marques do Lago: Number one, the seasonal drop in card purchase volumes, which impacted interchange revenues when compared to the fourth quarter. And number two, the increase in growth, which drove the credit loss allowance built in the quarter. Yet, our gross profit margins reached 43.2% this quarter, an increase of three percentage points in comparison to one year ago. One of the key elements of our strategy is achieving operating levels. Our efficiency ratio was 32.1% during the first quarter of 2024, an improvement of almost four percentage points in relation to the last quarter of 2023 and almost seven percentage points better than one year ago.
Speaker Change: The sequential drop in gross profit margins in the first quarter was driven by two main factors number one the seasonal drop in card purchase volumes, which impacted interchange revenues when compared to the fourth quarter.
Speaker Change: And number two the increase in growth, which drove credit loss allowance build in the quarter.
Speaker Change: Yet our gross profit margins reached 43, 2% this quarter, an increase of three percentage points in comparison to one year ago.
Speaker Change: One of the key elements of our strategy is achieving operating leverage our efficiency ratio is to the 32, 1% during the first quarter of 2024, an improvement of almost four percentage points in relation to the last quarter of 2023 and <unk>.
Speaker Change: Almost seven percentage points better than one year ago.
Guilherme Marques do Lago: Please recall that during the fourth quarter of 2023, our efficiency ratio was impacted by higher marketing expenses, mainly due to the phasing of this cost into the end of the year, together with higher cloud expenses driven by seasonal increases in data usage in the quarter. As we mentioned at the time, we believed that our efficiency ratio would come to normalize during the following quarters, as demonstrated during this first quarter of 2024. We continue to believe that this position is known as one of the most efficient financial services companies in the world.
Speaker Change: Please recall that during the fourth quarter of 2023, our efficiency ratio was impacted by higher marketing expenses, mainly due to the phasing of this cost into the end of the year together with higher cloud expenses driven by seasonal increases in data usage in the quarter as.
Speaker Change: As we mention at that time, we believe that our efficiency ratio would come to normalize during the following quarters and has demonstrated during this first quarter of 2024, we continue to believe that this position new S. One of the most efficient financial services companies in the world.
Guilherme Marques do Lago: We expect to benefit from the full potential of our platform's operating leverage as we continue to grow our customer base, upsell and cross-sell products, launch new features, and eventually achieve profitability in the new geographies of Mexico and Colombia, which are still in their investment phase. Let's now review the sustainable advantages across our four cost pillars. Number one, our cost to acquire was stable at $7, an amount we continue to believe to be one of the lowest among consumer fintechs and banks globally.
Speaker Change: We expect to benefit from the full potential for our platforms operating leverage as we continue to grow our customer base upsell and cross sell products launch new features and eventually achieve profitability in the new juice of Mexico, and Colombia, which are skewing their investment phases.
Speaker Change: Let's now review the sustainable advantages across our four cost pillars.
Number one our cost to acquire was stable at $7 an amount we continue to believe to be one of the lowest among consumer fintech and banks globally.
Guilherme Marques do Lago: Number two, our cost to serve remained as expected at a low level below $1, which we estimate to be approximately 85% lower than those of income. Once again, we believe this level of cost to serve makes NU one of the most efficient financial services companies in the world. Number three, on cost of risk, again, we have effectively managed credit risk, outperforming competitors on an apples-to-apples basis in terms of delinquency rate.
Speaker Change: Number two our cost to serve remained as expected at a low level below one dollar, which we estimate to be approximately 85% lower than those of incumbent banks.
Speaker Change: Once again, we believe this level of cost to serve makes new one of the most efficient financial services companies in the world.
Speaker Change: Number three on cost of risk again, we have effectively managed credit risk outperforming competitors on an apples to apples basis in terms of delinquency rates.
Guilherme Marques do Lago: And finally, number four, on the cost of funding, while significantly increasing deposit volumes, we were able to maintain our cost of funding at a competitive level of 84% of the blended interbank rates of Brazil and Mexico, thus closing the negative gap against incumbent banks and widening the positive gap over consumer fintech. And finally, moving to net income, we delivered another quarter of profitability with a net income of $379 million, increasing by 160% compared to the previous year.
Speaker Change: And finally number four on the cost of funding while significantly increasing deposit volumes, we were able to maintain our cost of funding at a competitive level of 84% of the blended interbank rates of Brazil, and Mexico, Thus closing the negative gap against incumbent banks and widening dip.
Speaker Change: Positive gap over consumer index.
Speaker Change: And finally moving to net income we delivered another quarter of profitability with net income of $379 million, increasing by 160% compared to the previous year.
Guilherme Marques do Lago: These strong and positive results serve as evidence of the effectiveness of our strategy and business model. Additionally, adjusted net income reached $443 million in the quarter, a 136% increase when compared to one year ago.
Speaker Change: There is a strong and positive results serve as an evidence of the effectiveness of our strategy and business model. Additionally, adjusted net income reached $443 million in the quarter and 136% increase when compared to one year ago.
Guilherme Marques do Lago: While we are encouraged by the first quarter results, it's again important to emphasize our commitment to managing our business for long-term value creation. This may require undertaking mature short-term investments aimed at optimizing our long-term opportunities. Now I'd like to hand the call over to Youssef, our President and Chief Operating Officer, who will walk you through the key highlights of our asset quality. Thank you, Lago. Good evening, everyone.
Speaker Change: While we are encouraged by the first quarter results. It's again important to emphasize our commitment to managing our business for long term value creation.
Speaker Change: This may require undertaken mateer of short term investments aimed at optimizing our long term opportunities.
Speaker Change: Now I would like to hand, the call over to use of our president and Chief operating Officer, who will walk you through the key highlights of our asset quality.
Speaker Change: Thank you Michael good evening everyone.
Youssef Lahrech: I will now take you through some of the highlights of asset quality and credit portfolio health for the first quarter of 2020. Let us start with NPL Trends. First, let me remind you that seasonally, the first quarter represents a high point for early stage delinquency. Specifically, 15 to 90 NPLs rise on average by 80 basis points between Q4 and Q1, based on historical data, in line with the rest of the market.
Speaker Change: I will now take you through some of the highlights of asset quality and credit portfolio of health for the first quarter of 2024.
Michael: Let us start with NPL trends.
Michael: First let me remind you that seasonally the first quarter represents a high point for early stage delinquencies, specifically 15 to 90 Npls rise on average by 80 basis points between Q4 and Q1 based on historical data in line with the rest of the market.
Youssef Lahrech: That being said, our leading indicator, NPL 15-90, increased to 5% in the first quarter of 2024, broadly in line with expectations. Second, our 90-plus NPL ratio increased slightly to 6.3%, also in line with expectations. This is a result of the normal flow through the delinquency buckets. However, considering that, as we discussed in the past, 90 plus is a stock rather than a flow metric. So over time, you get a stacking dynamic. And since we haven't sold any delinquent loans, our NPL rates require no adjustment.
Speaker Change: That being said, our leading indicator NPL 15 to 90 increased to 5% in the first quarter of 2024 broadly in line with expectations.
Speaker Change: Second our 90, plus NPL ratio increased slightly to six 3% also inline with expectations.
Speaker Change: This is a result of the normal flow through the delinquency buckets, considering that as we discussed in the past 90, plus as a stock rather than flow metric. So over time, you guys stacking dynamic.
And since we haven't sold any delinquent loans, our NPL rates require no adjustment.
Youssef Lahrech: As we've mentioned in previous calls, we continue to see meaningful opportunities to expand our credit portfolio, aiming for attractive returns and robust resilience. Part of that growth has been coming from expansions down the credit spectrum, which will continue to result in intentionally higher delinquency rates and will continue to be more than offset by additional revenues leading to increasing risk-adjusted margins over time. To illustrate the impact of the credit expansion dynamic on our consumer finance portfolio, we're sharing this analysis of NPLs as a ratio of interest earning balances only, as opposed to total balances in the previous slide. As you can appreciate, new NPLs as a ratio of interest earning balances have been trending significantly down on both 15 to 90 and 90 plus.
Speaker Change: As we've mentioned in previous calls we continue to see meaningful opportunities to expand our credit portfolio aiming for attractive returns and robust resilience.
Speaker Change #100: That growth has been coming from expansions down the credit spectrum, which will continue to result in intentionally higher delinquency rates and we will continue to be more than offset by additional revenues leading to increasing risk adjusted margins overtime.
Speaker Change #101: To illustrate the impact of the credit expansion dynamic on our consumer finance portfolio. We're sharing here. This analysis of NPL as a ratio of interest earning balances only as.
Speaker Change #101: As opposed to total balances in the previous slide.
Speaker Change #101: As you can appreciate news npls as a ratio of interest, earning balances have been trending significantly down on both 15% to 90% and 90 plus.
Youssef Lahrech: In other words, as we've expanded our credit portfolio, we have increased interest-earning balances at a faster rate than NPLs, thus enhancing returns and resilience. Our provisions continue to grow primarily driven by the growth in our portfolio, following the same dynamic as in prior quarters. This is again due to the fact that we front-load provisions when we originate loans, in accordance with IFRS 9's expected loss methodology. Our credit loss allowance expenses grew to $831 million this quarter, directly linked to the increased volumes of originations we generated in the quarter.
Speaker Change #102: In other words as we've extended our credit portfolio, we have increased interest, earning balances at a faster rate than npls, thus enhancing returns and resilience.
Speaker Change #102: Our provisions continued to grow primarily driven by the growth in our portfolio. Following the same dynamic as in prior quarters.
Speaker Change #102: This is again due to the fact that we frontload provisions when we originate loans in accordance with <unk> expected loss methodology.
Speaker Change #103: Our credit loss allowance expenses grew to $831 million this quarter directly linked to the increased volumes of origination we generated in the quarter.
Youssef Lahrech: As a reminder, last quarter we incurred a lower credit loss allowance expense. That decline was driven by higher credit card and personal loan recoveries as a result of the Desenhola government-sponsored debt renegotiation program in Brazil combined with other collections initiatives. Risk-adjusted NIM reached 9.5% in the quarter, up 3.2 percentage points from a year ago, although contracting 70 basis points quarter-on-quarter. The risk-adjusted NIM was directly impacted by the increase in provisions linked to the growth of our portfolio, particularly in Brazil, and by the growth of our deposits in Mexico.
Speaker Change #104: As a reminder, last quarter, we incurred a lower credit loss allowance expense that suppression was driven by higher credit card and personal loan recoveries as a result of the <unk> haul on government sponsored debt renegotiation program in Brazil, combined with other collections initiatives.
Speaker Change #105: Risk adjusted NIM reached nine 5% in the quarter up three two percentage points from a year ago, although contracting 70 basis points quarter on quarter.
Speaker Change #105: The risk adjusted NIM was directly impacted by the increase of provision linked to the growth of our portfolio, particularly in Brazil and by the growth of our deposits in Mexico.
Speaker Change #106: Excluding these two effects are risk adjusted NIM would have been virtually unchanged versus the past quarter.
Youssef Lahrech: Excluding these two effects, our risk-adjusted NIM would have been virtually unchanged versus the past quarter. With that, we are now ready to address your questions. Thank you very much. We will now start the Q&A session for investors and analysts. If you wish to ask a question, please press the reaction button and then click on raise your hand. If your question is answered, you can exit the queue by clicking on put your hand down.
Speaker Change #107: With that we're now ready to address your questions. Thank you very much.
Unknown Executive: 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.
Speaker Change #108: We will now start the Q&A session for investors and analysts if you wish to ask a question. Please press the reaction button and then click on raise your hand.
Speaker Change #109: If your question is answered you can exit the queue by clicking on what your hand down.
Speaker Change #110: Please limit yourself to one question and a follow up.
Speaker Change #111: 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.
Jorg Friedemann: I would like to turn the call over to Mr. Jorg Friedemann, Investor Relations Officer. Thank you very much, Operator. And our first question comes from the line of Thiago Labarta at Goldman Sachs. Good evening.
Speaker Change #112: I would like to turn the call over to Mr yard Freedom and Investor Relations Officer.
Speaker Change #113: Thank you very much operator, and our first question comes from the line of <unk> at Goldman Sachs.
Thiago Bovolenta Batista: Thank you for the call and taking my question. My question is on the increase in provisions. I understand part of it, the Central I impact 4Q, so I'm expecting some part of an increase. But if you can maybe delineate a little bit more the sharp increase in the quarter, is it a function of the loan mix? The interest-bearing credit card portfolio increased more, and personal loans increased a lot. And did Mexico have any impact on the provisioning?
Speaker Change #114: Hi, Good evening, Thank you for the call and taking my question.
Speaker Change #115: My question is on the increase in provisions understand.
Speaker Change #116: Part of it yes controller impacted <unk> so effective.
Speaker Change #116: Tim.
Speaker Change #116: Part of an increase if you can maybe delineate a little bit more.
The sharp increase in the quarter is it a function of the loan mix it would be thinking.
Speaker Change #117: Net interest bearing credit card portfolio increased more personal loans increased a lot.
Speaker Change #118: And then Mexico have any impact on the provisioning just to think about how we should think about it going forward as well. Thank you.
Youssef Lahrech: Just to think about how we should think about it going forward as well. Thank you. Hi Tito, this is Youssef.
Youssef Lahrech: Thanks for your question. So in terms of the provision dynamics and the provision bills we saw in the quarter, you're definitely correct to point out that last quarter was a little bit abnormally low because of St. Paul, and we had indicated about 60 to 70 million additional recoveries in the quarter. So you have to think about last quarter with that in mind. This quarter, we were back to what I would describe as more normal levels that reflect the dynamics of the portfolio.
Speaker Change #118: Hi.
Speaker Change #119: <unk> disease.
Speaker Change #120: Thanks for your question. So in terms of the provision that Alex and the provision build we saw in the quarter you're definitely correct.
Speaker Change #122: To point out that last quarter was a little bit abnormally low.
Speaker Change #120: We had indicated.
Speaker Change #121: About $60 million to $70 million.
Additionally, recoveries.
Speaker Change #123: Given the orders that you have to think about.
Over the last quarter.
With that in mind this.
Speaker Change #123: This quarter, we were back to what I would describe.
Speaker Change #123: As Bob has more normal levels that reflect the dynamics of the portfolios that we've experienced a lot of growth in both.
Youssef Lahrech: So we've experienced a lot of growth in both lending, secured and unsecured, as well as credit cards. Some of that growth comes from credit expansions. And we've definitely seen that play out, you know, for expectations, if not actually slightly better than our expectations in terms of the return.
Speaker Change #123: Lending secured and unsecured.
Speaker Change #123: As well as credit card.
Speaker Change #123: Some of that growth.
Speaker Change #124: For sure.
Speaker Change #124: Credit expansions.
Speaker Change #125: We simply seemed to play out.
Speaker Change #126: For expectations, if not actually slightly better than our expectations in terms of the returns and we're very happy with them.
Youssef Lahrech: So we're very happy with the NPP and the returns we're getting from those expansions. With respect to Mexico, in fact, in Mexico, what we've seen in the last couple of quarters is improvements in NPLs, partly because of the underwriting improvements we've made, better models, more data, just more experience in the market, and then, you know, partly because of the better mix of customers we've been getting over the last couple of quarters after repricing the point-by-yield up. So, I think Mexico is probably a positive driver rather than not on that front. Great Thanks, Youssef.
Speaker Change #126: And the returns we're getting from those expansions.
Speaker Change #126: See that reflected in the risk adjusted NIM growing.
Speaker Change #126: Understood.
Speaker Change #126: Year on year.
Speaker Change #127: With respect to Mexico.
Speaker Change #128: In fact in Mexico, what we're seeing in the last couple of quarters is improvements in Npls.
Speaker Change #128: Because of the underwriting improvements we've made in our model more data just more experienced market.
And then.
Speaker Change #128: Partly because of better mix of customers, we thought we.
Speaker Change #128: We've been getting over the last couple of quarters after repricing the quasi yield up so so that's in Mexico has been probably a.
Speaker Change #128: A positive driver rather than months on that front.
Youssef Lahrech: That's helpful. And my follow-up question, I guess, on the risk-adjusted NIM, you mentioned it would have been stable-ish, sort of a quarter of a quarter adjusting for this enrollment. Is that sort of maybe what we should expect for the full year? Or do you think there can be some risk-adjusted NIM expansion throughout the year? I know you don't give guidance, but just how do you think that should evolve? To some extent, it will be helpful. Thank you.
Speaker Change #129: Great. Thank you that's helpful and.
Speaker Change #130: Follow up I guess on the risk adjusted NIM, you mentioned it would have been stable ish sort of quarter over quarter adjusting for this <unk> rollout is that sort of maybe what we should expect for the full year or do you think there can be some risk adjusted NIM expansion throughout the year I know you don't give guidance, but yes.
Speaker Change #130: How do you think that should evolve.
Speaker Change #130: To some extent it will be helpful. Thank you.
Youssef Lahrech: Yeah, sure. So Tito, you're correct, like, the risk-adjusted NIM going forward will reflect kind of the dynamics of the portfolio, the credit portfolio going forward. If we, like we have, over the last couple quarters, continue to see opportunities to expand, you know, that would come with enhanced margins, right. But we, as you pointed out, don't, don't give guidance on that, nor try to forecast that with any degree of precision. Okay, great. Thank you very much.
Speaker Change #130: Yes sure.
Speaker Change #131: You are correct.
Speaker Change #131: The risk adjusted NIM going forward will reflect kind of dynamics of.
<unk> of the portfolio and the credit portfolio going forward.
Speaker Change #132: If we like we have.
Speaker Change #133: Over the last couple of quarters continue to see opportunities to expand that we've come with enhanced margins right.
Speaker Change #134: We as you pointed out.
Speaker Change #134: We will give guidance on that nor try to forecast that with any degree of precision.
Speaker Change #135: Okay, great. Thank you very much.
Thiago Bovolenta Batista: And our next question comes from the line of Thiago Batista from UBS. Thanks, Jorg. Thanks for the opportunity.
Speaker Change #135: And our next question comes from the line of Java Batista from UBS.
Unknown Executive: I have a question about the SMEs business of NU. We saw that NU had already achieved more than 4 million clients in the SMEs business, something close to 2.4 active clients in this segment. When you look at central bank data, NU is charging about 9-10% per month on these short-term world capital loans. This is probably a very small portfolio for Nu right now, but can you share with us Nu's strategy in this segment and how big this could be in the future? Hi, thank you for the question.
Thiago Bovolenta Batista: Thanks York.
Thiago Bovolenta Batista: Thanks for the opportunity.
Thiago Bovolenta Batista: I have a question about the SME piece is of no.
Thiago Bovolenta Batista: We saw that newer that you've had more than 4 million clients in the SME business something closer to four.
Speaker Change #137: Active clients in this segment.
Speaker Change #137: When it looks at Central Bank data noise charging about 910% per month in this short term what kept the loans.
This is probably a very small portfolio for newer right now, but can you share with us.
Speaker Change #138: Our strategy in this segment and how big are these kind of be in the future.
Unknown Executive: So you're right, we actually haven't really talked publicly that much about our growth on the SME side, but it is a significant opportunity ahead of us. And partly this opportunity has come to fruition as we started to cross-sell SME accounts to our large consumer base. So just to give you one data point, out of the 93 million or so Brazilian customers that we have, we think we have in our base something like eight or nine million small businesses.
Speaker Change #139: Hi, Thank you for the question so you're right, we actually Havent really talk politically that much about.
Speaker Change #140: Our growth on the SME side.
Speaker Change #141: But it is a significant opportunity ahead of us and partly at these opportunity has.
Come to fruition as we started to cross selling.
Speaker Change #141: Semi account to our large consumer base. So just to give you one data point out of the $93 million or so Brazilian customers that we have we think we have in our base something like eight or 9 million small businesses and thats, a significant percentage of something like $15 million of total business existing in Brazil, So already in our base.
Unknown Executive: And that's a significant percentage of something like 15 million total businesses existing in Brazil. So already, at our base, we have a path towards pretty significant operations with small businesses. We, by the way, see that they tend to be very badly served also, especially if they are owned by one shareholder or two shareholders. So, as we call it here in Brazil, this is a big opportunity that we've been developing as it has grown consistently. Today, our value proposition is fairly basic. We began with an account for small businesses, then we launched a debit card.
Speaker Change #142: We have a path towards pretty significant operation with more businesses, we by the way that they tend to be very badly served also especially if they are owned by widened shareholder or to a shareholder so I recall hearing Brazil may.
Speaker Change #142: So there is a big opportunity that we've been developing as he has grown.
Speaker Change #143: Consistently today or value proposition is fairly basic we began with.
Speaker Change #144: And account for the small business and we launched a debit card we have already started growing for a few quarters to credit card for it as more business. This is a product that we're very excited about.
Unknown Executive: We have already started growing for a few quarters the credit card for small business. This is a product that we're very excited about because we get to use a lot of the credit and the rating data that we have on the consumer side for the small business side. There actually is a lot of synergies in using a lot of data for both sides of the consumer and allows us to see a consumer more on a complete basis.
Speaker Change #145: Because we get to use a lot of the credit underwriting data that we have on the consumer side for the small business side that actually is a lot of synergies in using out of the data for both sides of the consumer and allows us to share consumer more but a more complete basis and we also see that when we start banking somebody both on the consumer.
Unknown Executive: And we also see that when we start banking somebody, both on the consumer side as well as for small business, we see a pretty significant increase in RPAC. We see a higher increase in engagement. We see higher activation.
Speaker Change #146: Side as well as the small business, we see a pretty significant increase in <unk>, we see a higher increase in engagement with Shire activation. So you not only adds additional our park is that it brings a lot of synergies to the platform as a whole.
Unknown Executive: So it not only adds additional RPAC but brings a lot of synergies to the platform as a whole. In terms of working capital loans, we are just beginning to test that product. It's tiny in our base.
Speaker Change #147: Our working capital loans, we are just beginning to test that product is tightening our base is something that we are ramping up slowly.
Unknown Executive: It's something that we are ramping up slowly, and we're testing a number of different secured and unsecured products for small businesses, but we haven't really rolled out anything big yet.
Speaker Change #148: And we're testing a number of different secured and unsecured product for a small business, but we haven't really rollout anything big yet.
Unknown Executive: The only thing, Thiago, that I would add to that is that, similarly to the profit pool that we see in consumers, the profit pool that we estimate to exist in SMEs is still 65 to 70 percent driven by credit. And within credit, we started with the credit card for SMEs. The credit card business is performing extremely well.
Speaker Change #149: The only thing <unk> that I would add to that is that similarly to the profit pool that we've seen consumers. The profit pool that we estimate to exist in SME is a SKU, 65% to 70% driven by credit and within credit we started with credit card for Smes.
Unknown Executive: We are very encouraged by the early results, and we are now gradually expanding into working capital. What we expect, however, in SME, is that, differently from, for example, in the public payroll market, it is not necessarily a market in which our growth will hinge on someone else's losing market share. We think there's a tremendous opportunity to increase the size of the pie within credit penetration in the Brazilian SME space. It still has very low penetration, and we think we can expand the market quite strongly. Very clear, David. I love it. Our next question comes from the line of Geoffrey Elliott from Autonomous: Hello, can you hear me?
Speaker Change #150: Credit card business is performing.
Speaker Change #151: Extremely well, we're super encouraged by the early results and then we are gradually expanding into working capital.
Speaker Change #152: What we expect however in Smes that differently from for example from the public payroll market. It is not necessarily a market in which our growth will hinge on someone else's, losing market share. We think there is a tremendous opportunity to increase the size of the pie within the credit penetration into Brazilian SME space.
Speaker Change #153: This is.
Speaker Change #153: It still has very low penetration and we think we can expand the market are quite strongly.
Speaker Change #153: Okay.
Speaker Change #154: Very clear Debbie and luxury.
Speaker Change #154: Our next question comes from the lineup Geoffrey Elliott from autonomous.
Speaker Change #154: Hello.
Geoffrey Elliott: Yeah, hello. Sorry, I think I had to click a couple of times there to unmute. Can you hear me now?
Speaker Change #155: Yes, Hello, sorry.
Speaker Change #156: I think I have to click a couple of times that you're on mute can you hear me now.
Unknown Executive: Yeah, you can hear now. Great, thanks very much for taking the question. Share-based compensation was quite a bit higher this quarter than it has been. Can you just remind us of the dynamics there? Is the share price a driver? Is it about grants? What's going on?
Speaker Change #156: Yes.
Speaker Change #157: Great. Thanks, very much for taking the question.
Speaker Change #158: Share based compensation.
Speaker Change #159: There's quite a bit higher this quarter.
It has been can you just remind us of the.
Speaker Change #159: The dynamics.
Speaker Change #160: The share price.
Speaker Change #160: Drive.
Speaker Change #161: Is it about swaps.
Speaker Change #162: What's going on.
Lago: Who drives that, and how should we think about a normalized level? Hi Geoff, this is Lago. Thanks for the question. Yes, we had an increase in share-based compensation. And I think it is largely the result of three compounding effects. I think number one is that there's general headcount growth in the company. Number two, the result of no more aggressive performance recognition that we did in the first quarter of 2024 compared to the first quarter of 2023. And number three, the share appreciation, which negatively impacts our social tax contributions, primarily in Brazil, which can account for up to 36% of the grant.
Speaker Change #163: <unk>, how should we think about a normalized level.
logwood: Hi, Josh this is logwood. Thanks. Thanks for the question, Yes, we had an increase in share based compensation and I think it is largely.
Josh: The result of three compounding effects I think number one is there is a general head count growth and the company.
Josh: Number two is the result of no more aggressive performance recognition that we did in the first quarter of 2024 compared to the first quarter of 2023.
Josh: And number three the share appreciation, which negatively impacts our social tax contributions primarily in Brazil, which can account for up to 36% of the grant. So as you will see in our explanatory notes I'll further financial statements.
Josh: You'll note the decrease in share based compensation, but also the corresponding increase.
<unk> taxes, and social contribution taxes, which are accounted together with share based compensation compensation.
Lago: So, as you will see in the explanatory notes to our financial statements, you will note the increase in share-based compensation but also the corresponding increase in share taxes and social contribution taxes, which are accounted for together with share-based compensation. Now, one of the things, Geoff, that we take very seriously is the net and gross dilution that we apply to our shareholders. And if you take a look at our gross and net burn rates, we have been operating below 100 basis points.
Josh: Now one of the things John that we take very seriously is the net and gross dilution that we apply to our shareholders.
Speaker Change #166: If you take a look at our gross and net burn rates, we have been operating below a 100 basis points in fact over the past two years, we have been operating below 60 basis points.
Lago: In fact, over the past two years, we have been operating below 60 basis points, and we believe number one that we are in the bottom quartile of the industry in terms of companies that apply the lowest levels of dilution to our shareholders.
Speaker Change #167: And we believe the number one that we are in the bottom quartile of the industry in terms of companies that applied the lowest levels of dilution to our shareholders.
Lago: And number two, as we increase in size and value, we do expect operating leverage to continue to play its part here. So we expect that this number will actually go down over time. Thank you.
Speaker Change #167: And number two as we increase in size and value. We do expect operating leverage to continue to play. It's Bart here. So we expect that this number will actually go down over time.
Geoffrey Elliott: And in terms of what to think about as a normalized figure there, I guess we would want to take out the share price appreciation; it's probably not going to be up 40% every quarter. So what can you point us to to get to a more normal figure? So we don't provide guidance on that. But if you take a look at Exploratory Note number 10 of our financial statements, you will see how much of that increase came from share price appreciation, more or less. So you can exclude that number from the total share base compensation.
Thank you.
Speaker Change #168: All one thing.
Speaker Change #168: About as a normalized.
Speaker Change #169: I guess, we would want to take out the share price appreciation thats, probably not going to be up.
Speaker Change #169: 40% every quarter so.
Speaker Change #170: What can you point us to to.
Speaker Change #170: Get through a more normal cycle.
Speaker Change #170: So.
Speaker Change #171: We don't provide guidance on that but if you take a look at exploratory no number 10 of our financial statements you will notes.
Speaker Change #172: And you will see how much off net increase came from share price appreciation they are more or less.
Speaker Change #173: So you can exclude the number from the total share based compensation, we do however pay much closer attention drawn to our net and gross burn rates and we think on that note. One should easily expect that this will be meaningfully below a 100 basis points per year.
Lago: We do, however, pay much closer attention, Geoff, to our net and gross burn rates. And we think, on that note, one should easily expect that this will be meaningfully below 100 basis points per year. Great, thanks very much.
Speaker Change #174: Great. Thanks very much thank.
Speaker Change #175: Thank you.
Gustavo Schroden: Thank you. And our next question comes from the line of Gustavo Schroden from Bradesco IVF. Hi, good evening, everybody.
Speaker Change #176: And our next question comes from the line of established for all then from Bradesco.
Gustavo Schroden: And thanks for taking my question. I'd like to explore the NIM a little bit. Indeed, that was a very impressive NIM in the quarter. But I'd like to understand the trends and the moving parts here. Because on the one hand, we have an increase in the cost of funding from 80% to 84%. On the other hand, if we analyze specifically personal loans, average interest rates declined from 6.4% to 6.2%.
Speaker Change #177: Hi, good evening, everybody and thanks for taking my question I'd like to explore and it'll be at the NIH.
Speaker Change #177: Indeed, it was a very impressive.
Speaker Change #178: I am in the quarter, but I'd like to understand.
Speaker Change #179: The trends in the more the moving parts here because if one side, we had an increase in the cost of funding from 80% to 84.
Speaker Change #180: And the other hand, when our lives specifically the.
Lago: So I am I am assuming here that the difference here, or the positive is coming from the other products, such as credit cards, installments, revolving, revolving, and also some trading gains or other products. So my question is, could you give us a call on these other products before you are raising interest rates on these other products to offset this, let's say, Thank you. Gustavo, this is Lago.
Speaker Change #181: The personal loans the average interest rates decline from six 4% to six 2% so.
Speaker Change #182: I am a Sony here at that time, the difference here or the positives.
Speaker Change #183: It's coming from the other products such as credit cards, if installments revolving.
Speaker Change #183: Revolving and also some some trading gains or.
Speaker Change #187: Are there products.
Speaker Change #184: My question is could you give us more color on these other projects it for you or.
Speaker Change #185: Raising interest rates seen in those other products to chew offset these let's say.
Speaker Change #186: Uh huh.
Speaker Change #188: Kind of a pressure if we compare the cost of funding versus the personal loss I'm asking just because I can see that the secured loans.
Are gaining share in your portfolio. So any color on that would be great. Thank you.
Lago: Thanks so much for your question. I think you are referring to slide number 17 in our earnings presentation. And yes, we have experienced what we believe to be a relatively strong expansion in net interest margin over the past four quarters. It went from about 15% to 19.5%. And it is largely the result of two opposing forces.
Gustavo: Gustavo This is lago. Thanks. Thanks, so much for your question I think.
Speaker Change #190: You are referring to slide number 17 in our earnings presentation and yes, we have experienced what we believe to be a relatively strong expansion in net interest margin over the past four quarters you'd went from.
Speaker Change #190: 15% to 19, 5%.
Speaker Change #191: And it is largely the result of two opposing forces I think on one aspect on one side you do have the optimization of the balance sheet in Brazil as you see the expansion of our loan to deposit ratio going from 30% to 35% to 40% you should generally expect to see net interest.
Lago: I think on one aspect, on the one side, you do have the optimization of the balance sheet in Brazil. As you see the expansion of our loan to deposit ratio going from 30% to 35% and then to 40%, you should generally expect to see net interest margins going up. And even though you mentioned that secure personal loans have lower yield levels than unsecured and also lower interest levels than credit cards, they do have materially higher yields than the treasury bonds in which we deploy most of our excess cash.
Speaker Change #192: <unk> going up and even though you mentioned that secured personal loans have lower yield levels than unsecured and also lower interest levels than credit cards. They.
Speaker Change #193: They do have materially higher yields than the treasury bonds in which we deploy most of our excess cash so as we shift part of our treasury and treasuries to earn interest earning assets of consumer finance you should expect to see net interest margins expanding in Brazil.
Lago: So as we shift part of our treasury into treasuries to earn interest-earning assets of consumer finance, you should expect to see net interest margins expanding in Brazil. The offsetting force, to which I alluded before, is our operations in Mexico and Colombia, where we are paying, as of today, deposit rates that are slightly higher than the interbank deposit rates in those countries, which brings the net interest margin down on one side. So I think going forward, those two offsetting forces will play out. We do expect to see net interest margin continue to expand on average in the coming quarter. That's very clear, Lago.
Speaker Change #193: The offsetting for us to reach I alluded before is our operations in Mexico, and Colombia in which we are paying as of today deposit rates that are slightly higher than the interbank deposit rates in those countries, which bring the net interest margins down on one side. So I think going forward those two.
Speaker Change #193: Offsetting forces will play out we do expect to see net interest margin to continue to expand on average in the coming quarters.
Lago: Just a follow-up here. What is the, let's say, the level of the loan-to-deposit ratio we should use in our model? In my opinion, according to your answer, that should be a good proxy or a good variable to forecast and try to get the best NIM in the future. So if you could share with us what a good level of a loan-to-deposit ratio is, it would be great as well. Yeah, so a good reference more than a than a guidance is the loan to deposit ratio of the large retail common banks in Latin America is between 100 to 110%. I don't expect that we will get to a loan to deposit ratio anywhere close to those levels, but it will be materially higher than the 40% that we presented in the last quarter. Perfect, thank you.
Speaker Change #194: That's very clear along with just just a follow up here.
Speaker Change #193: Is the.
Speaker Change #193: Let's say the level of our launch deposit ratio we should.
Speaker Change #193: Using our model too.
Speaker Change #195: Opinions are quite detour answered that should be a good proxy.
Speaker Change #196: Good viable tool to forecast and trying to get the best.
Speaker Change #197: In the future. So if you could share with us what is that that good level of our loan to deposit ratio would be great as well.
Speaker Change #198: Yes, so I mean, a good reference more than that.
Speaker Change #199: <unk> says the loan to deposit ratio off the large retail incumbent banks and lots of America.
Speaker Change #200: Is between 100% to 110%.
Speaker Change #201: I don't expect that we will get to a loan to deposit ratio anywhere close to those levels, but it will be materially higher than the 40% that we presented in the last quarter.
Speaker Change #202: Perfect. Thank you.
Jorge Kuri: And our next question comes from the line of Jorge Kuri of Morgan Stanley. Hi, good evening everyone, and congrats on the numbers. Thanks for taking my question. I wanted to see if you could maybe double-click on your loan to customer growth during the quarter. It was really impressive.
Speaker Change #203: And our next question comes from the line of equity of Morgan Stanley.
Jorge Kuri: 21% quarter on quarter on the total balance. You also disclose your originations going from one to 1.7 billion reais. How much of that is attributed to the early success of your payroll loans? How much of that is FGTS?
Speaker Change #204: Hi, good evening, everyone and congrats on the numbers thanks for it.
Speaker Change #205: Thank you my question.
I wanted to see.
Speaker Change #206: You could maybe double click on your.
Speaker Change #207: Loan to customer growth during the quarter it was really impressive.
Speaker Change #208: 21% quarter over quarter on the photo violence.
Speaker Change #209: You also disclosed originations going from one to a $1 7 billion reais.
Speaker Change #210: How much of that is attributed to the early success of.
Speaker Change #210: Your payroll loans, how much of that is yes.
Lago: Continue to develop the personal loans business. Anything that you can help us understand, you know, what the look and feel of this very big uptick in personal loans would be, in loan-to-customer, sorry, would be very helpful. And again, you know, I think the market's very excited about the process for payroll loans. So to what extent is that, you know, is included here? And what can you tell us about this whole growth? Thank you. Jorge, thanks for the question. This is Lago.
Speaker Change #211: Continue to develop the personal loans business anything that you can help us understand.
Speaker Change #212: What is the look and feel of these very big uptick in personal loans would be in local customer sorry would be very helpful and again I think.
Speaker Change #213: The market's Barry.
Speaker Change #214: Excited about the prospects for payroll loans, so to what extent that is included here and what can you tell us about this whole growth. Thank you.
Lago: I think we're very pleased with the evolution of the total portfolio growth that we have presented. I would point you to slide 36 of our earnings presentation, where we provide more details on the breakdown between personal loans and credit card growth. And one of the things that you will note is that, irrespective of the seasonality, we have been posting fairly robust growth in our credit card book. In fact, by the end of the first quarter of 2024, we estimate that our market share in cards in general will reach about 15%, 1.5%, which would place Nubank as the second credit card issuer in the country. And we continue to acquire market share quarter after quarter. Now, notwithstanding the robust growth in credit cards, personal loans are actually outpacing credit cards. And that has happened over the past five quarters in a row.
Lago: Jorge Thanks for the question. This is Lago I think.
Speaker Change #216: We are very pleased with the evolution of the of the total portfolio growth that we have presented.
Speaker Change #217: I would point you to slide 36 of our earnings presentation in which we provide more details on the breakdown between personal loans and credit card growth.
Speaker Change #218: And one of the things that you will know is that irrespective of the seasonality we have been posting fairly robust growth in our credit card book.
Speaker Change #219: In fact by the end of the first quarter of 2024, we estimate that our market share in cards in general has reached about 15%, one five which would place new bank is the second credit card issuer in the country.
And we continue to acquire market share quarter after quarter now notwithstanding the robust growth in credit cards personal loans is actually outpacing credit cards.
Lago: And you will note that in the first quarter of 2024, personal loans grew by 25% on an FX neutral basis, while credit cards grew by 8%. Now, to your question on personal loans, I would then refer you to, let me take a look here at slide 15, in which you can see the evolution of the originations of personal loans.
Speaker Change #220: And that has happened over the past five quarters in a role and you will note that in the.
Speaker Change #221: First quarter 2020 for personal loans grew by 25% on an FX neutral basis credit card grew by 8% now to your question within personal loans I would hand refer you to.
Speaker Change #222: Take a look here to slide.
Speaker Change #223: 15 in Youtube can see the evolution of the originations of personal loans, you will see that over the past four quarters. It increased from 6 billion reais per quarter to more than 12 billion reais. So we almost doubled the originations.
Lago: You will see that over the past four quarters, it increased from R$6 billion per quarter to more than R$12 billion, so we almost doubled the origination. You will also see that the primary driver of this absolute growth is still unsecured personal loans, the eligibility of which continues to expand across our customer base. If you take a look at the total unsecured personal loan pie in Brazil, which accounts for the second or third largest profit pool in the country, our customers alone, as of the end of the fourth quarter, accounted for about 43% of the entire loan book in Brazil. And we still have no less than 8% market share there.
Speaker Change #224: Youll see the still the primary driver of this absolute growth is with unsecured personal loans diligence <unk> of which continues to expand across our customer base. If you take a look at the total personal loan unsecured personal loan pie in Brazil, which accounts for the second or third largest profit pools in the <unk>.
Speaker Change #225: Three our customers alone as of the end of the fourth quarter accounted for about 43% of the entire loan book in Brazil, and we still have no less than 8% market share in there. So we have plenty of room to grow.
Lago: So we have plenty of room to grow. Now, at the beginning of the second half of 2023, we expanded in secure personal loans, which encapsulates consignado or public payroll loans, FGTS, and investment of equity loans. Public payroll loans and FGTS account for about 90% of our total originations, with investment-backed loans accounting for 10%.
Speaker Change #226: Now at the beginning of the second half of 2023, we expanded in secure personal loans.
Speaker Change #226: Which encapsulates considering outdoor public payroll loans F GTS in investment banking loans.
Speaker Change #226: Public payroll loans and <unk> account for about 90% of our total originations with investment banking loans accounting for 10%.
Lago: We expect that the originations of secure personal loans will continue to outpace the originations of unsecured personal loans as we increase the collateral agreements that we have as of today. So today we offer public payroll loans, Jorge, primarily to INSS and SIAPI, which are now federal public servants and pensioners and retirees, which account broadly for 50% of the target market of secure personal loans in Brazil. We will be increasing our scope to include armed forces in many states and municipalities, and we hope to reach about 75% of the target market by the end of 2024.
Speaker Change #226: We expect that the originations of secured personal loans will continue to outpace the originations of unsecured personal loans.
Speaker Change #226: As we increase the collateral agreements that we have as of today. So today, we offer public payroll loans Jorge.
Jorge Kuri: Primarily to ISS, and CRP, which are no federal public servants, and pension years, Intermit diaries, which account broadly for 50% of the target market of secured personal loan in Brazil.
We will be increasing our scope to add armed forces in many states and municipalities and we hope to reach about 75% of the target market by the end of 2024.
Lago: And just to finalize that, Jorge, I think one, perhaps easy way to understand the significant opportunity we continue to have ahead is that we have more or less 60% of the Brazilian adult population as a customer. That 60% owns something like 40 to 50% of the entire credit pool in the country. And if you just look on an average basis across the lines, we probably have something like a 10% market share.
Speaker Change #228: And just to just to finalize that or I think one one perhaps.
Speaker Change #228: <unk> to understand where this significant opportunity. We continue to have ahead as we have more or less 60% of the Brazilian population is a customer.
Speaker Change #229: That 60% owned something like 40% to 50% of the entire credit portal in the country.
Speaker Change #230: And if you just look on an average basis across the lines would probably have something like.
Speaker Change #231: 10% market share so.
Speaker Change #232: We could double triple quadruple the size of our existing credit portfolio and the bottleneck to growth is on the unsecured side or own willingness to to grow our own willingness to take risk and thats in certain areas. We go very slowly and we test our way into exploration.
Lago: So we could double, triple, quadruple the size of our existing credit portfolio. And the bottleneck to growth is on the unsecure side, our own willingness to grow our own willingness to take risks. And that's in certain areas; we go very slowly, and we test our way into acceleration.
Lago: And on the security side, our bottleneck is signing up a bunch of contracts with a number of different entities. We have already signed all those contracts. Whenever we go to the entities and we say we are going to be offering products for your associates that are 30 to 40% lower in interest than everybody else, that is a very good value proposition for them. And so we haven't seen a lot of real resistance to signing up the contracts with us. There is some interconnection between systems.
Speaker Change #232: And on the secure side or bottleneck, signing up a bunch of contracts with a number of different entities. We have been signing up all those contracts whenever we go to the entities and we say we are going to be offering products for your associates that are 30% to 40% lower interest and everybody else that is a very good value.
Speaker Change #233: Proposition for them and so we haven't seen a lot of.
Speaker Change #234: Real resistance in signing up the contract with US there is some.
Speaker Change #235: Interconnection of systems, we have to integrate.
Lago: We have to integrate with a number of older systems. So that takes some time. And that's going to be taking some time over the next year. But so far, we feel very good about our ability to grow in the pool of addressable secure portfolios in the country. Thank you, David and Lago.
Speaker Change #235: With a number of all of our systems. So that takes some time and is about to be taken some time over to next year, but so far we feel very good about our ability to grow in the pool of addressable secured secured portfolio in the country.
Jorge Kuri: If I may ask a follow-up question, I'm looking at your slide 19, where you have the last five quarters of gross profit margin. Given the particularities of what's happening with your asset mix and the deposit mix with Mexico, would it still be fair to assume a seasonal behavior like we see here in 2023, where sequentially every quarter was up in terms of gross profit margin in 2023? Would that be applicable for this year, or are the dynamics going to be different because of these two items that I mentioned? Jorge, I think it will largely depend on the velocity with which we grow deposits in both Mexico and Colombia, by and large.
Speaker Change #236: Okay. Thank you if I may.
Speaker Change #237: Follow up Im looking at your slide 19, where you will have.
Speaker Change #238: Last five quarters or so.
Speaker Change #239: Gross profit margin.
Speaker Change #240: Given the particularity of what's happening with your asset mix in the deposit mix.
Speaker Change #241: With Mexico.
Speaker Change #242: Would it still be fair to assume.
Speaker Change #243: Seasonal behavior like we see here in 2020 city were sequentially every quarter.
Speaker Change #244: What's up in terms of gross profit margin in 2023 would that be applicable for the year or the dynamics are going to be different because of these four items that I mentioned.
Speaker Change #245: What do you think it will largely depend on the velocity with which we grow deposits in both Mexico, and Colombia by and large if it was only for Brazil, one would expect the gross profit margins would continue to expand sequentially throughout the quarters.
Lago: If it was only for Brazil, one would expect that gross profit margins would continue to expand sequentially throughout the quarters, especially because the first quarter is usually a low seasonal quarter for us. But the expansion of gross profit margins in Brazil is partially or fully offset by headwinds coming from Mexico and Colombia. So those two things will be playing out.
Speaker Change #245: Because the first quarter is usually.
Speaker Change #245: A low seasonal quarter for us but.
Speaker Change #246: The expansion of gross profit margins in Brazil is partially or fully offset by the.
Speaker Change #246: The headwinds coming from Mexico, and Colombia, So those two things will be playing out.
Speaker Change #247: It depends on the speed with which they play that we will see this resulted in our gross profit margin I still believe that throughout 2024, one would expect to see gross profit margins for the full year very much in line with the gross profit margin that we had for the third quarter of 2023, so around 40.
Lago: It depends on the speed with which they play that we will see this reflected in our gross profit margin. I still believe that throughout 2024, one would expect to see gross profit margins for the full year very much in line with the gross profit margin that we had for the third quarter of 2023, so around 42-43%. Great, thank you very much Lago. Thanks and congrats again.
Speaker Change #247: 243%.
Speaker Change #248: Great. Thank you very much level, thanks nickel price again thanks.
Jorge: Thanks Jorge.
Jorge Kuri: Thanks Jorge. And our next question comes from the line of Eduardo Rosman from BTG Pactual. Hi everyone.
Jorge: And our next question comes from the line of Eduardo Rosman from BTG Pactual.
Eduardo Rosman: I have a question here. I want to delve deeper into your strategy of deposits in Mexico. You're having massive success, but that's naturally coming at a cost, right? So when we look to incumbents, we see that they pay very little as a percentage of the reference rate.
Eduardo Rosman: Hi, everyone I have a question here I wanted to delve deeper into your strategy of deposits in Mexico Youre <unk>.
Eduardo Rosman: Having massive success, but that's naturally coming out of cost right. So when we look to <unk> comments, we see that they pay very little.
Speaker Change #251: As a percentage of the reference rate. So what's the go there in terms of remuneration short and medium term goal is to reduce the remuneration or eventually pressure competition to move to move higher and also if you can also give an update as well on your recent partnership you know far far cashing the cash out to know and.
David: So what's the goal there in terms of remuneration, you know, the short and medium term goal is to reduce the remuneration or eventually pressure competition to move higher. And also, if you can also give an update as well on your recent partnership, you know, for cash in and cash out, you know, and the challenge naturally to grow deposits in the low income there. Thanks. Hi Eduardo here, David.
Speaker Change #252: The challenge naturally to grow deposits in the low income there. Thanks.
David: So listen, Mexico is a really attractive market for a number of different reasons. One of the interesting reasons that have become much more visible to us recently is that, differently from Brazil, deposits, as a product, are the largest source of profit for the incumbent back. So when you look at the average yield that banks are paying consumers, it's something like 3-4% a year when you have an interest rate, a sovereign interest rate, of 12-13% plus.
Eduardo Rosman: Hi, Eduardo here.
So, let's say Mexico is a really attractive market for a number of different reasons. One of the interesting reasons that has become much more visible to us recently is that differently from Brazil that deposits as a product is.
Eduardo Rosman: The largest source of profit for incumbent backs.
Eduardo Rosman: So when you look at the average yield that Baxter bank consumers, it's something like 3% to 4% a year. When you have an interest rate of sovereign interest rate in the 12, 13% plus.
David: So this is a bit of a normality in a regular banking market because banks are effectively making significant profits without really taking any risk. When you look at Brazil, you see a market where that is driven very much by taking credit risks, which generally is what you would expect in competitive markets. That's not the case in Mexico.
Speaker Change #253: So this is a bit of that.
Speaker Change #254: Normality in a regular banking market because banks are effectively making significant profits without really taking any risk. When you look at Brazil, you will see a market where.
Speaker Change #254: That is driven very much by taking credit risk, which generally is what you would expect in competitive markets. That's not the case in Mexico.
David: And when you look at the level of interest rates in products, they are still very high. So in a product, when we look at our unit economics, even offering a very high yield, we're still making positive unit economics given the structure of the market. Now, given the fact that these profits exist in the system, we think there's a really interesting disruption opportunity for the entire Mexican system. Because if most of your profits are coming from deposits, frankly, the barrier to entry is not that high. Yes, probably in the past, you needed branches. Now you don't.
Speaker Change #254: When you look at the level of interest rates and products. They are still very high.
Speaker Change #255: So in a product when we'd make or unit, we look at our unit economics, even at offering a very high yield we're still making positive unit economics, given the structure of the market now.
Speaker Change #256: Now given the fact of how this profit success in the system. We think there's a really interesting disruption opportunity for an entire Mexican system, because if most of your profits are coming from deposits frankly that barrier to entry is not that high.
David: And yes, the brand is important because consumers won't leave their life savings in a brand that they don't trust. But the reality is, if you have a good brand and you have a very good product, you will take those deposits away. And I think the past six to nine months and the pace of growth that we're showing with this yield is showing very significant growth above our expectations and much higher than our fintechs, which are paying even higher yields than we are.
Speaker Change #256: Yes.
Speaker Change #257: In the past you need our branches now you don't and yes brand is important because consumers won't leave their their life savings in a brand that they don't trust, but the reality is if you have a good brand and you have a very good product you will take those deposits away and I think the past six to nine months and the pace of growth that we're showing with.
Speaker Change #258: This yield is showing very significant growth above our expectations and much higher than our fintech that are paying even higher yields than we are so we're not only necessarily just competing by higher yields you are already being able to see that we've built a very solid and trusted brand in Mexico and and this is Ben.
David: So we're not necessarily just competing by higher yields; you're already able to see that we've built a very solid and trusted brand in Mexico. And this has been a big source of deposits. Now, all being said, I think in the long term, we will also rationalize the cost that we are expecting. We tend to make this decision based on the value proposition. Our goal is to have the very best deposit value proposition in the country, and that is a function of yield and features.
Speaker Change #259: A big source of deposits.
Speaker Change #260: Now they all being said I think in the long term, we will also rationalize.
Speaker Change #260: The cost that we are expecting.
Speaker Change #261: We tend to make the physician based on value proposition of our goal is to have the very best deposit value proposition in the country.
Speaker Change #262: That is a function of yield and features initially or features we're not that big which meant we had to rely a lot on yield and Thats what were doing right now.
David: Initially, our features were not that big, which meant we had to rely a lot on yield, and that's what we're doing right now. But very soon, our features will be growing, and by the end of the year, we will be a very different product. And you mentioned cash in, cash out. That was a significant bottleneck that we had a few months ago. We are solving that as we speak.
Speaker Change #263: But very soon our features have been growing and by the end of the year will be a very different product.
Speaker Change #264: And you mentioned cash in cash out that was a significant bottleneck that we have.
David: So as we increase the level of features, as we increase the value proposition, as we strengthen the brand, we expect to be able to decrease yield while maintaining the best value proposition. We think that incumbent banks are going to have to increase the yield that they're offering consumers if they want to keep a lot of these consumers. Ultimately, in this new world, there's just not that many buyers of entry, and you just cannot keep your consumers trapped. They will go to whoever gives them the best option.
Speaker Change #265: <unk>, we're solving that.
Speaker Change #265: As we speak so as we increase the level of features as we increase the value proposition as we strengthen the brand we expect to be able to decreased yield while maintaining the best value proposition. We think that incumbent banks are going to have to increase the yield.
Speaker Change #266: Are they offering consumers if they want to keep a lot of these consumers ultimately in this new world Theres, just not that many barriers of entry and you just cannot keep your consumers trapped they will go to wherever it gives them the best option and so we think we are on path to building that product in that category that way.
David: And so we think we are on the path to building that product in that category that way. Rosman, if I may add one thing, what we have been seeing in Mexico, as we have seen in Brazil in the past, is that as we attract deposits from customers in the country, we are also benefiting from very relevant second order impacts that allow us to increase our brand awareness. It allows us to increase credit card applications.
Speaker Change #267: <unk>, if I may add one thing what we have been seen in Mexico as we have seen in Brazil in the past.
Speaker Change #268: Is that as we attract deposits from customers in the country. We are also benefiting from very relevant second order impacts.
<unk>: That allows us to increase our brand awareness.
Speaker Change #269: It allows us to increase credit card application. So critical applications have more than doubled in Mexico. Since we repriced, our deposit products and allow us to acquire data to do better credit underwriting and customer segmentation. It gives us positive credit selection. So there is a tremendous amount of second order impact that the.
David: So credit card applications have more than doubled in Mexico since we repriced our deposit products. It allows us to acquire data to do better credit in writing and customer segmentation. It gives us positive credit selection. So there's a tremendous amount of second order impact that the deposit flows are bringing to our flywheel that is not necessarily captured only in the absolute nominal amounts of deposits that we see coming in. No, great. Thanks a lot.
Speaker Change #269: Asset flows are bringing to all of our flywheel.
Speaker Change #269: That are not necessarily capture only in the absolute nominal amounts of deposits that we see coming in.
Speaker Change #270: Great. Thanks, a lot.
David: And our next question comes from Yuri Fernandes at J.P. Morgan. Thank you, everybody, for the opportunity to ask questions. I have just one on renegotiated loans. I still don't have the slide from your presentation, so if you could just provide some color on how the numbers are tracking for the first quarter, how this compares to the 9.6 that you had in the fourth year. So just trying to get some color on the renegotiated loan strength. Thank you. Yuri, this is Lago.
Unknown Attendee: And our next question comes from unit Fernandez at Jpmorgan.
Speaker Change #272: Thank you everybody.
Speaker Change #273: Asking questions I haven't just wound on renegotiated loans.
Speaker Change #274: You don't have the glide anymore on your presentation. So.
Speaker Change #275: You may just provide some color on how the numbers are tracking the first quarter. This compares to the nine six.
Speaker Change #276: <unk>, so just trying to get some color on renegotiated loans strength. Thank you.
Yuri Rocha Fernandes: Thanks for the question. So renegotiation loans still account for about 10% of our portfolio. It has not changed materially since we last presented this. We do expect that we will be disclosing our renegotiation rates on an annual basis at the time whenever we disclose our fourth quarter results. In addition to that, you can see some levels of renegotiations in the filings that we present to the local regulators, especially in Brazil, which we do on a six-month basis.
Speaker Change #276: This is Laura thanks for the question so renegotiations long since to account for about 10% of our per fall into has not changed materially since we last presented this.
We do expect that we will be disclosing our renegotiation rates on an annual basis at the whenever we disclose our fourth quarter results. In addition to that you can see some levels off for negotiations in the filings that we present to the local regulators, especially in Brazil than we do on a six month basis.
Yuri Rocha Fernandes: Going forward, however, as we know, changing and repositioning the mix of our credit products in Brazil, primarily, both between personal loans and credit cards and within personal loans between secured and unsecured, should directly affect the rates of our negotiations. But there has been no material change since we last presented this in the last one. No, super clear, Lago.
Speaker Change #277: Going forward, however, as we know change and repositioned the mix of our credit products in Brazil, primarily.
Speaker Change #277: Between.
Speaker Change #277: Personal loans and credit cards and within personal loans between secured and unsecured those should directly affect the rates offer negotiations, but there has been no material change since we last presented those in the last quarter.
Lago: And just for a better understanding of new NPL formation and asset quality trends, you mentioned renegotiations are not there. Is there any other factor that is helping, you know, your new NPL formation? Or is this really, you know, a mostly stable quarter for new NPL formation for the company? Thank you. So I think there's no material non-recurrent item that would be distorting our NPL and Stage 3 formation. So I think they are pretty much BAU. No, perfect.
Speaker Change #278: So very clear logical and just for a better understanding on new NPL formation and Thats. Its quality trains you mention of renegotiations or not there is there any other factor that is healthy our new NPL formation.
Speaker Change #279: And really are mostly stable quarter for our new NPL formation for the company. Thank you.
Speaker Change #280: So I think there is no there is no material nonrecurring items that would be distorting, our NPL and stage III formation. So I think they are pretty much view.
Speaker Change #281: Perfect. Thank you very much.
Yuri Rocha Fernandes: Thank you very much. And our next question comes from the line of Pedro Leduc of Ita. Thank you guys for the call and the question. I'm looking at MII post cost of risk, and that rose mid-single digits, Q and Q, if I'm not wrong.
Speaker Change #282: And our next question comes from the line of Fayetteville advocate of it out.
Speaker Change #282: Okay.
Speaker Change #283: Thank you guys for the call and the question I'm looking at NII post cost of risk.
Speaker Change #284: And it rose mid single digits Q on Q, if I'm not wrong.
Speaker Change #284: Okay.
Pedro Leduc: I understand your provisions aid up a lot of the NII growth, but I'm really curious about this combo, this net basis of mid-single-digit growth. It's historically below what you've been growing at, and I don't see that much of a difference in your loan book growth. Have some hypothesis Maybe the loan book that we see at the end of the quarter doesn't reflect the average of what it was last quarter, so it didn't generate that much NII, or that incurred losses are different than the expected losses, so you had to catch up. Really curious about how you piece together this NII post-costal risk being basically flat and how we should think about it going forward. Thank you. Hi, this is Youssef.
Speaker Change #285: I understand your provisions ate up a lot of the NII growth, but I'm really curious about this this commvault does net basis of mid single digit growth historically below what you've been growing at an.
Speaker Change #285: And I don't see that much of a difference in your loan book growth. So.
Speaker Change #286: Have some hypothesis, maybe the loan book that we see at the end of the quarter doesn't reflect the average or what it was last quarter. So had been generate that much NII.
For that.
Speaker Change #287: Losses are being different than the expected loss that you have to catch up really curious on how you piece.
Speaker Change #288: Together this NII post cost of risk being basically flat and how we should think about it going forward. Thank you.
Youssef: Thanks for the question. So I think you're referring to risk adjusted NIM on page 26, where you can see the evolution.
Speaker Change #288: Hi, Andrew this is used to thanks for the question, So I think you're referring to.
Andrew: Risk adjusted NIM.
Andrew: On page 26, you can see the evolution.
Youssef: Over time, and again, as a reminder, if you compare quarter on quarter, you have to bear in mind that Q4 2023 was impacted by a suppression of the CLA because of higher recoveries than normal, and that was driven by Desnihola and some of the collections programs we put in place in Brazil to take advantage of that, as well. So in reality, that 10.2% in Q4 was inflated; it would have been, you know, closer to what we experienced this quarter at 9.5.
Andrew: Over time again as a reminder, if you compare quarter on quarter, you have to bear in mind that Q4.
Andrew: 2023 was impacted.
Andrew: By a suppression.
Speaker Change #290: The CLA because of higher recoveries than normal.
Speaker Change #291: Driven by this new holler.
Speaker Change #291: The collections programs.
Speaker Change #292: We put in place in Brazil to take advantage of that.
Youssef: So in reality, if you take a longer term horizon view year on year, we've seen a pretty sizable expansion of the risk adjusted NIM by about 320 basis points or so. If you look at cost to risk along the same basis, you know, it went from 8.7 to 10%. So about 130 basis points.
Speaker Change #292: As well.
Speaker Change #293: So in reality the 10, 2% in Q4 was was inflated.
Speaker Change #293: It would have been closer to what we've experienced this quarter at $9 five so in Israel. It could tick up a longer term horizon view year on year, we've seen.
Speaker Change #294: Pretty sizable expansion of the risk adjusted NIM by about 320 basis points or so if you look at the cost of risk around along the same basis. It went from $8, 7% to 10%. So about 130 basis points. So you see.
Youssef: So you see, you know, quite a bit more expansion in the margin, you know, two and a half percent expansion in the margin compared to the expansion in the cost to risk. Pedro, the only thing I would add to what Youssef mentioned, if I may, is that if you take a look at the originations of and the mix of new credits that we have added in the first quarter of 2024. I would draw your attention to page number 15.
Speaker Change #295: Quite a bit more expansion in the margin to an opex, especially in the margin compared to the expansion and cost of risk.
Speaker Change #295: Okay.
Speaker Change #296: The only thing what you yourself mentioned if I may is that if you take a look at the.
Speaker Change #297: Originations off and the mix of new credits that we have added in the first quarter of 2024.
Youssef: You will see that unsecured personal loans in the fourth quarter of 2023 grew by now about 400 million reais, and it grew by about 1.6 billion reais from the fourth quarter of 2023 to the first quarter of 2024. So there was a material growth in credit books on unsecured personal loans, which actually drew more CLA than credit cards. So the mix of growth also plays a role in how risk adjusted and interest margins should be seen. But I'm not sure if we have fully addressed your question. Yeah, I'm almost a little more confused because I thought for a few you had netting it, and Provisions.
Speaker Change #298: I would draw your attention to page number 15.
Speaker Change #298: You will see the.
Speaker Change #298: Unsecured personal loans in the fourth quarter of 2023 grew by about.
Speaker Change #299: About 400 million Reais any grew by about $1 6 billion Reais from the fourth quarter of 2023 to the first quarter of 2024. So there was a material growth.
Speaker Change #300: In credit books in unsecured personal loans, which actually draw more CLA than credit cards sold the mix of graph also plays a role on how.
Risk adjusted net interest margins should be seat, but I'm not sure. If we have we have fully addressed your question better.
Speaker Change #300: Yes.
A little more confused because I thought you had in that setting.
Pedro Leduc: I thought it was net zero, but I was comparing it sequentially. And I do understand your reasoning there on the mixed evolution. But I did expect it to come a little bit more with NII.
Speaker Change #300: Okay.
Provisions Melissa I thought it was net zero of the firewall comparing it sequentially.
Speaker Change #301: And I do understand your reasoning there on the mix evolution.
Speaker Change #301: And I did expect that to come a little bit more with NII from expecting a originated more towards the end of the quarter.
Pedro Leduc: So I'm expecting it to originate more towards the end of the quarter. No, I mean, we can certainly follow up with you in more detail on the timing of the originations throughout the quarter, but I don't think there was any one-off origination that happened, that happened, let's say, in March that was materially higher than what happened in January and February. So, relatively low levels of originations. Okay, thank you.
Speaker Change #302: No I mean, we can certainly follow up with you in more details on the timing of the originations throughout the quarter, but I don't think there was any one off originations that happened that happened, let's say in March there was materially higher than what happened in January and February so relatively.
Speaker Change #302: <unk> a level levels of originations.
Speaker Change #303: Okay. Thank you.
Mario Lucio Pierry: And our next question comes from Mario Pierry from Bank of America. Hey guys, thanks for taking my question. I wanted to stay on asset quality. When we look at your NPL, they are at the highest level in the series, right?
And our next question comes from the line of Might've Gary.
Might've Gary: Bank of America.
Mario Lucio Pierry: The NPL over 90 days is 6.3%; when I look at your loan, stage three formation is at 3.7%, also a historical high. You talk about, on your release, that the increase in expected losses, or you had an increase in expected losses because you're increasing the risk profile of the newer cohort. So, you know, what we're seeing in Nubank is very different than what we're seeing at the other banks in the system in Brazil, where the banks have really become very cautious in lending.
Speaker Change #305: Hey, guys. Thanks for taking my question I wanted to stay on asset quality when we look at your Npls.
Speaker Change #306: They are at the highest level.
In the series the NPL over 90 days of six 3%.
Speaker Change #307: When I look at your loan stage three formation at three 7% also a historical high.
Speaker Change #308: Let's talk about on your Vinnie.
Speaker Change #308: The increase in expected losses.
Speaker Change #309: Or you had an increase in expected losses, because you're increasing the risk profile of the newer cohort.
Youssef: And we're seeing NPLs improving, and asset quality improving. So I wanted to, you know, pick your brain as to how you can be so confident, right, in continuing to take on more risk? Why do you think that the consumer in Brazil is in good shape?
Speaker Change #308: So.
Speaker Change #310: What are we seeing a new bank is very different than what we're seeing at the other banks in the system in Brazil, where the banks really became very cautious and landing.
And we're seeing now npls, improving and asset quality, improving so I wanted to.
Speaker Change #311: Pick your brain as.
Speaker Change #312: How can you be full confidence in continuing to take on more risk.
Speaker Change #313: Why why do you think that the consumer in Brazil is in good shape.
Youssef: You already showed, Brian, that the interest portion of the credit card is at 26%, well above the industry. And so the ability of the consumer to continue to take on more credit and more risk. Clearly, right, you are pricing in that you're increasing your return on your loans, but it eventually gets to a level that is too high. So, you know, just trying to pick your brain here.
<unk> already shown Brian that the interest portion I'll get the credit card is at 26% well above the industry and so the ability of the consumer.
Speaker Change #314: To take on more more.
Credits at more risk.
Speaker Change #315: Clearly your pricing that you're increasing your your your return on your loans, but.
Speaker Change #316: Eventually gets to a level that is too high.
Speaker Change #317: Just trying to pick your brain here.
Youssef: You know, it seems like you're moving down into a riskier segment of the population while everyone else is doing the opposite. So that's my question. Yeah, Youssef here.
Speaker Change #318: It seems like Youre moving down into a riskier segment of the population.
Speaker Change #318: While everyone else is doing the opposite.
Speaker Change #318: So thats my question.
Youssef: Thanks. Thanks so much for the question. So, let me maybe address or remind us a little bit about, you know, how we think about credit underwriting, if you'll allow me, and then I'll address specifically the latest trends. So, when we underwrite credit, our objective is not to minimize NPLs. Rather, our objective is to maximize the NPV of that credit grant, to maximize the NPV of that customer relationship, subject to resilience constraints, right?
Speaker Change #319: Yes, I used to hear thanks. Thanks, so much for the question so.
Speaker Change #320: Let me let me maybe.
Speaker Change #321: A dresser or remind us a little bit about <unk>.
Speaker Change #322: How do we think about credit underwriting if you'll allow me and then I'll address specifically the latest trends so when we underwrite credit.
Speaker Change #322: Our objective is not to minimize npls.
Speaker Change #323: Rather our objective is to maximize the NPV of that credit brands to maximize the NPV of the customer relationship.
Subject to resilience constraints right. So specifically we wanted to ensure that every credit brand that we make is NPV positive even in the event of a downturn. So we typically don't take a position with respect to <unk>.
Youssef: So specifically, we wanna ensure that every credit grant that we make is NPV positive, even in the event of a downturn. So we typically don't take a position with respect to timing the point of the cycle at which we're at. We're fairly agnostic to that.
Speaker Change #323: Timing the point of the cycle at which we are at.
Speaker Change #324: We're fairly agnostic to that we want every origination we made two performing good and bad times.
Youssef: We want every origination we make to perform well in that time. So when we see opportunities to expand credit and take a little bit more risk, especially, you know, with products and features that customers love and create a lot of value for them, like we see with some of the financing products we've introduced, like fixed financing on the credit card or unsecured loans, we're not shy about taking that risk. But we always do it with very rigorous testing, sometimes testing for months and several quarters before we roll out, and very rigorous monitoring of the risk and return that we get as a result.
Speaker Change #325: So when when we see opportunities to expand credit and taking a little bit more risk, especially with products and features that customers love and create a lot of value for them like we see with some of the financing products. We've introduced like the financing on the credit card or unsecured loans.
Speaker Change #325: We're not shy about taking that risk, but we always do it with very rigorous testing, sometimes testing for months and several quarters before we rollout and very rigorous monitoring of the risk and return that we get as a result.
Youssef: And we've been very happy with the results of those expansions, as I mentioned earlier, be they in personal loans, secured and unsecured, or in credit cards, as you can see in the expansion of our interesting earning portfolio that Lago talked about. You know, one way perhaps to think about the dynamic of our credit book is looking at the data we shared on page 25 of the earnings presentation, which shows you that NPL is a ratio of interest-earning balances. You can see that we've grown interest-earning portfolio balances faster than we've grown NPLs, and thus, that's a simple way to kind of validate that this is more accretive to return than NPV.
Speaker Change #325: And we've been very happy with the results of those expenses as I mentioned earlier.
Speaker Change #326: <unk> personal loans secured and unsecured or in credit cards.
Speaker Change #327: As you can see in the expansion.
Speaker Change #328: Our interest earning portfolio that like we've talked about.
Speaker Change #329: One way, perhaps to think about the <unk>.
Dynamic.
Speaker Change #330: The dynamic in our credit book is looking at the data. We showed on page 25 of the earnings presentation, which shows you NPL as a ratio of interest earning balances you see there that we've grown interest earning portfolio balances.
Speaker Change #331: Balances faster than we've grown npls and thus that's a simple way to kind of validate that this is accretive.
Speaker Change #330: To returns and NPV.
Youssef: So again, this is not a result of us taking a particular position on where we are in the cycle. It's rather us testing, you know, over months, quarters, and years, new products, new features, observing the returns, and then deciding to roll them out when we see really good and resilient returns on that. Okay, one point I would add just to close on Youssef's explanation is the majority of the additional products, financing products that we've been launching, that we've been growing are very short-term duration in nature. We're talking about 30, 60 days type of loans.
Speaker Change #332: So again this is not a result of us taking a particular position on where we are at the cycle.
Speaker Change #333: It's rather us testing over months and quarters and years new products New features observing the returns and then deciding to rollout when we see really good.
Speaker Change #334: And resilient returns on that.
Speaker Change #334: Okay.
Speaker Change #335: One point I would add just just to close on <unk>.
Speaker Change #336: <unk> explanation is this.
Speaker Change #337: The majority of the additional products.
Speaker Change #338: With that we'll be launching that we'd be growing our very short term duration in nature. We're talking about 30 60 days type of loans.
Youssef: So this tends to be a really information-rich type of product that allows us to react very quickly to any signs that we might see things that are not playing out as we expect. Again, we're making an underwriting decision based on a view of an NPV model, based on a lot of testing, based on a lot of foundational testing that we're doing, and the ability to do this type of short-term, short-duration product just allows us to increase the financial portfolio that we have while maintaining significant control on the risk of the portfolio. Let me ask you a follow-up question here.
Speaker Change #339: So this test to be a really high information rich type of product that allows us to react very quickly to any signs that we might see things that are not playing out as we expect again were making an underwriting decision based on our view of an NPV model based on a lot of testing better there's a lot of foundational testing that we're doing.
Speaker Change #340: And the ability to do this type of short term short duration products just allow us to increase their financial profile that we have.
Speaker Change #340: While maintaining significant control on the risk of the portfolio.
Mario Lucio Pierry: When I look at your credit cards outstanding in Brazil, you went up by about $200,000 from $37.5 million to $37.7 million. Even though your active clients in Brazil grew by 3.6 million. So this is the slowest pace in the increase of the number of cards, right?
Speaker Change #341: Okay, Let me ask a follow up here.
Speaker Change #342: When I look your credit cards outstanding in Brazil.
Speaker Change #343: Up by about 200000 from 70.
Speaker Change #344: $77 5 million to $37 7 million.
Speaker Change #345: Even though your active clients in Brazil grew by $3 6 million. So this is a slow with PE in the increase of number of cards right in Europe.
Unknown Executive: You're the average, you're growing about 1.8 million credit cards in Brazil in 2023, uh, per quarter now. What does this mean? Does it mean that you are being more conservative, or you reached a percentage of your client base that they don't have the capacity to take on a new credit card? Mario, one thing that I would point out that I'll certainly let my other colleagues chime in is that in Brazil, as we start to approach 55, 60, 65% of the adult population, it's inevitable that the marginal growth will not necessarily come from adding more customers or more credit cards to the existing customer base.
Speaker Change #346: Average youre growing about $1 8 million credit cards in Brazil in 2023.
Speaker Change #347: Per quarter now in the.
Speaker Change #347: 200 <unk>.
Speaker Change #350: Does this mean does it mean like.
Speaker Change #349: We're being more conservative or you.
Speaker Change #348: You've reached a percentage of your client base.
Speaker Change #351: They don't have the capacity to take on a new credit card.
One thing that I would point out that I'm certainly left my other colleagues chime in is that in Brazil, as we start to approach no 50, 560% to 65% of the adult population.
<unk> that the marginal growth.
Speaker Change #352: We will not necessarily come from adding more customers or more credit cards to existing customer base. We still have a lot to go there, but it's only natural that at some point in time the growth in number of customers off the number of cards will diminish but why do we still have plenty of room ahead is what.
Unknown Executive: We still have a lot to go there, but it's only natural that at some point in time, the growth in the number of customers for the number of cards will diminish. But what we still have plenty of room for is what you can see on page 34 of the earnings presentation.
Speaker Change #353: You can see on page 34 of the earnings presentation, and you can see the evolution of the purchase volume and the evolution of our pack as the customers mature.
Unknown Executive: And you can see the evolution of the purchase volume and the evolution of RPAC as the customers mature. So even the customers that we have on board 24 months ago, they are tripling their purchase volume as they mature their usage with us. So what we will naturally see in Brazil is a natural kind of flattening of the curve of the number of customers and credit card customers but the continuous evolution of the maturation of purchase volumes in ARPAC. And then, conversely, Mexico and Colombia are in the very early days of the expansion of the number of customers and the number of cards. So they are at a different point in the S-curve cycle.
So even.
Speaker Change #353: At the customer.
Speaker Change #354: Customers that we have onboard to 24 months ago. They are frequently their purchase volume as they mature their usage with us.
Speaker Change #355: While we will naturally see in Brazil is that a natural kind of a flattening of the curve of number of customers and credit card customers, but it continues the evolution of the maturation of purchase volumes and they are back and then Conversely, Mexico and Colombia are in the very early days of the expansion of number of customers and number of cards.
Speaker Change #356: So they are in a different client off the eschar cycle there.
Unknown Executive: Okay, thank you very much, guys. And our next question comes from the line of Brian Flores of CDT. Hi, hi guys.
Speaker Change #357: Okay. Thank you very much guys.
Speaker Change #359: And our next question comes from the line of.
Brian: Brian in Florida is a CD.
Brian Flores: Thank you for the opportunity to ask questions. I wanted to follow up on Mexico. We talked about the liability side, and I think that is ramping up very well. I wanted to ask you about the asset side, too, because we have seen, as Lago mentioned, some room for optimization with the low LBR so far. So I wanted to pick your brain on what key differences you've found in client behavior, infrastructure, and also how your strategy has adapted to this, right? And if you think the speed is going according to the plan, or you think, you know, it's maybe a bit slower or a bit ahead. Thank you.
Speaker Change #360: Hi, Thank you for the opportunity to ask questions.
Speaker Change #361: I wanted to make a follow up on Mexico, we took on the liability side and I think that is ramping up very well I wanted to ask you on the on the asset side right because we have seen a lager.
Speaker Change #362: <unk> mentioned some room for optimization with the low LDR. So far so wanted to pick your brain on what key differences have you found in client behavior infrastructure.
Speaker Change #362: Also how has your strategy to these right.
You think this is.
Speaker Change #362: Please go ahead. According to the plan or do you think it is.
Speaker Change #363: It's noteworthy is ahead. Thank you.
Unknown Executive: Thanks for the question. So we've said a lot of times in the past that we tend to... Going to a new market, underwriting very conservative, a very conservative approach. And the growth curve that you will see from us in a lot of the unsecured products, really zero, is periods of acceleration, periods of pause, even periods of tactical detractions, accelerations, and pauses. You know that if you look at our growth rate in unsecured lending and personal loans, maybe 12 to 18 months ago, we had a bit of a pause, then we accelerated again. I think Mexico is following a very similar path. We launched slowly, we accelerated, we did a lot of foundational testing. That's, by the way, the reason why our delinquency rate in the country was much higher.
Speaker Change #364: Yes, thanks, Thanks, and thanks for the question so.
Speaker Change #364: We've said.
Speaker Change #366: A lot of times in the past that we tend to.
Speaker Change #365: Going to a new market.
Speaker Change #367: Underwriting very conservative a very conservative approach and the growth curve that you will see from us in a lot of the unsecured products really know is periods up acceleration periods of boss even.
Speaker Change #367: Even periods of tactical distractions acceleration spouses.
Speaker Change #367: Saw that if you look at our growth rate in unsecured lending and personal loans maybe.
Speaker Change #368: 12 to 18 months ago, we had a bit of a pause and we extended it again I think Mexico following a very similar path.
Speaker Change #369: Launched slowly we accelerated it with data a lot of foundational testing that's by the way the reason why our delinquency in the country was much higher we were just testing a lot does really means given a number of different lines and credit cards to consumers, where we don't have really any data.
Unknown Executive: We were just testing a lot. This really means giving a number of different lines and credit cards to consumers where we don't really have any data yet. A lot of this is credit losses, but in reality, it's CAPEX, it's effectively R&D dollars into building our own models. And what you've seen in Mexico, maybe over the past six months, was after a period of acceleration, we de-accelerated the growth. We went into a period of slowing down a bit our growth, partly to continue working on new generations of our models that ingested new data sources.
Speaker Change #370: A lot of this is credit losses, but in reality, if capex is effectively R&D dollars into building our own models.
Speaker Change #371: And what you've seen Mexico, maybe over the past six months wise after a period of acceleration with the accelerated the growth we are waiting to a period of.
Speaker Change #372: Of slowing down a beta of our growth partly was to continue to work in our new generations of our models that ingesting new data sources, partly was also because we wanted to see how funding was going to come on.
Unknown Executive: Partly this was also because we wanted to see how funding was going to come in. As you obviously know, we cannot just accelerate too much if we don't have funding resolved. So getting Nuconta right in Mexico for us was the number one strategic imperative, because if we don't have that part of the balance sheet, we don't really have a business. So we de-accelerated a bit to continue iterating on products. We launched
Speaker Change #372: As you obviously know we cannot just accelerate too much if we don't have funding.
Speaker Change #373: We solved so getting a contract right in Mexico for <unk>.
Speaker Change #373: The number one strategic imperative because if we don't have that part of the balance sheet, we don't really have a business.
Speaker Change #374: With the accelerated a bit to continue iterating on products, we launched <unk> Quanta has been very successful. We've also if you look at some of the numbers that we.
Unknown Executive: Nuconta has been very successful. We've also, if you look at some of the numbers that we, these closed regulatory reports or delinquency rates in Mexico have been coming down a lot, very fast. We're operating with much lower delinquency levels.
Speaker Change #375: These close to regulatory reforms or delinquency ratio in Mexico has been coming down a lot very fast we're operating with much lower delinquency levels and this is now driving a slow acceleration again into.
Unknown Executive: And this is now driving a slow acceleration again for credit cards in Mexico and new accounts. You'll see that also the number of new customers in Mexico has accelerated over the last quarter. So I give you all this context to effectively say we're now on the path of accelerating again in Mexico. We have the funding. We're very comfortable with some of the data sources or ability to do underwriting based on our own methodology or on our own consumer behavior.
Speaker Change #376: Into credit cards in Mexico, and new accounts, you'll see that also the number of new customers in Mexico has accelerated over the last quarter. So I'll give you I'll give context effectively saying we are now on a path of accelerating again on Mexico. We have the funding we're very comfortable with some of the data sources.
Our ability to do underwriting based on our own methodology.
Speaker Change #376: On our own consumer behavior, and we'll continue to operate a bit like that.
Speaker Change #377: The opportunities we have generated I wish you'd think that worry us a bit we pass a bit and that tends to be the path that we that we tend to stay at that we tend to take in these new markets.
Unknown Executive: And we'll continue to operate a bit like that. As we see opportunities, we accelerate. We see things that worry us a bit. We pause a bit.
Unknown Executive: And that tends to be the path that we tend to take in these new markets. The only thing Brian, I would add is that if you take a look at the first quarter results of our operations in Mexico, the one that we fired with the local regulators, you will note that we are already growing our book in Mexico at about seven, 8% on a quarter over quarter basis. We expect this growth rate that we mentioned will pick up in the coming quarter. Perfect.
Speaker Change #377: The only thing Brian I would add is that if you take a look at the first quarter results of our operations in Mexico.
Speaker Change #378: One that we filed with the local regulators you will note that we already growing our book in Mexico at about seven 8% on a quarter over quarter basis. We expect this growth rate as <unk> mentioned, we will pick up in the coming quarters.
Unknown Executive: And if I may follow up just very quickly, do you have any updates on the banking license? Do you think this is critical to really ramp up growth, as you mentioned? Yeah, sure. So it is not critical to ramp up growth.
Speaker Change #378: Perfect.
Speaker Change #379: My follow up just very quickly.
Speaker Change #380: Do you have any updates on the banking license.
Speaker Change #381: It is critical to really ramp up in growth as you mentioned.
Speaker Change #382: Yeah sure. So it is it is not critical to ramp up growth. We can continue ramping growth with the Sofia <unk> license that we have we're getting the deposits that we need and that is the critical part.
Unknown Executive: We can continue to ramp up growth with the SOFIPO license that we have. We are getting the deposits that we need. And that's the critical part.
Unknown Executive: I think the banking license is really critical for the long term of Mexico. There are certain bottlenecks in the SOFIPO license that eventually will become real issues for our products. One specific example is deposit insurance. SOFIPO only gives us a deposit insurance of something like $18,000 to $19,000.
Speaker Change #383: The banking license is really critical for the long term of Mexico. There are certain bottlenecks in this a <unk> license.
That eventually will become real issues for our products. One specific example is deposit insurance. So people. It gives us a deposit insurance up something like 18 to $19000 and bank license gives deposit insurance all the way to $180000. So for Mexican high income consumers it will be critical.
Unknown Executive: And a bank license gives deposit insurance all the way to $180,000. So for Mexican high-income consumers, it will be critical to have a banking license. But that's not our core target today.
Speaker Change #384: So to have a banking license does not our core target today.
Unknown Executive: A banking license will also expand the possibilities of cashing cash out with certain banking correspondents. And so, thinking ahead of where the business will be in five years from now, we definitely need a banking license, and that's why we already started the process for the banking license last year. The process is going well. I think the regulators are doing all of their work around due diligence.
Speaker Change #385: It also bankunited will also expand the possibilities of caching <unk> with certain banking correspondence and so thinking ahead of where the business will be in five years from now we definitely need the banking license and that's why we already last year entered.
Speaker Change #386: With the process of the banking license the process is going well with I think the regulators are doing.
Speaker Change #387: All of their work around the due diligence we've.
Unknown Executive: They've been very active in working with the regulator, answering all the questions that they've received, and so far, it's going according to expectations. But it's not necessarily an easy process.
We've been very active work on the regulator answering all the questions that they have received.
Speaker Change #387: And so far is going according to expectations, it's not necessarily an easy process is not a fast process, but we're taking very seriously and so far we've heard very good.
Unknown Executive: It's not a fast process, but we're taking the process very seriously, and so far, we've heard very goodwill from the regulator in enabling new players to get banking licenses to bring much more competition into the banking space in Mexico. And our final question comes from Neha Agarwala from HSBC. I will make it quick. Thank you. I wanted to zoom in on Mario's previous question in terms of asset quality.
Speaker Change #388: Goodwill from the regulator in enabling new players to get a banking license is to bring much more competition into the banking space in Mexico.
Speaker Change #389: Pretty much.
Neha Agarwala: Origination, especially in personal loans, was extremely strong this quarter, but early delinquencies have inched up. I understand part of that is seasonality, but given the rate outlook and the softening of economic activity, would you be more concerned or more cautious in the coming quarters and try to step back a bit in terms of originations, or should we see continued this level of originations for personal loans or an acceleration? Thank you so much. Hi Neha, this is Youssef. Thanks so much for the question.
Speaker Change #390: And our final question comes from Nihon <unk> from HSBC.
Speaker Change #390: Sure.
Speaker Change #391: Hi al.
Speaker Change #392: Thank you.
Nihon: I wanted to zoom in on <unk> question in terms of asset quality.
Speaker Change #394: Origination, especially in the personal loans was extremely strong this quarter.
Speaker Change #395: But early delinquencies have inched up I understand part of that is seasonality.
Given the rate outlook and the softening of economic activity would you be more concern are more cautious in the coming quarters and try to step back a bit in terms of originations.
We see continued these level of origination for person those are the next generation.
Speaker Change #395: Thank you so much.
Youssef: So you are right in pointing out that the NPL movement in the quarter from Q4 to Q1, particularly NPL 15 to 90, was largely the result of seasonality, right? So we've experienced a 90 bit increase; typically, the increase from Q4 to Q1 is 80 bits. So, you know, more or less within the seasonal expectations and, perhaps to be super precise, a little bit coming from credit expansion, as we've mentioned multiple times, in both personal loans, unsecured personal loans, and the credit card earning interest portfolio, as well.
Hi, This is Lisa thanks, so much for the question so.
Speaker Change #396: You are right in pointing out that the NPL.
Lisa: Movement in the quarter from Q4 to Q1, particularly NPL 15 to 90 was largely the result of seasonality that we've experienced the 90 bps increase typically.
Speaker Change #398: The increase in Q4 to Q1 to 80 bps, so more or less within the seasonal.
Speaker Change #399: Expectations, and perhaps to be super precise of a little bit coming from credit expansion.
Youssef: And as I mentioned before, we tend to be fairly agnostic to the point in the cycle at which we're at because when we originate credit, when we underwrite credit, we always make sure that that credit performs and is NPV positive under good times and bad times, right? So we stress the risk expectations in our NPV model, which ensures that. Our cohorts, you know, on aggregate, can withstand a doubling of risk and still be NPV positive.
Speaker Change #400: As we've mentioned multiple times in both personal loans unsecured personal loans and the credit card, earning interest portfolio.
Speaker Change #400: As well.
Speaker Change #400: As I mentioned before we.
Speaker Change #400: We tended to be fairly agnostic to the point in the cycle, which were at because when we originate credit when we underwrite credit.
Speaker Change #400: We always make sure that that credit performs at an NPV positive.
Speaker Change #401: Under good times, and bad times, where so we stress.
Speaker Change #401: The risk expectations in our NPV model.
Speaker Change #401: Which ensures that.
Our cohorts on aggregate and withstand the doubling of risk and still be NPV positive. So we're very comfortable with the level of resilience with which we operate that way.
Youssef: So we're very comfortable with the level of resilience with which we operate that way. But all said, as I've mentioned in past quarters and this quarter again, our expectation is that there are going to continue to be really good opportunities for us to expand our credit portfolio across the board, right? We see opportunities to expand in secured lending, as you know, Lago and David have discussed. We also see opportunities in unsecured personal loans to increase the eligibility of customers and also in credit cards with the continued growth of IEPs and the continued rollout of new products and features on the financing front.
Speaker Change #402: All said.
Speaker Change #403: As I've mentioned in past quarters, and this quarter again, our expectation is that there are going to continue to be.
Speaker Change #404: Really good opportunities for us to expand our credit portfolio across the board, we see opportunities to extend a secured lending is.
Speaker Change #405: As <unk> discussed, we see opportunities in unsecured personal loans to increase eligibility.
Two.
Speaker Change #404: Sure.
Of customers and also in credit cards with the continued growth of <unk> and the continued rollout of new products and features on the financing front. So our expectation is definitely.
Youssef: So our expectation is definitely that there will continue to be opportunities to expand. And typically, as we've done in the past in Brazil and in Mexico and other markets, when we see results that are a little bit different than what we expect on the downside, we will take the appropriate action to slow down if that's what the situation calls for.
Bill: Bill will continue to be.
Opportunistic spend.
Bill: Typically as we've done in the past in Brazil, and Mexico and other markets when we see.
Speaker Change #407: Results that are a little bit.
Speaker Change #408: Different than what we expect on the downside, we will take the appropriate action to slow down.
Speaker Change #409: If that's what the situation closely.
Neha Agarwala: Thank you so much. We are now concluding today's call. On behalf of Nu Hldg and our investor relations team, I want to thank you very much for your time and participation in our NIS call today. We are very excited about our development as we continue strengthening our position in the markets we operate in. 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.
Speaker Change #410: Thank you so much.
Speaker Change #411: We are now concluding today's call on behalf of <unk> Holdings, and 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 with our development as we continue strengthening our position in the markets. We operate over the coming days, we will be following up with the questions.
Speaker Change #412: Heath 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 is to have any further questions. Thank you and have a good night.