Nu Holdings Ltd.

good afternoon ladies and gentlemen welcome to new holdings conference call to discuss the results for the fourth quarter of 2022. a slide presentation is accompanying today's webcast which is available in news investors relations website www.investors.new in English and www.investidores.new in Portuguese.

This conference has been...

recorded and the replay can also be accessed on the company's IR website. This call is also available in Portuguese. To 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 Mute Original Audio. Para acessar nossa conferência em português, clique no ícone do globo ao lado inferior direito da sua tela Zoom e selecione a opção Portuguese Room. Ao acessar a nova sala, certifique-se de mutar o áudio original. 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. Jörg Friedman, Investor Relations Officer at New Holdings. Mr. Friedman, you may proceed.

Thank you very much, Operator, and thank you all for joining our earnings call today. 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 Vélez, our Founder, Chief Executive Officer and Chairman, Youssef Larache, our President and Chief Operating Officer, and Guilherme Lago, our Chief Financial Officer. Additionally, Jaggi Dugal, our Chief Product Officer, will join us for the Q&A session of the call. Throughout this conference call, we will be presenting non-IFRS financial information, including adjusted net income. These are important financial measures for the company, but are not financial measures as defined by IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information are available in our earnings press release. Unless noted otherwise, all growth rates are on a year-on-year, FX-neutral basis. I would also like to remind everyone that today's discussion might include forward-looking statements, which are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties, and could cause actual results to differ materially from the company's expectations. please refer to the forward-looking statements disclosure in the company's earnings press release. Today, our founder and CEO, David Valles, will discuss the main highlights of our fourth quarter 2022 results and some of the opportunities ahead. Subsequently, Guilherme Lago, our CFO, and Youssef Larache, our President and COO, will take you through our financial and operating performance for the quarter, after which time we will be happy to take your questions. Now, I'd like to turn the call over to Davi. Davi, please go ahead.

Thank you, Jorge. Hello, everyone.

Thank you for being with us today. Once again, I am happy to share that Noob posted another record quarter, showing continued growth across all our metrics, including meaningful increase in profitability. We will also be disclosing numbers for Noob Brazil specifically today, which we think show up very exciting pictures. We welcome more than 4 million customers to our platform this quarter, and we now have close to 75 million clients across our three geos, posting a growth of 38% year-on-year. We're now the fifth largest financial institution in Brazil and the sixth largest financial institution in Latin America in terms of number of customers. Let's now dive into the main operating highlights of the quarter and of the year. During the fourth quarter, our revenue amounted to almost $1.5 billion, growing 112% year-over-year. The triple-digit expansion in revenues is the compounded effect of the strong expansion of our active customer base in Brazil with our ability to cross-sell products and foster client engagement. Nu also expanded gross profit by 137% year-over-year to $578.3 million in the fourth quarter of 2022. The significant expansion of our gross profit margin, which reached 40% this quarter, up from 36% in the fourth quarter of 2021, reinforces the operational leverage capacity of our business and the strong execution of our team. In 2022, we succeeded both in terms of pricing, adequately credit products amidst adverse conditions, and adapting our funding costs to deal with much higher than expected interest rates. As a result, new holdings deliver an adjusted net income of $113.8 million in the fourth quarter of 2022, up from $3.2 million in the fourth quarter of 2021. The Brazilian operations highlighted in the right side of the slide continue to mature and contribute meaningfully to these results, with 93% of our revenues generated by this GEO. Adjusted profits for the Brazilian operations reached $157.7 million in Q4 of 2022, up from a loss of $3.8 million during the fourth quarter of 2021. Our progress in Brazil illustrates how our business model is able to start generating winning meaningful profits while growing revenue over 100%. The beginnings of GNU were based on the unbundling of financial services back in 2013. Now, our most important business opportunities rest on the re-bundling of financial services by building a diversified multi-product, multi-segment, and multi-country portfolio of businesses. As you can see in this slide, even our adjacent businesses already achieved a notable figure of a million customers, attesting the company's cross-sell capacity. Despite the growing scale of our core products, NOAA is still in the early days of its product development's life cycle. That said, the signs of the inflection of the S-core for our products are already clear. This slide is meant to show two things. First, the pace at which we develop and launch new product has accelerated over time. Second, our product portfolio is well positioned to deliver multiple years of strong growth. While new accounts and credit cards have just reached the inflection points of their growth stages, most of our other products are at earlier stages of their life cycles. suggesting still high levels of upsell and cross-sell potential for multiple sources and for years to come. We will continue to expand our platform with disruptive products that further strengthen our relationship with our customers and enable us to acquire increasing levels of customer principality and share of wallet across all demographic segments. Our most important launches in 2023 include the expansion of our lending products in Brazil into secure lines, such as public payroll, and the launching of savings accounts in both Mexico and Colombia. Just as new is in the early days of its product development lifecycle, it is also in the early days of its international expansion. Over the past decade, we have successfully expanded our operations in Brazil, having reached a customer base that represents 44% of the adult population of the country. It is inevitable that our customer growth in Brazil over the coming years will be lower than what we experienced over the last years. Our growth in Brazil will progressively pivot from customer acquisition into customer monetization. Conversely, however, we're still at the early stages of the customer acquisition lifecycle in Mexico and Colombia, countries in which our penetrations are still low, but early signs of performance are extremely encouraging. Mexico and Colombia are beating Brazil at practically every single customer growth and engagement metric. They're growing faster and showing NPS levels higher than those of Brazil. In both of these countries, we have already become the top issuer of new credit cards. The stages of development for our three geos are complementary and expected to provide new with very strong growth engines for years to come. To better showcase the earnings potential of our model, we want to spend a few minutes digging specifically into our Brazil business, which continues to show very strong top-line traction and also meaningful bottom-line profitability. Over the past four years, we expanded our client base in Brazil by 11x, having reached a penetration of 44% of the adult population of the country. 70% to 80% of the clients came to Nu through organic channels, mostly member-get-member, providing us with strong growth virality and one of the lowest customer acquisition costs among fintechs and incumbent banks globally. We have been successfully applying the same playbook in Mexico and Colombia. The compounding effect of customer growth and higher levels of customer monetization have resulted in strong top-line growth in Brazil. In the fourth quarter of 2022, our Brazilian operations recorded $1.4 billion in revenue, 110% year-on-year growth, and a gross profit margin of 44%. Adjusted net income grew progressively over the past quarters, reaching $158 million in the fourth quarter of 2022, for an annualized adjusted return on tangible equity of 58%, and an annualized return on equity of 40%. Although part of this number was positively impacted by the seasonal effects observed in the fourth quarter of the year, such as higher purchase volume and lower cost of funding, one can see that the profitability of our operations in Brazil has reached an inflection point and already positioning us among one of the financial institutions with the highest return on capital in the country. But we believe we're still in the early stages of the development of our model in the country. with still significant upside in terms of both top-line growth and operating leverage. Finally, this slide details the outcome of our strategy in Brazil and at the holding level. The viral expansion of our customer base combined with our successful cross-selling and up-selling strategies have driven strong profitability in our Brazil business. Beyond a fourth quarter that is positively affected by seasonality, New Brazil posted a return on tangible equity of 25% and a return on equity of 15% for the full year of 2022, even considering the losses reported in the first quarter of the year. While 2022 was a challenging year micro-wise and very critical for us as we built trust as a newly public company, we could not be more proud of our 2022 results, which largely exceeded our internal expectations. The execution capability of the entire new team was very strong, and we proved that it is possible to maintain an accelerated rate of growth as we can share in every product vertical and geography, while keeping credit delinquency in check, improving operating leverage, and ultimately showing strong profitability. But these achievements, as important as they are, represent only the first steps of what we can deliver in the future. Once our new geos mature and Similarly to Brazil, scale further and start to compound the profitability potential that our model creates. With that, I would like to pass the floor to our CFO, Guilherme Lago, who will walk you through more details of our results. Thank you.

Thanks, Davi, and good evening, everyone. To better frame the discussion around our year-end results, I would like to recap the three key elements of our simple and powerful value-generating strategy. Number one, continue to grow our customer base in the markets in which we operate, Brazil, Mexico, and Colombia, and quickly converting new customers into active ones. Two, expanding average revenue per active customer, or RPAC, through both cross-sell and up-sell. And three, delivering growth while maintaining one of the lowest cost operating platforms in the industry. Our fourth quarter results show positive evolution in each one of these three pillars. Let's start with the first pillar of our strategy, customer acquisition. In the fourth quarter, we added 4.2 million and ended the year with 74.6 million customers, a 38% increase year over year. In Brazil, we are steadily adding between 1 and 1.5 million customers per month. the vast majority of which still come from referrals, which lowers the acquisition cost and accelerates activation. In Mexico, we surpassed 3.2 million customers by the end of the quarter. As per the last available data for 2022, news market share in terms of new cards issued in the country approached 29%, while share of purchase volumes for credit cards already achieved 5%. Our strongest growth in relative terms was in Colombia, where our customer base reached nearly 600,000. In Colombia, NUA accounted for 38% of the number of new cards in 2022, as per the latest available information, with 2% market share in terms of purchase volumes for credit cards. The second part of this pillar is activation, where we continue to drive higher levels in the fourth quarter. Our overall monthly activity rate reached 81.9%, 5.6 percentage points higher year over year, and the 11th consecutive quarter of sequential increase. we are seeing positive and increasing momentum in activity in all of the three markets in which we operate, despite their different stages on the S-curve. Let's move to the second pillar in our strategy, revenue generation. The three charts on this slide show a clear relationship. Let's start with the chart on the left. We are very proud that, as of the end of 2022, 58% of our active customers had chosen NU as their primary banking account or PBA. This is the holy grail of the financial services business and the cornerstone of our model for three simple reasons. Number one, PBA customers generate RPACs that are much higher than those of non-PBA customers. Number two, PBA customers present 90-day NPLs that are much lower than those of non-PBA customers. And three, PBA customers also have lower levels of price elasticity and adverse selections than those of non-PBA customers. The number of PBA customers underscores the development of a model that effectively engages and serves our customers with multiple products and throughout all stages of their lifecycle. It begins with how we attract clients, which is through a powerful engine based on customer referrals. The more customers use Nu as its primary bank account, the greater the number of products they use and the higher the monthly RPAC they generate. With every cohort, we have been able to accelerate the pace at which Nu becomes the primary bank account of our customers. We have also been able to accelerate the pace at which our customers use our products. These two factors compound to speed up RPAC for newer accounts and also helping to push up the overall RPAC of the company. For the fourth quarter, our monthly RPAC continued to increase and achieve $8.2 per month. pushed by both the increasing cross-selling and up-selling of our new cohorts and the maturation of our older cohorts, whose average RPAC reached $23 per month. We can see in this slide that our monthly RPAC continues to grow sequentially, expanding 37% year over year. The higher number of active clients combined with higher RPACs prompt the sustained growth in our revenues. Revenue grew 112% year-over-year to $1.5 billion, another record high. Our revenue in 2022 was nearly three times higher than in 2021 and almost seven times higher than in 2020. Now turning to our Cards business, we continue to experience strong growth with purchase volumes up 54% year-over-year to $24 billion. In 2022, purchase volumes reached $81 billion, an 85% increase over 2021, demonstrating the power of our product cross-sell, up-sell and customer engagement capabilities. Most of the purchase volumes continue to come from our older cohorts of customers, which spend three to four times as much per month as recent cohorts. While there is a difference from the outset between newer and older cohorts, as shown on the chart on the right-hand side, both show clear upwards trends of consumption over time. On average, credit card spend for a customer who has been with us for more than 24 months triples. We expect the substantial amount of clients we added in the last two years to increase their purchase volumes with our cards as their relationships with us continue to mature. Our consumer finance portfolio, composed of credit cards and personal loans, reached $11 billion, a 62% expansion over year-end 2021. Our credit story has two tales. On the one hand, credit cards continue to grow strongly at 69% year-over-year as more clients are added to our ecosystem and our low-and-grow methodology plays out. On the other hand, we have been more cautious with the originations in the personal loan portfolio, aligned with the higher risk of this product. Originations in personal loans increased slightly and the overall book grew sequentially during the fourth quarter to $2 billion. The base of growth has been lower than that of credit cards, at 33% year over year, but with the ongoing performance of the book, we expect this to accelerate over the coming quarters. Now let's review in more details the evolution of our credit card portfolio and the originations of our personal loans. We continue to pursue our strategy of increasing the share of our credit card loans that earn interest, closing the gap as compared to the market. We have narrowed this gap by offering our customers interest-earning installment loans on their credit cards, which is of the fourth quarter surpassed market levels and represented 12% of our credit card loan book. We see attractive risk-adjusted rates of returns from this type of finance. It allows us to monetize our credit card business beyond simple fee generation and fulfill a customer need. At the same time, we have been intentional in not expanding our share of revolving receivables, which continues at 7% of our total receivables and, once again, widened the gap versus the market, whose revolving now accounts for 17% of total receivables. We base our origination of personal loans on the latest performance of our own cohorts, our assessment of risk going forward, including our judgment of the economic and credit environment. Last year, we increased the resilience we demand from our loan originations and we have seen positive performance to date, leading to gradual increases in our origination volumes. We expect this trend to continue going forward as long as this positive performance track record persists. Indeed, we continue to see upside in our ability to drive growth in lending in a healthy and profitable manner. We have substantial reach, given the size of our customer base. We believe the risk assessment in our platform is best in class, allowing us to deliver superior products and experience to our customers. We also have strong capital base and an ample liquidity to increase our leverage. As market conditions improved and allow our credit risk appetite to increase, we should be able to deploy capital effectively and profitably. This strategy should be reinforced with the upcoming launch of Secure Lending. In July 2022, we launched money boxes, which are personalized investment tools. We also started to remunerate deposits at 100% of the Brazilian interbank deposit rate, but retroactively and only for amounts that remain on deposit for more than 30 days. Given their stage rollout, these two changes did not materially affect our funding cost in the third quarter. But in the fourth quarter, we started to see the full impacts of these changes. In the fourth quarter of 2022, our cost of funding improved to an all-time low of 78% of the interbank deposit rate. This led our financial expenses to decline quarter over quarter. We are now starting to unlock the value of the strong liability franchise that has been built over the past years. and our deposit base continued to grow. Deposits increased 55% year-over-year to $16 billion. We have seen no material impact on the deployment of money boxes or the changes in remunerations on our deposits inflow. The success of this new strategy already has had an important effect on our profitability for the fourth quarter and should be recurring in the subsequent quarters. The successful implementation of our new funding strategy, combined with the continued growth of our credit portfolio, made a meaningful contribution to our results in the fourth quarter. This is most visible in our net interest income, or NII. Our NII reached $688 million this quarter, growing 30% quarter over quarter. The improvement in our cost of funding helped increase in our net interest margins, or NIM, 2.4 percentage points over the level of the third quarter to a record high of 13.5%. While we can attribute much of the recent gains in net interest margins to our new funding strategy, we expect this trend, respected seasonality, which is especially strong in the fourth quarter, to continue going forward based on three factors. Number one, the growth in our credit portfolio, which should surpass that of our deposits. Number two, the adequate pricing of our credit products as we continue to build underwriting resilience with pricing. And number three, the improved mix of our loan book, especially as we resume the growth of our personal loans over the coming quarters. Let's move to the third pillar in our overall strategy, maintaining a low cost to serve. We believe our platform is one of the most cost-effective in serving customers in the markets in which we operate. For the fourth quarter, our cost to serve amounted to 90 cents of the dollar. On our year-over-year comparison, our cost to serve did not grow. This achievement is even more impressive considering how much we evolved in terms of products per customers and PBAs. Over the same period, our RPEC increased 37%, clearly illustrating the strong operating leverage of our business model. Looking ahead, as we said in past quarters, we expect our cost to serve to remain at or below the dollar level, as the scale gives us significant operating leverage and bargaining power with our suppliers. In terms of gross profit, we achieved $578 million, up 137% year-over-year, a significant acceleration versus the growth posted last quarter. This level of gross profit was the highest we have ever achieved. At the same time, our gross profit margin of 40%, four percentage points higher year-over-year, accelerated the pace of recovery started in the third quarter. To illustrate how far we have come, our gross profit of $1.7 billion in 2022 is more than two times higher than of 2021 and nearly five times higher than of 2020. Operating leverage is a key element of our strategy, with the full benefits becoming increasingly clear as we advance product penetration and drive revenue growth. This is visible in our efficiency ratio, which improved for the fourth consecutive quarter to reach an all-time low at 47% or 41% excluding share-based compensation. This is already comparable to the levels of efficiency of Latin American incumbent banks, but it is still far from the potential of our platform that continues to collect the benefits of scale. We expect our operating leverage to continue to be captured as our scale increases, although there might be seasonal variations affecting this number. In the fourth quarter, in particular, our platform benefited from stronger purchase volumes and deposits inflows. Now, moving on to the bottom line. We posted another quarter of improving bottom line performance. In the fourth quarter of 2022, our adjusted net income and net income amounted to $114 million and $58 million, respectively. These results are encouraging as they serve to validate our strategy and our business model. However, we reinforce that we look at our business with a view towards long-term value creation, which may require us to make additional investments in the short term to optimize our long-term opportunities. And we expect to continue managing the company this way. We see this fourth quarter and the year of 2022 as a whole as evidence of our sustainable cost advantages. On cost to acquire, we added over 20 million customers during 2022 and presented one of the lowest customer acquisition costs among fintechs and banks globally. On cost to serve, we held it constant on an FX neutral basis throughout the entire 2022, despite the inflationary pressures in the countries in which we operate and increasing levels of customer engagement. On cost of risk, we successfully managed the risk in our credit portfolio, aimed at a very challenging backdrop, and continued to outperform competitors when comparing apples to apples. Yousef will provide more details on that shortly. On cost of funding, we began to unlock the potential of our deposits franchise. starting to close the negative gap we had against incumbent banks and widening the positive gap we have against fintechs. As we go into 2023, we expect the trends from the fourth quarter to continue to gain traction. In particular, we emphasize our ability to develop and scale best-in-class products, expand internationally and operate at very low costs.

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Now, I would like to turn the call over to Youssef, our President and Chief Operating Officer, who will walk you through some of the highlights of our asset quality.

Thank you, Ligo. Let me take you through some key indicators of asset quality and overall credit portfolio health for the fourth quarter of 2022. Let us start with overall NPL trends. Our early delinquency indicator, NPL 15 to 90, improved this quarter by 50 basis points, reaching 3.7%. This was driven by two main factors. Number one, the improvement in the credit performance of our personal loans portfolio in response to the management actions taken in Q2. And second, the favorable seasonality that takes place during the fourth quarter when early delinquencies usually trough. It is important to note that that trough is usually accompanied by a rebound in early delinquency rates during the first quarter of each year. 90 plus NPL ratio increased from 4.7 to 5.2%, behaving in line with the expected stacking behavior of these buckets. I want to take this opportunity to reinforce that new has never sold delinquent loans, which otherwise would have had a purging effect, thereby artificially lowering delinquency rates. With respect to loan renegotiations, they remain at around 7% of our book, with approximately half of those coming from current and not past due customers at the time of renegotiation. For the credit card portfolio, these six graphs show the time series of NPL by income band, where the purple line represents new and the gray line represents the industry. As we already mentioned during previous calls, and as you can see on these updated charts, we continue to outperform the industry on a like-for-like basis. For the lower income bands, our comparative advantage is even more pronounced. The gap for each income band continues to widen as you look at the trend over time, demonstrating that our competitive advantage in underwriting remains consistent and sustained. Just as in past quarters, provisions continue to grow primarily driven by the growth in our portfolio. We front-load provisions when we originate loans based on the expected losses for the life of the credit in accordance with IFRS 9's expected loss methodology. This quarter, much of the expansion in our risk-adjusted NIM can be traced back to the improvement in our cost of funding. However, even after adjusting for that factor, we would still see risk-adjusted NIM stronger than that of the third quarter and even stronger compared to that of the fourth quarter of 2021. Having shared these data and perspectives on credit and asset quality, let me now turn the call back to our founder and CEO, David Velez, for his concluding remarks.

Thanks, Joseph. It has now been a little over one year since our IPO. And despite much more adverse conditions than we could have anticipated, we're proud to have over-delivered on our commitments to the market. Our over 8,000 colleagues delivered these results through an unwavering focus on strong execution, and I think each and every one of them. Let me now close by summarizing some of the most important changes in the environment, how we adapted our strategy to deliver on what had been promised and what lies ahead of us for 2023. First, in late 2021, no one expected the sharp increase in policy rates that skyrocketed to almost 14% in Brazil. To mitigate this, we launched money boxes, and six months later, we lowered our cost of funding to 78% of the CDI from about 100%, while both deposits and money boxes continued to grow sequentially and strongly. Second, with a tougher environment for asset quality in Brazil, we became more restrictive in originating personal loans, while repricing our products and building resilience within our portfolios. In parallel, we accelerated the launch of secure lending with the general launch of payroll lending in Brazil, expected in the upcoming quarter. We're confident that this is a disruptive solution for customers, which will foster growth into different client segments, thus furthering balancing our credit board. Third, we doubled down on smart efficiency, moves to foster profitability and showcase the operating leverage of our model. One of these moves was the termination of the CSA, which will save the company $70 million per year. But beyond that, it reinforces how committed Nu as a company is to accelerating value creation for all of our shareholders. Our efficiency ratio will continue to improve progressively over the coming years as we capture cost savings opportunities and reduce the rate of headcount growth going forward. Finally, in 2023, we will prioritize winning our first share of wallet in the upmarket in Brazil, where there remains tremendous opportunity growing our personal lending book, both secure and unsecured, and expediting the inflection of the growth model in our new deals. Almost 2 million customers with monthly income of 12,000 Riyals are already clients of Nu. But our share of wallets with them is currently at approximately 10%. In 2023, we will also break into a secure lending market, positioning payroll loans as a core product to complement our personal lending product shelf and widen our growth opportunities in the country. Last but not least, 2023 will be the year in which we launch and deepen the penetration of NuQuinta in both Mexico and Colombia, we should accelerate the growth and sustainability of our platform in these countries. We will continue investing significantly in both countries as we think the potential price is very significant. We entered 2023 with a lot of strength and are excited to continue improving our model across products and geographies. We would like to take your questions now.

Thank you very much. We will now start the Q&A session for investors and analysts.

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 QE by clicking on put your hand down. Please limit yourself to one question and a follow-up. If you have further questions, please re-enter the QE. you may submit online questions at any time today using the Q&A box on the webcast. I would now like to turn the call over to Mr. Jörg Friedman, Investor Relations Officer.

Thank you, Operator.

And our first question comes from Jorge Cude, Morgan Stanley.

Hi, good afternoon everyone and congrats on the fantastic results and thanks for the additional disclosure on the Brazil numbers. profitability at this point is evidently really impressive, so congrats on that. I wanted to ask about the money box. It was a really positive surprise to see your funding cost at 78% of CDI, down from 95% in the previous quarter. To what extent this is a seasonal improvement based on the fourth quarter excess liquidity that normally comes in customers because of the 13 salary? Or is this sort of like the level from which you could continue to improve in 2023? And what do you think is the opportunity for you to continue to improve that number? If I remember correctly, I think in a couple of public forums, you said that maybe by the end of 2023, the funding cost could be at 80%, but evidently you were at 78% at the end of last year. So how do you see that evolving? Thank you.

Thank you so much for your question. Um, we, we do expect the, the funding costs to remain largely at the same levels throughout the coming quarters. Respective seasonality as you corrected pointed out in the 4th quarter of every year, we have the additional flow from the 13th salary. which has in the month of December 2022 pushed down a little more the cost of funding than would otherwise be expected in a so-called normal month. However, We haven't yet seen the full impact of the change in the remunerations. We will only see this in the first quarter of 2023. So with those puts and takes, we do expect that cost of funding at today's levels is a sustainable level for us to see throughout 2023. Great. Thank you very much, Lelo.

And our next question comes from the line of Tito Labarta from Goldman Sachs. Operator, please open his line.

Hi, good evening. Thank you for the call and taking my question. You know, congratulations, pretty impressive results. My question is a little bit on the competitive environment and just looking at, you know, now you're 58% of your active client base. You have as primary banking clients already. You know, when we look at the industry, you know, some of your incumbent peers, particularly the ones focused on similar regions or income levels seem to be suffering. a lot more than you are. So just to think about what do you think has been able to differentiate you and really manage this credit cycle in a way that many people didn't think you potentially could and be able to deliver the results that you can. And if you could talk a little bit about how competition perhaps is influencing that, that would be helpful if you get some color on that.

Sure, Tito. Thank you very much for the question. So, listen, I think the story that we're playing out is a very different story than the incumbents banks are playing out because on one end, we have 44% of the adult population in Brazil as a customer, a very meaningful population. On the other end, we have very small market share still in a lot of our products. In credit card, we have something like around 13%. In personal loans, we have about 3%, 4%. So we get to grow within our consumer base, share picking the best customers, and can continue gaining share even if the environment is pretty adverse. So that's the first big differentiation. The second consideration is, and this is, I think, a point that perhaps the market hasn't understood that well, we are growing our credit book within our own, what in Brazil called correntistas, or the close ocean. We give credit to customers that use our primary bank accounts, that are getting their salaries in our accounts, that are using our apps to do payments, that are getting an insurance. So that generates a lot of loyalty on one end, and that generates a lot of information that we can use for underwriting. We are not providing credit in the open ocean, as a lot of banks have actually done over the past 12 months. There's been a lot of growth in that open ocean. So it's been a different strategy, and as a result, we get to continue to pick within a base that we understand and that we know. The third consideration is we've actually always looked to provide products that are very good for consumers, and we've been very careful about taking into account ratios on household debt. So just to give you one data point, the credit card product, we don't think revolving as a product is a good product for consumers to finance. It's a very high interest rate. Consumers enter into that product and they ultimately end up getting very high losses. So as a result, we look for customers that pay on time. We've always looked for customers that pay their bill on time. If we could choose, we would get 100% customers that pay on time. And as a result, what you see is in the market, about 70% of customers of the incumbent banks getting to the revolver. For us, it's only 7%. So we end up with a consumer base that is healthier, that is less leveraged, that provides more data to give us information around underwriting, and that we ultimately get to cherry pick to provide credit and continue to grow, even if the environment, as a big headline, is adverse and generates some risk. regardless of that we did though decided to take it a little bit slower as you saw in 2022 especially in consumer lending which was a newer product but as you will see as you see here on the delinquency numbers on q4 which ended up being better than we expected even though there is some seasonality we already started uh growth again and and feel comfortable that we can start starting tweaking up the growth on the lending side But we will be monitoring these very closely, and if the environment shifts, we are very, very agile and can shift very quickly as well.

Great. Thanks, David. That's very clear, very helpful. One follow-up, if I may. And thanks for the slide 10, showing that profitability in Brazil, you know, it's already showing annualized of 40%. But you still have a very under-levered balance sheet, and, you know, efficiency is improving pretty quickly. But do you think there's still upside to that 40% ROE in Brazil as you expand the product base, the whole upsell and cross-sell to your clients? And do you think there's some upside to that number from here?

Tito, we think that the profitability levels that we are showing now are a good testament of the long-term potential of the profitability that we can have as a digital bank. It provides clear evidence in our view about the cost modes and the revenue advantages that we have. So in the long term, we do believe that there's more upside optionality there. In the short term, we don't provide guidance. So for 2023, we do expect to see some puts and takes in this equation. We do expect on one hand to see the caps on the interchange of prepaid cards coming into fruition on April 1st. We do expect that as we accelerate growth, this will put additional weight on our margins. Conversely, as TAO wins, we expect that we will continue to grow and extract even more operating efficiency out of our system. All in all, we think 2023 is another year of a healthy level of returns on equity, respected seasonality across the quarters. In the long term, we believe that there's more profitability for us to extract from the model than we have seen so far in Brazil. And we also hope that Brazil is also a good showcase to what we can develop in other geos. So as we can see in the S curve that Davi showed, Mexico and Colombia are a few years behind Brazil, but we have no doubt that they will achieve profitability levels at the same zip codes as the ones that we are achieving in Brazil in a few years.

And just to add a bit on that, I think, ultimately, if you take a step back and go back to the kind of first principles of the business model that we've always been espousing is that the model of digital banking should provide much higher ROE than traditional banking because ultimately you are operating with costs that are over 85% lower than incumbents. We don't have branches in every corner. We don't need hundreds of thousands of employees. We don't need a lot of very expensive headquarters. All of that, we don't need it to serve customers and even provide a better experience. So that has always been sort of the hypothesis. We've tried to Prove it through unit economics. When we look and show it, when we show economics of the products that we have in lending, there are upwards of 60% in credit card, there are upwards of 100%. But now we finally get to prove it to you with an actual geography like Brazil that is at a mature level and can start showing this level of ROE. And while there are some benefits of seasonality in Q4, as Lago mentioned, Ultimately, that is the direction that I think the model will converge towards in Brazil and in other geographies as well.

That's very clear. Thanks, David. Thanks, Lago.

And our next question comes from the line of Mario Pieri of BIAVEI.

Hi, guys. Congratulations on the quarter. Quick question from me. When I look at your net interest margin evolution, you clearly benefited from lower funding costs. But we're looking here at the model, and we're also seeing higher lending spreads on your products, even though your mix is going against you, given that you're growing more on credit cards and personal loans. So my question is related to your ability to continue to reprice um you know not only even the competitive environments but the health of your clients right like we we know the economy in brazil it's okay it's not doing great we know that uh consumers in brazil are facing the effects of higher rates higher inflation their disposable incomes so just wanted to understand here like if you see much more room for for repricing your product and and As a follow-up to that question, you know, we have been hearing a lot of noise in Brazil of potential implementation of interest rate caps on credit card loans. If you could discuss that as well, that would be helpful. Thank you.

Hi, Mário. Thank you so much for your question. Let me try to break them into first a little bit on net interest margin and then the second one on the cap. On the net interest margin, as you have seen, and I'll draw your attention to slide number 22 of our presentation, we have seen a fairly material expansion over the past four quarters. And we expect that this expansion will continue as a result largely of two factors. Number one, we do expect that the credit portfolio will outpace the growth of deposits, and therefore we should see the loan-to-deposit ratio going up, and that should be, by and large, a big tailwind to that interest margins. Number two, we do expect that the continue of the lower cost of funding, that should increase the margins that we have. We are not relying, going straight to your question, on additional repricing of our products. But we believe that we will see kind of a shift in mix throughout 2023. I think personal loans, unsecured personal loans on one hand may outpace the growth of credit cards. But conversely, we should also see throughout 2023 the beginning of no de consignado or public payroll loans. So, the combination of this changing in mix should provide us also with an expansion of net interest margin by, by and large. So, I think that is my attempt to address your 1st question. Basically, net interest margins is expected to continue at a healthy pace. Not because we will reprise the products up, but because of the growth of the landing portfolio and the continuous lower. Of cost of funding that is the number number 1 number 2 on on the cap on credit cards. We have been hearing and discussing with a few analysts and investors about this question. And this is a question that has been lingering in Brazil for. Over a decade now, right? So, for over a decade, we have seen attempts to restructure and reshape the unit economics of credit cards. We have been investing a lot of time understanding this and actively participating in these discussions. We don't think that there's going to be any short term change to the unit economics of credit cards. It is a very complex product that if you change 1 thing in interest rates, you should probably also change other things in interest free installments. And therefore, it poses for a very complex outcome. It is our view also that interest rate caps and credit cards will largely lead to lower levels of financial inclusion and lower levels of credit availability to the general public, which seems to be the opposite direction at what now the Brazilian Central Bank and the current administration wants. So we don't see any of those risks in the short term, but we are watching this carefully and participating in the debate.

Very clear, Lago. Thank you very much.

And our next question comes from the line of Gustavo Schroden from Bradesco.

Hello, good afternoon everybody.

Congrats on the bottom line, strong bottom line and thanks for the call. My question is indeed about the bottom line or the net income. I understand that you do not provide an official guidance and I could hear your answer on the Titus question. My point here is that if we analyze, for example, the fourth quarter results, we could have a sense of a feeling about what would be the net income in 2023. So what I'm trying to understand here is that do you think that would be reasonable to use the fourth quarter results as a proxy for earnings quarter or earnings during the coming quarters in 2023? to have as a starting point for us? Or do you see some change over the course that could change the dynamics that we saw in the fourth quarter? Thank you.

Gustavo, thanks so much for your question. It is a challenging question to address as we don't provide guidance. But I think 2023 provides for a mix of puts and takes, as I mentioned to Tito. On average, we expect that we will continue to pose relatively healthy levels of returns on equity and bottom line profitability in Brazil. Although we do expect to continue to see seasonality playing its role throughout 2023 as we have seen in 2022. If you take a look on slide 11. Of the presentation, you will see that our adjusted return on equity for the 3rd quarter of 2022 was about 20% that it went up to 40% in the 4th quarter. So we expect to continue to see those trends throughout 2023. But, uh, but, uh, healthy levels of profitability nevertheless. Two things I would highlight, however, as you look at Mexico and Colombia, we continue to invest and we will continue to invest in both of those countries as we have invested in Brazil. It has taken Brazil almost nine years, ten years to get to today's profitability levels. We think that Mexico and Colombia We'll still take a few years, but we will be able to shorten that cycle there over the coming decade. However, as I mentioned in my opening remarks, Gustavo, we will not manage the company trying to optimize for next quarter or next two quarters ROE. We will optimize The results for the long term, yet the business model in Brazil shows very kind of a vivid signs of profitability that we expect to continue to showcase to analysts and investors as we evolve.

Great, great. Thanks, Lago. And just a follow-up here, specifically on the ROE that you mentioned and specifically on the investments that you mentioned in Mexico and Colombia, we could see that your capital allocation in Brazil is about 1.7 billion out of 4.9 billion total. are consolidated. My question here, what are your expectations of a capital allocation in other countries, such as Mexico and Colombia, I would say in one or two years, or maybe when you think that Mexico and Colombia will be at the same maturity of Brazil? I'm just trying to understand here the capital allocation, because in my understanding it is important, especially when we analyze the ROE, so I'm just trying to get a sense here your capital location and what would be the potential equity overall here, potential ROE in a consolidated basis. Thank you.

No, absolutely. Let me try to provide some guidance, or not guidance, provide some color on those questions. I will draw your attention to page, slide 35 of our presentation. There you can see our capital position. First and foremost, we do believe that our business plan in Brazil, Mexico, and Colombia is fully funded. We have plenty of capital, plenty of liquidity to support the growth organic of Brazil, Mexico, and Colombia over the coming years. uh we we do appreciate however that uh mexico and colombia uh can be more funding intensive than is in brazil especially because of the working capital cycle of credit card in those countries uh and and and also because of how much interest earning uh Is used in credit card, so in Mexico and Columbia, the working capital cycle, I pay merchants in. D plus 1 D plus 2, whereas I pay merchants in Brazil in D, plus 27 and the percentage of the credit card books that is allocated to interest earning portfolio. There is higher than it is in Brazil for those 2 reasons. It is more funding intensive for us to operate in those 2 countries. and we will have to develop very soon our deposit base in Mexico and Colombia, and eventually those will become countries in which they will also be more capital intensive with higher levels of return on assets there.

Great, Lago. Thanks, very clear. Thanks a lot.

And our next question comes from the line of Marcelo Telles at Credit Suisse.

Marcelo, your line is open.

Okay, so it seems that we are having problems with the line of Marcelo Telles. So let's move on to the next question. And the next question comes from the line of Pedro Le Duc at Itaú.

Thanks so much, Jörg, Lago, Willis, for the call.

Good evening. I want to get your thoughts a little bit on loan book growth and vis-a-vis provisions, provision expenses. How are you seeing NPLs evolve? This quarter ticked up a bit. Yeah, there's some seasonality here as well. Stage three formation is a bit high, coverage down. So as I model 2023 here, I can definitely see the strength of NII. offsetting a slower loan book growth, even though some growth, yes. But I struggle to see provision expenses coming down as a percentage of the loan book, at least this year or near term. Does that make sense? Again, thank you.

Pedro, this is Yusef. Thank you for the question and good evening. So taking your question in part, so with respect to provision expense, I would point you to the appendix of our earnings presentation. Page 48, I believe, kind of breaks down the drivers of that. And as in past quarters, it's driven predominantly by growth. You know, about 90% of it is driven by growth. Now, when you look at the credit quality and NPL, so beyond what I provided in the earlier remarks, I think it's important to kind of distinguish the dynamic of NPL 15 to 90, the early indicator, short-term delinquencies from 90 plus. So 15 to 90 decreased sequentially. That's very much in line with seasonal patterns. 90 plus increased because 90 plus tends to behave uh as a uh as a stock metric right it accumulates uh for credit cards all the way up to a year after entering delinquency buckets and so we've seen kind of behavior on these two metrics uh pretty much following expectations um and so you know going forward it's hard you know for me to give you very precise uh guidance given that The pattern of delinquencies will depend on several factors. Part of that is the quantity and mix of our own originations. Part of that is more macro drivers. But, you know, what I can tell you is from a seasonal perspective, we expect, as usual, Q1 to be a seasonal peak in delinquencies following the trough in Q4, and then Q2, Q3 tend to be more normal.

So that's, you know, that's what I expect the seasonal pattern to look like. Thank you. Sorry, if I may follow up.

The outlook for provision expenses vis-a-vis loan book growth on a relative basis for 2023 expected coming down gradually as the year goes. How are you guys seeing that?

Yeah, Pedro, I expect what we've seen in past quarters and in Q4 to continue, which is, you know, provision expense will primarily be driven by the growth in the bulk of it. as you've seen on page 48, is driving that growth. And again, it's the quantity of growth, but also the mix. So there's slightly different dynamics between credit cards on secured lending. And when we introduce secured lending, it will change the mix a little bit as well over time.

Thank you.

And our next question comes from the line of Thiago Batista at UBS.

Hi guys, congratulations on the results.

I have a question about the amazing 40% ROE that we provided for the Brazil operations. Do you know what would be the profitability if central bank rules regarding capital were already implemented? So what would be the ROE with the fully loaded of the capital requirements in Brazil? And as a follow-up, if the payroll loan business should be diluted or not for those ROE?

Thiago, this is Thiago. Good evening. Thanks so much for your question. The ROE numbers should not change much in the new regulation because as of the end of 2022, we were already operating at an all-in basal, already looking at the conglomerate between 9% and 10%. So, it should be, this should increase gradually from 2023 throughout 2025, but we are not operating with a much lower capital base than other financial institutions would have been had they opted for the prior regulation. So. We can certainly work with you after the call and try to fine-tuning from 9.5 to 10.5, but it should directly not change much the levels of returns that we are getting as of today, largely because we are massively overcapitalized in Brazil. If you take a look at our financial statements in the very last page, you're going to see that the capital ratios of our financial institutions is above 20%, the capital ratios of our payment institutions above 20% as well. So I think that's my attempt to address your first question. On your second question, no, I don't think that the payroll loan should be dilutive to our overall ROE. We are assuming that we're going to have levels of return on equity and returns on tangible equity that are in line or higher with the return on equity that we posted in the fourth quarter of 2022. But I'm not sure if I answered your question. I'm very glad you went into those two things.

Very clear, Lago. Thank you a lot.

And our next question comes from the line of Niha Agarvala from HSBC.

Hi, congratulations on the results and thank you for taking my question. I'd like to talk about asset quality a bit. Could you give us a sense of what would be the asset quality, the NPL ratio 90 day with the older methodology, if that's possible? And we've seen the early delinquencies come down during this quarter, which is a good sign. Does this mean you're feeling a bit more comfortable regarding asset quality or are there pockets of vulnerability that you continue to remain cautious about? And how do you see that impacting originations in the coming quarter? In 2022, you're very clear that you would probably like to maintain originations at a level of 5 billion every quarter. Should we expect that to be accelerated during 2023? And what do you see the risks regarding that acceleration?

Yeah, good evening. Thanks for the question. So let me address first your question on the impact of the write-off methodology change we did at the end of the second quarter of last year on NPLs. As we've reported in past quarters, you should think about the impact on 90-plus NPL. as a reduction of two to two of 200, 220 basis points in the quarter. So it's pretty consistent with past quarters on that. Now, with respect to NPL trends, and as you correctly pointed out, so there's been sequential improvement in 15 to 90. Some of that was seasonality. Some of that was the improvements we drove throughout the year. in our underwriting stance, particularly with respect to personal loans. As we mentioned in past quarters, we took a bit more of a cautious stance given the uncertainty throughout the year, and we've seen very positive results from that, both in terms of the repricing we've done on the top line, as well as NPLs. And so, all in all, we feel pretty good about what we're seeing from a risk-return standpoint. And that drove the sequential increase in originations, as Ligo pointed out, of around 10 percent in personal loans itself. And so we're pretty encouraged by these trends. You know, again, it's hard for me to give you very precise guidance on a going-forward basis, but, you know, so far we're kind of comforted by what we're seeing on those.

Sorry, I did not get the 90-day NPL ratio under the old methodology. What would the number be approximately? Do we have that?

Yeah, yeah. So just to refresh on how the new methodology works. So and it affects, you know, primarily personal loans whereby, you know, the timing of write off moves from 360 days to 120 days. This is per IFRS principles on expectation of recovery. So when you're moving the timing of write offs, you're basically moving whatever was from 120 days to 360 days of delinquency to write off. So that tends to decrease 90 plus. decrease. It was around 220 basis points of decrease between moving from the old to the new methodology. And that's been consistent across quarters since we made that change. I don't know if that was clear.

Okay. Okay, yeah. I just wanted to confirm about the 220 basis points difference. That's perfectly okay. And regarding asset quality, if you could just elaborate At this point, like, it seems like things are getting better, early antiquities are coming down. What worries you regarding asset quality? Is there any particular exposure that worries you? Or are you just cautious about the macro and trying to take it slow, keeping an eye on asset quality?

Yes. So, on that, I mean, I think it's helpful to kind of take a step back and rewind the clock a little bit to where we've come from. abnormally low because consumers were saving money. There were government interventions and so forth. So for a bunch of reasons, we were in abnormally low delinquency territory. And it was very clear that the trend was going to be normalization and a move upwards of delinquencies. I personally think that cycles largely played out and we're now in a new part of the cycle. And so it's a little bit more of a higher uncertainty part of the cycle. And for us, you know, the stance is to be cautious. We're not worried about particular pockets, but, you know, we're always prepared to adjust our underwriting based on anything we see in our monitoring. And we've actually built our underwriting system to be able to iterate very dynamically, very quickly adjust, you know, if we see things play out different from our expectations in either direction. But I would say in the last two quarters, and particularly in Q4, we've seen relative signs of stability, and we've seen NPLs come in fairly close to our expectations.

Perfect. Thank you so much.

And our next question comes from the line of Jamie Friedman at CIG.

Hey, guys. Thank you, and let me echo the congratulations. i just wanted to follow up on um some of the previous questions including those from here so um lago when you were walking through slides 18 to 20 i thought that the suggestion i don't want to exaggerate was that there could be an acceleration and originations i realize you don't give guidance but if we could everybody seems to be Asking about the same thing. So what is it maybe, Lago or Yusuf, that would make you more confident in opening the credit box? Because it seemed like in 22, just to kind of revisit what happened, the box was open, then it was closed, then it was reopened, then it was closed. So anyway, where are we in the Goldilocks? And what would make you more confident lending again? Thank you.

Jamie, thank you so much for the question. Let me let me try to to address and then I'll also invite Yusuf to compliment. I think there are a few aspects that he addressed in his response to Neha that would help us here as well. But I think if you if you take a look at our, you know, presentation slide 18, you're going to see that the growth that we have had is built off, you know, basically two tails, as I mentioned in my opening remarks. Number one is credit card. Credit card has grown Over the past year at a clip of about almost 70% year on year, and we continue to see very strong support in its growth throughout the 1st quarter of 2023. We believe that we're going to have another strong year at 2023 as a whole. in personal loans as you can go to slide 20 and know referring to some of the comments that Yousef made earlier in the call we were in fact a little bit cautious throughout 2022 we waited for a few quarters for delinquency to stabilize we have seen Delinquency stabilizing in the 3rd quarter, but primarily in the 4th quarter. And if you take a look in the 4th quarter, we have already started to accelerate the originations of personal loans. It went from about 4.6 to 5 billion, so no more or less 10% growth. All else constant by which I mean, if we continue to see. no losses and delinquencies playing out as per our expectations, you should expect to see ourselves growing a bit more the originations of personal loans throughout 2023. Now, in 2023, you should also expect to see our launching secure personal loans, mostly public payroll loans, which should be an additional growth engine for our loan book throughout 2023 and 2024. But Youssef, I'm not sure if you have anything to add to Jamie's questions.

Yeah, Jamie, just to add a couple of things to that in terms of how we think about the credit box and tightening or loosening. I mean, we operate always working backwards from booking every loan, every credit grant to be NPR. and still be above hurdle returns. And so that's what we work backwards from. And we kind of observed in our monitoring, you know, of adjust accordingly. So it's unusual that we make very big wholesale changes to our underwriting scorecard at any given point in time. It tends to be much more dynamic, much more gradual, much more tweaking around the edges, unless there are extraordinary events. So I think you're seeing a little bit of that in the fourth quarter with the increase in personal loan volume. And again, if performance continues to come in per our expectations, that trend should continue. The other thing to think about is beyond tightening and loosening the credit box, what impacts our underwriting or our origination volumes is the quantity of customers we have available to us to underwrite. And in particular, the quantity of customers for uh pba customers primary banking account customers you know that gives us a lot more confidence and a lot more certainty in terms of being able to underwrite them for credit card for higher limits or for personal loans thank you so thank you lego and our next question comes from the line of eugene simoni at moffett nathan

Hi, guys. Good evening.

Thank you for squeezing me in. I actually wanted to ask a question on your 2023 priorities. Specifically, it was very helpful to hear, I think, David, in the beginning of the call, you kind of called out a couple, I think, strategic areas that you're looking to focus on in 2023. including secured loans, affluent segment, obviously Mexico and Colombia. I wanted to ask from a product angle, so new product launches, or maybe the products that are early in their development that you're focusing on for 2023. What's the top two, three products there that we really should be watching this year?

Hi, good evening. This is Jag Dougal. I'm the Chief Products Officer at NewBank. And let me take a Let me take a swing of your question and complement with what David said and reinforce some elements of it. There are a series of launches that we are really happy with that either recently happened or or are pending. First, I'll reinforce a couple that both David and Lago have mentioned. We are excited at NewBank year by year to go after the largest profit pools in the markets that we operate. So we started with credit card. and moved over the last couple of years into unsecured lending. And now we're excited to move into secured lending, which is the third largest profit pool in the country, starting with a big focus on loans secured via public payroll. We also have investment backed loans, which we've recently launched and looking to build out our secured loan portfolio. So just reinforcing that point. a couple you also mentioned and david mentioned the the focus on building up a deposit base in mexico and ultimately in colombia as well by opening up our bank account product or cuenta in both of those countries this year that'll be important in its own right as part of broadening our product offering for our customers and also to help drive funding for credit as those markets evolve. a few other products that i will i will mention first one that we launched a little while ago but is now getting to the point where we're starting to make it available to more customers is our credit card product for small businesses our bijota credit card product which again allows us to a address the credit card market, but be also broaden our offering for small businesses and build out the other side of our network. And the other product that I would mention to you is the product we just announced publicly, I think it was yesterday, which is auto insurance. And again, it's just an example of us rounding out our product portfolio, particularly for customers who are in the middle and upper parts of the income spectrum. So that stands out. And we're also continuing to work on scaling up our money boxes, which we've talked a lot about, and our ultra violeta of market credit card, which has shown a lot of promise in the last several months. So those are a few of the things that I would highlight for you. Got it. Very helpful. Thank you.

I'll leave it there.

and our next question comes from the line of alexander mark rath at key bank hey everyone thanks for taking my question um maybe first just on the credit uh portfolio i wanted to ask just on on slide 19 um the 12 receivables mix of installments obviously kind of above market just curious as to where you're comfortable or or kind of targeting that 12% to trend in the near term and long term.

Yeah, hi there.

So on the growth in interest earning receivables and credit cards, so this was the product of us, you know, basically launching a number of new features for customers to be able to finance purchases, to finance payments, whether they be barcode payments and fixed payments, which is one of the latest features we've added. And we've seen a lot of success in strong adoption, really strong behavior from those features. So it wasn't really that we were working backwards from a particular number, but really seeing strong customer adoption of these features and very strong unit economics from those. So going forward, and introduce new features. So hard for me, again, to give you a specific guidance on where that number is going to land, but we've been pretty happy with the customer adoption, the performance of those features we've introduced on credit card financing.

Okay, that's helpful. And then maybe just one more kind of macro-related questions. Just some kind of help or commentary on how you're thinking about Potential tailwinds and headwinds for 23, not looking for guidance, but just more generally speaking, how should we think about some of the, the puts and takes for for 23.

On TV, so look, I think if you look historically on TV. Over the next over the last 3 years, the market has grown at no. 30 to 35% per year. part of that was basically a recovery of the TPV pre-COVID. I think now we are getting to a point in time in which market expects the aggregate TPV of the market to grow at anywhere close to low double-digit rates for 2023-2024. That should not be the growth rates that one should expect from our cars business. We should expect from our cars business to grow materially higher than that. as we expect to continue to gain market share in both credit cards as well as prepaid slash debit cards. We have been gaining market share over the past two years at a pace of about 150 to 250 bps per year. We should expect to continue gaining market share strongly over 2023 and 2024. Great. Thank you.

Thank you. Thank you, Lago. Thank you, everyone. And this concludes today's call. On behalf of New Holdings and of our investor relations team, I want to thank you very much for your time and participation in our earnings call today. We're very excited to continue on growing and strengthening our position in Brazil, Mexico, and Colombia. Over the coming days, we will be following up with the questions received by our platform. So please do not hesitate to reach out to our team if you want to make any further questions.

Thank you and have all a good night.

The new holdings conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.