Having said that, however, if you take a look at the profit pool of the Brazilian retail industry, about 70% of the profit pool is still composed by consumer credit. Namely, credit cards, unsecured personal loans and secured personal loans. So it should not be a surprise that as of today, the majority of our revenues and gross profit margin also comes from some of those consumer finance products. But I believe as the new business that we have, namely investments, marketplace, insurance, continue to emerge. We will have more and more visibility of their financial and non-financial performance, in the coming future.
Operator: And our next question comes from the line of Craig Maurer at FT Partners.
Craig Maurer : So two questions. One, the activity rate showed, strong improvement. Can you characterize what were the underlying drivers to that? Was it the growth in primary banking relationships, or was it the launch of payroll. And secondly, you’re talking about going down the credit quality ladder, which could drive delinquencies a bit higher. I’m curious your thoughts on how that might affect, the Portfolio, if you go, if Brazil goes into another soft period regarding credit, should we expect to see a more significant rise in losses as a result and how you’re thinking about that with regard to provisioning?
Guilherme Lago: Thank you so much for your question. Let us state this in steps. So the first question is about the activity rate, and I would draw your attention to Slide number 10 in which you see that activity rate has basically continue to go up from about 82% to now closer to 83%, not understanding the very strong growth of our customer base. I think that is largely explained and correlated with our, no progress towards primary banking relationship. If you take a look at the chart, on Slide 11, which is the following one. The chart on the left indicates the primary banking relationship cohort analysis that we present every single quarter. And as you may note, we now have almost 60% of our active customers being primary banking relationship customers.
And you can also note that we are getting to more than 50% faster and faster over time. For the 2018, 2019 cohorts, it used to take us about 50 months to get there. Now it’s taken us less than 12 months to get there. Why is this happening? I think it is happening as a result of external factors and internal factors. External factors is that as consumers where we operate, embrace real time currency pigs, embrace digital banks more and more, they more easily embrace the business model of Nubank that has become even more pronounced during and after COVID. The internal factors is actually the chart that you can see at the center of this slide, which is as we launch more products, as we launch more features, We earned the right to be the primary banking relationship of more and more customers.
So if you were a customer of the bank back in 2017, you had only one product, credit card. Arguably, it was very hard for you to gear our primary banking relationship customers with credit card only. But as we launch bank account, peaks, investments, insurance, marketplace, DuCoin, we have a much more compelling value proposition, a much more complete set of products and that foster primary banking relationship that foster engagement. We do not see this trend stopping or declining. On the contrary, we think that we will continue to launch best-in-class products, disruptive solutions. And with that, we will not only sustain high levels of activity, but we will also foster the continuous expansion of those activities. So I’ll pause here. I will pass the floor to Youssef to address your second question related to credit underwriting.
Youssef Lahrech: Hey, Craig. On the credit expansions and what does that do to the credit book, in the event of a downturn. So just as a reminder, we underwrite, obviously, try to max seeking to maximize NPV, but also we underwrite for resilience. What does that mean practically? It means that every additional loan we book, every new customer that we onboard, we want them to be profitable and above hurdle returns in the event of a downturn. So, specifically, when you look at a cohort level, we underwrite our cohorts such that they’re able to withstand the doubling of losses and still be, NPV positive. So that gives us a lot of resilience and a lot of, and a strong ability to withstand variability and the ups and downs of the cycle.
Now that’s one thing. The other thing I’ll point out is, thinking about various segments within the credit spectrum. Having a high-risk segment doesn’t necessarily mean it’s going to be a higher volatility segment in the event of a downturn. Those tend to be sort of very dependent on what kind of down cycle we’re in. We know we’ve seen in other markets; more mortgage holders deteriorate more than the average. We’ve seen small businesses sometimes, deteriorate more the average. So it really depends on what kind of cyclical dynamic you’re facing. And again, we take the approach of wanting to have through the cycle strong resilient returns and everything we underwrite.
Jorg Friedemann: And this concludes the earnings call for the third quarter. The name of Nu Holdings and its management team, I want to thank you all for your participation in our conference call today. Our IR team, is fully available to any additional follow ups, and we will be responding to questions sent via webcast over the coming days. With that, we finish our earnings call. Have a good night. Thank you.
