XP Inc. (NASDAQ:XP) Q1 2025 Earnings Call Transcript

XP Inc. (NASDAQ:XP) Q1 2025 Earnings Call Transcript May 20, 2025

Andre Parize: Today, on behalf of the company, I would like to thank you all for your interest and welcome you to our First Quarter 2025 Earnings Call. Today’s presentation will be led by our CEO, Thiago Maffra, and our CFO, Victor Mansur, who will both be available for the Q&A session right after the presentation. If you’d like to ask a question, please use the raise hand feature on Zoom, and we will address them in the order we received. We also offer the option of simultaneous translation to Portuguese. If you’d like to activate it, please click the button below. Before we begin, please refer to our legal disclaimers on Page two, where we provide additional information regarding forward-looking statements. You can also find more information in the SEC filing section on our IR website. Now, I’ll turn it over to Thiago Maffra. Good evening, Mafra.

Thiago Maffra: Thank you, Andre. Good evening, everyone. I appreciate you all joining us today for our first quarter 2025 earnings call. Let’s begin by reviewing the key highlights for the quarter. It is important to mention that we continue to execute our strategy initiatives delivering high results consistently. Starting with Client Assets plus AUM and AUA that we are now disclosing that achieved BRL1.8 trillion posting a 13% growth year-over-year. We accounted 18.1000 (ph) advisers representing 2% growth year-over-year and active client base posted 4.7 million with 2% growth year-over-year. In the quarter, gross revenues posted BRL4.6 billion with 7% growth year-over-year. We delivered solid (ph) ABG growth of 16% year-over-year reaching BRL1.3 billion.

And once again, happy to announce that we achieved the all-time high quarterly net income in our history, posting BRL1.236 million. It represents a 20% year-over-year growth. On profitability, we achieved 24.1% ROE during the quarter, with 340 bps expansion versus first quarter ‘24. On capital ratio we market a comfortable level at 19%. It represented an increase of 130 bps quarter-over-quarter. What’s important here is, our capacity to grow our business while keeping our capital discipline. Vitor will provide further details on this topic related to new regulation implemented during the quarter. Regarding diluted EPS, we posted 24% growth year-over-year, which corresponds to a faster growth than net income. As we mentioned last quarter, we should take this dynamic into consideration since we are executing our share buyback program strategy.

On this topic, I would like to reinforce that we have ended previous program of 1 billion and have canceled the treasury shares. Today, we also have announced a new share buyback program of another 1 billion. It’s part of our capital distribution plan aligned with our guidance target of this ratio to operate the business between 16% and 19%. Now, let’s see more details on the next slides. This quarter, we are sharing new info to provide a better understanding of our ecosystem. Basically, we added institutional client assets in total client assets and provided the completely view including assets under management from our asset management business and AUA from our fund administration business. Said that, our total client assets AUM and AUA comprehends almost 1.8 trillion, which represent a 13% growth year-over-year.

On the right hand of the slide, we see how net new money evolves. This net new money is only related to client assets, not AUM or AUA. This quarter, we market BRL24 billion in net new money, representing 79% growth year-over-year. Even considering the public events we faced during this year, we were able to keep growing. As we said many times before, our target for retail net new money is around BRL20 billion per quarter. This quarter, we delivered our commitment and it posted 54% growth year-over-year, corroborating to our understanding that our two differentials set us apart from peers and we’ll contribute to our continuous growth for the next years. On the next slide, let’s delve into our retail strategy. Here, we will explore our differentials and results of recent implemented initiatives.

Q&A Session

Looking to our product platform, we have not only the most complete and sophisticated in the country, but also the largest. If we look to our credentials in equities, futures, FX, options and ETF, we represent roughly 50% of the market, including fixed income in the analysis, we are also the largest player in corporate credit traded volumes, number of trades and midsized banks time deposit distribution, among other indicators. This advantage places XP ahead of any player in the country regarding investments. Being top of mind is an important lever to capture any market opportunity. And based on this rationale, we are confident that we can navigate in different weathers, grow our business while benefiting from our operational leverage. Now on our multichannel distribution.

I would like to remind you that since we have implemented our proprietary tools, providing more intelligence to support internal advisers with the electives, we had increased the daily activities by 11 times, ruling this out to all of our advisers. We have seen the standardized model providing higher productivity and client satisfaction across the board. Results of that are clear: the standardization of the way of work resulted in 19% lower year-over-year client churn and 14% higher year-over-year in adherence to recommended allocation. In parallel, we keep focusing on quality. We have increased our top-tier advisers by 21% year-over-year. The latter shows that the most productive profile is increasing faster and we should capture this benefit during the next years by providing a better level of service to our clients, more intelligence to our advisers and recommended the location process along the financial planning initiative, we are seeing encouraging results.

This powerful combination resulted in 10 points higher NPS and a lift in net new money of more than 50% of for clients that went through the financial planning process. Besides that, our standardized model includes IFAs and provides not only scale, but also balance returns to clients with different risk profiles. In other words, we see clients become even more satisfied before (ph) serves while they have returns aligned with their profiles on all channels. Finally, we were once again awarded as the best financial adviser platform in Brazil, something we are very proud of. This shows how we keep innovating and getting ahead of competition through different strategies throughout the years, but all those strategies have in common or client satisfaction as the priority.

Now let’s move to the next slide and see retail cross-sell figures. As we already mentioned during recent quarters, we launched many initiatives to provide better quality service to our clients. And as a consequence, they are increasing their engagement with XP. Now let’s see more details on our cross-sell and the first one is credit card. It grew 7% year-over-year, marking BRL12.1 billion in TPV during the first quarter. Despite the seasonality quarter-over-quarter, we expect to accelerate our credit card business with the new launch we will have by June. We will offer two new products focused on affluent and private bank segments. The new offering will comprehend an attractive package of benefits that will accelerate our penetration pace.

Life insurance written premium presented 40% growth year-over-year in first quarter ’25. As we said before, our insurance business is another growth avenue for the next years since our penetration is still in early stage, and we’ll keep evolving on a quarterly basis. It’s important to recap that we are starting to reap the benefits from our own insurance company, since it takes three years on average to see more positive results flowing through the P&L. This dynamic is because the first two years are more concentrated with paid commissions and provisions. On retirement plans, our client assets keep growing double-digit, posting 15% year-over-year growth and market BRL83 billion. XP has only 5% market share and there is a lot of room to grow.

As I said in recent quarters, we implemented new initiatives as cash back and sales force expansion to keep gaining relevance in our offering during the next years. Retail credit NII posted 48% growth year-over-year, marking BRL82 million in revenues in the quarter. Our lending process is based on client investments as collateral, and we have a lower than 1% ECL. On other new products, compounded by FX, global investments, digital account and consortium, they presented 99% growth year-over-year with revenues marking BRL205 million this quarter. It corroborates (ph) with our plan to explore other opportunities to cross-sell in our retail client base with innovative and attractive offerings, targeting to achieve BRL1 billion per year this year.

Moving to the next slide, we will address our wholesale bank evolution. Starting with DCM, as we had anticipated last quarter, the industry presented much lower volumes at the beginning of the year, and we also were impacted. On the flip side, as we had also anticipated and expected, it was possible to gain market share and keep our credentials of top ranked in DCM agribusiness credit notes and real estate funds. While the DCM industry reduced by 19% year-over-year, XP had an impact of 8% year-over-year. During the last years, we built the largest investment platform in Brazil, with relevance in secondary trading. This is a true differential to compete in this arena today and in the future. Regarding XP Institutional Broker Dealer, it’s another quarter that we gained market share.

In the end of 2024, XP posted 16% market share. And now we are at 17% competing head-to-head with the leader. In recent quarters, we have described our corporate security growth engine. First, our capacity to originate warehouse and distribute corporate credit, it’s way better than it was a few years ago. And second, how we are strategically warehousing assets under different market conditions. XP became a relevant player and more important than that, is to show how we have created a unique loop to recycle our corporate securities book to retail and institutional channels. In the quarter, we have sold a good portion of our book from the end of 2024, and we have warehouse more than that, achieving BRL34 billion, a net increase of BRL2 billion quarter-over-quarter.

The rationale was backed by our understanding that DCM is still with mild volumes in second quarter ’25, and we want to keep our competitiveness in the fixed income arena to our retail clients. To conclude my presentation, I would like to reinforce that we are starting to reap the benefits of the cross-sell and wholesale strategy we have been implementing in the last years. Despite not having yet a positive investment cycle, we are delivering solid results, capturing operating leverage with margin and ROE expansion. We believe we are still at the beginning of this process, and we are already projecting to close the year with ROE expansion, which is also a trend we expect to continue in the coming years. Now I will hand it over to Victor, who will provide a deeper look into your financial performance this quarter.

Victor Mansur: Thank you, Maffra. Good evening, everyone. It’s a pleasure to be here with you to discuss the financial performance for the first quarter of 2025. Let’s begin with the financial highlights for the quarter. Total gross revenues for the quarter reached BRL4.6 billion, representing a 7% increase year-over-year and a 4% decrease quarter-over-quarter. It’s important to bear in mind the seasonality of the first quarter due to holidays and summer time. We must pay attention that Retail grew 10% year-over-year, Corporate & Insurance Services, 11% year-over-year and Other posted minus 24% year-over-year. Considering other revenue concept, it’s important to understand the predation, conglomerate restructuring effects. Just to recap, before the restructuring, the financial results generated from cash position invested from the issued debt used to be allocated in other revenue and the cost of corporate debt was allocated interest expense on debt.

Now if the XP Bank on the top of the local conglomerate, both concepts are allocated as the bank net interest margin. If it wasn’t for this effect, other revenue would have been flat year-over-year. Therefore, it’s fair to calculate the operational revenues growth, excluding other. In this case, total growth was 9% year-over-year, sustaining that our business are responding to our plan for the year and accelerating for the second half of 2025. The key drivers behind this growth for the year, while retail fixed income, retail new verticals and other retail with our new ventures growing at a fast pace. On the wholesale bank corporate also posted positive growth of 23% year-over-year. As just mentioned, retail revenues grew 10% year-over-year and minus 4% quarter-over-quarter.

Retail revenue posted BRL3.4 billion in the quarter, a 10% growth year-over-year and a 4% decrease quarter-over-quarter, due to the seasonality. As expected, fixed income was the main driver in the quarter achieving BRL1.15 billion with 4%, 5% growth year-over-year and posting 3% growth quarter-over-quarter. For the first time in our history, fixed income was the largest revenue in retail. Fixed income results are completely connected for distribution capacity, warehouse strategy and the relevance in secondary trading. I also would like to highlight that other retail posted 19% growth in the year, mainly supported by FX, global account and digital account. Let’s move next to the slide of Corporate and Issuer Services. Corporate and Issuer Services revenue increased 11% year-over-year, marking BRL562 million and minus 6% quarter-over-quarter.

Even in a scenario if lower volumes from local industry, we’re gaining market share in DCM arena and as a result, Issuer Services delivered flattish revenues year-over-year, marking BRL282 million and a decrease of 16% quarter-over-quarter. It was a strong quarter for our Corporate division, capturing cross-selling opportunities, mainly if derivatives and energy. Corporate posted BRL280 million in the quarter, with 23% growth year-over-year and 7% growth quarter-over-quarter. Moving on to the next slide, we will explore our SG&A and efficiency ratios. Our SG&A expenses totaled BRL1.4 billion in the quarter, flat year-over-year and 10% lower quarter-over-quarter. We still focus on our expense control discipline such as new hirings of internal advisers.

Once again, we improved our efficiency ratio, and this time, it was lower in 204 basis points, reaching 34.1% in the first quarter. It is the lowest in our history. As revenue growth outpaced expense growth, we expected continued gains in operating leverage as we scale our business, even considering new investments to enhance our platform, such as improvement in our banking product offering and the more intelligent segmentation. Moving to the next slide. As a consequence of our assertive strategy to provide and complete our sophisticated investment platform to our clients, our EBT margin expanded 220 basis points year-over-year, reaching 29.1%. It also represents an expansion of 4 basis points quarter-over-quarter. Total EBT for the quarter was BRL1.3 billion, a 16% increase year-over-year and minus 2% quarter-over-quarter.

As I said last quarter, during 2025, our efforts will be concentrated on expanding our ecosystem and capturing the benefits of our larger business, targeting our commitment to 2026, deliver EBT margin between 30% and therefore. On the next slide, we see the net income. Net income achieved BRL1.2 billion, a 20% growth year-over-year and a 2% growth quarter-over-quarter. As Maffra mentioned, a record high net income for the quarter. More importantly, EPS grew 24% year-over-year, and we will explore this better in the next slide. We have been more vocal on our share buyback programs lately. Our diluted EPS achieved BRL2.29 per share. And as a consequence of executing the program and canceling the shares its growth base is faster than our net income.

During the first quarter of ’25, our diluted EPS posted 24% growth while the net income grew 20%, both on a year-over-year basis. In the quarter, ROTE marked 3.2% for 174 basis points higher year-over-year, and ROE achieved 24.1%, if 304 basis points higher than the last year. When compared on a quarter-over-quarter basis, ROTE increased 101 basis points and ROE increased 68 basis points, respectively. And now moving to capital management. As we demonstrated last quarter, XP has distributed closer to BRL10 billion in dividends and buybacks during the last years. During this year, we also have executed our last buyback program. And today, we announced a new one of BRL1 billion. The new program can be executed until December ’26, in spite of our plan to return more than 50% of our net income in both 2025 and ’26.

Moving to the second part of capital management on the next slide. To conclude my presentation, as anticipated last quarter, we had a new effect from the 4966 resolution, which contributed positively to our capital ratio. Returning our BIS ratio to 19% in the quarter. This new resolution changed the operational RWA calculation. The new methodology introduces some additional factors, such as the 10 year operational loss base. This combination of factors made operational RWA model more risk-sensitive resulting in a reduction in XP required capital. On the right-hand side of the slide, we can see that the total RWA to total assets reduced by 2 percentage points year-over-year, and total RWA reduced by 4% sequentially when compared to the last quarter.

As I said before, our RWA will grow at a moderate pace, more aligned if net income and delivering some leverage throughout the year. It’s important to highlight that our VAR stood stable at 16 basis points of our equity or BRL33 million, demonstrating our risk discipline. We continue to maintain our conservative capital position. If a CET1 is standing at 17.3%, CET1 alone is already in our guidance for total BIS ratio and well above our peers, which provide us the flexibility to execute our strategy, include further investments in technology, our business expansion and also enable us to return capital, targeting our 16 to 19 BIS ratio guidance. And now, me and Maffra will be available to the Q&A section.

A – Andre Parize: Now we’re going to start our Q&A session. The first question is from Eduardo Rosman from BTG. Rosman, you may proceed.

Eduardo Rosman: Hi, guys. Good evening, and congrats on the numbers. Two things here. First, on your ROE. Do you think you can continue to increase your ROE towards the 30% level, as we can see on your return on tangible equity? That’s the question number one. And naturally, I think it’s linked to the second question, which is regarding your payout. I think you mentioned in the last conference call that you could sustain more than 50% payout in the coming years, but you are generating a lot of capital, right, even though you are doing buybacks and growing the results, you generated more capital? So don’t you think that 50% or close to that is conservative for the next couple of years? So these would be my two questions. Thanks.

Victor Mansur: Hi, Rosman. Thank you for the question. First, about the ROE. We said last quarter that we should see over 2025 the risk-weight assets growing at a slower pace than net income. The consequence is slightly higher ROE over this year, next year. And as you say, the ROTE is higher than 30%. And over time, we should close this gap between both of them. Also talking about capital returns, our BIS ratio improved quarter-over-quarter as we said, and this number of 50% of payout since conservative and in this space, should be higher as the same as the last years.

Eduardo Rosman: Great. Thanks a lot.

Andre Parize: Okay. Next question is from Pedro Leduc, Itau BBA. Leduc, you may proceed.

Pedro Leduc: All right. Thank you so much for taking the questions. Two quick ones. First, on take rates, of course, they were down seasonally Q-on-Q, but you’re also undergoing a change knowing the way remuneration goes, fixed variable commissions, etc. So if you can put that into context as well to help us also see how we should see the next quarters evolve on take rates? That’s the first. And then the second on the SG&A side, great job there on the total figures. When we look at that because personal and variable was a big component there, if there’s some seasonality here or is this really a tighter ship? Just to make sure that we see this line more sustained for these levels throughout the year. Thank you.

Victor Mansur: Hi, Leduc. Thank you for the question. Beginning with SG&A, then we move to take rate. First, we are a performance based on the company and in the beginning of the year, some business there are more seasonal as investment banking, institutional broker dealer, performance of those business was weaker than in the 4Q. And as they have a compensation that is more volatile, the compensation provisions is lower. But over the year, as those business improve, we may see this number getting a bit higher, the same as 2024, but we are committed to deliver some efficiency in terms of efficiency ratio and bonus ratio even though. Talking about take rate, it was slightly lower than the 4Q. Remembering that 4Q, we have some business lines as actions a bit higher than in the first quarter, due to the average traded volume in B3 and also offered primary offerings of public of listed funds.

So, we expected the average number for our take rate to follow the same pace as the last years and should cover a bit over the year, but not as high as the 4Q.

Thiago Maffra: I can take the second part of your question about the different — it’s Thiago here, and good evening. So about the different models that you mentioned, the flat fee against the transactional model, we have seen the fee based model growing in the past years, it was almost zero two years ago. We closed last year, I would say, around BRL40 billion. I’m taking out here what we call WMC, Wealth Management and Consulting business because, of course, they are 100% flat fee. But on the total AUC, excluding this channel, it was BRL40 billion out of almost BRL1 trillion last year. We expect this number to grow to, I would say, around BRL100 billion this year, okay? And what we see in terms of take rate, the take rate goes down a little bit there away when you compare the two models.

But the share of wallet increased a lot, okay? So in terms of revenue, I would say, it’s almost zero, if not zero, very close to. So but we can bring a lot more money, and we have been investing a lot on flat fee, the fee-based model and also on the consulting model here that we can consolidate costs outside of XP. We have implemented the area on the B2C channel, I would say, two, three months ago. It’s growing really fast. Of course, the base was zero, but it’s growing. So you can expect the consulting model and the fee-based model to grow in the next — this year and in the next years.

Pedro Leduc: This was great color. Thank you very much.

Andre Parize: Okay. Next question is from Yuri Fernandes from JPMorgan. Yuri, you may proceed.

Yuri Fernandes: Thank you, Parize. Good evening. Thank you, Mansur, Maffra. I have a fixed — first one on fixed income. This was the first quarter that fixed income is above equities, right, and equities has been a drag on your retail revenues. So just trying to think ahead maybe better equity market in Brazil not sure if you just want to discuss lower rates. But when should we see the equity side of your business is start to stabilize? And how do you see the fixed income because I was checking here the historical and equity used to be 3, 4 times bigger to fixed income and now, fixed income has surpassed. So just trying to understand when we should see maybe — I know they are some kind of natural hedges for each other, but when should we see like a better momentum on those two engines for you?

And then just a more specific question on your expected credit losses. When we go to your accounting, we did see an increase on ECL for you this quarter. So just checking if this is related to, I don’t know, more warehousing of securities and then you need to build more ECL or if you are seeing some kind of marginal worsening on expected credit losses on any kind of portfolio? Thank you.

Victor Mansur: Thank you for the question, Yuri, taking the first part here. First of all, when you look at actual revenues, the important part is that the markets need to pick up, not only in performance, but also in traded volume. If you compare quarter against quarter, the average trade volume at B3 was lower that impact us negatively over the quarter. And also, inside of this line, there is primary offering of listed funds, some as real estate funds and other kind of products. So we need to see the markets improving to see this line growing again. Also, it’s important to mention that we have a lot of operational leverage inside of the actual lines and we have dominance in several products, as Maffra showed in his presentation.

So actions, futures, options, BGRs and then you go, so if markets improve here in Brazil, we should see this line coming rising again. But when you compare fixed income now and fixed income one year or two years ago in XP, I don’t think it will return at the same level or decrease over time. Even if you have the interest rates starting to fall a little bit, we still are going to have high interest rates in Brazil, a lot of opportunity in fixed income and also the DCM market in Brazil is growing at a fast pace. This year, we may have lower smaller market than last year, but the trend is very poised for this kind of product.

Thiago Maffra: And just to complement Victor here. The way I like to think about take rate and the mix of revenues between the products, it’s basically three points. We have volume that Victor already mentioned. We have — we are probably at the very close to the bottom of volumes in Brazil. Of course, if they pick up, we will have more revenues. The second one is price. The price didn’t change much. We didn’t make any money in equities in commissions and so on. So we didn’t see any price pressure in any of the types of products in the past years. So what left us to the main point here is mix, okay? So in the past two years, everything shifted from alternatives, REITs and so on, which is to fixed income. Fixed income for reasons you know very well.

They have the lowest ROE, ROA possible. So once we start to have a reshuffle in the mix the take rate should go up, okay? But again, as we mentioned in the past earnings calls, we are not taking that into consideration for guidance. But for sure, that’s a possible upside if we start to have a better cycle here. Going to your second question about ECL. It was a one-off event with one credit and you should normalize that for the next quarters to around BRL100 million. That’s a good proxy for the next quarters.

Yuri Fernandes: Super clear, Maffra. And just making triple checking here, like, your ROE message of — ROE is moving up, our ROTE is moving up, doesn’t imply any material change on your current revenue mix, right?

Thiago Maffra: No.

Yuri Fernandes: Okay. Thank you very much and congrats.

Andre Parize: Okay. Next question is from Gustavo Schroden from Citi. Schroden, you may proceed.

Gustavo Schroden: Hi, guys. Good evening, and thanks for taking my question, and congrats on the decent results. I have two questions as well. The first one is still on revenues. Sorry to insist on that, but taking your guidance for the year that you provided last quarter, you mentioned that revenues should grow at least 10%. In this quarter, it grew 7%, although, we saw a strong or a decent growth in the retail of 10% year-on-year. but the gross or the consolidated revenue is still growing below the guidance range. So I believe that as you didn’t change our guidance, I believe that you’re still believing that. So if you could share with us which line should improve and I mean give us more color of what should we expect in terms of gross revenue growth?

Again, you mentioned that I would say that you are more conservative in terms of a take rate especially considering the mix. But as you said, the pie is still growing. So any color on gross revenue growth would be very helpful. And my second question is regarding your, let’s say, consolidated tax rate. If I’m not wrong, you paid like a 14.6% this quarter versus 18% last quarter. So, what would explain this lower, let’s say, consolidated tax rate? Thank you.

Thiago Maffra: I will take the first one, Schroden. Thank you very much for your question. Yes, we didn’t change the guidance of at least 10% growth in revenues for ’25. We already knew that the first half of the year, Q1 and Q2, we would face tough comps because of many reasons because the capital markets was very strong last year. We knew that, that would go down. And this year, we are going to grow more on the retail than what we have been delivering on issuer services and corporate. So it was on our budget to have a lower than 10% growth on the first two quarters. To be honest, we are 1% higher than the budget for Q1, okay? So we are very on track, so that was a red plan. The second important point here is to have in mind that the first quarter is always the lowest quarter of the year in terms of revenue, in terms of net income and most — all the metrics.

So you should see all the metrics improving in the next quarters. And we have planned in our budget, higher growth on the second half of the year. So that’s why we are comfortable and confident that we can deliver at least 10% growth in revenues. To give you some more color, again, this year different from last year, most of the growth in revenue will come from retail, okay? So especially, because of Issuer Services that’s not going to grow this year. The first main point on retail to have in mind is fixed income. We believe that fixed income, as you already saw, was for the first time, the highest revenue among all the products for the first time ever, and we believe that should continue to happen because the mix will not change that fast, at least not this year, in our view.

And our capacity to originate warehouse and distribute products especially structured notes, corporate bonds and midsized bank time deposits. It’s a big competitor advantage in our view and will continue to grow. The second one is new verticals. We have many levers here. One of them is credit cards. If you see that was the lowest growth on the first quarter. If I’m not mistaken, 7% — 7% something, 8% on the first quarter year-over-year. We are going to launch a new family of cards in June this year, top-rated cards for affluent and private bank clients. And we are very confident that we are going to accelerate the growth for cards on the second half. The second thing on new verticals is insurance. We are very confident that we are going to keep the pace of 40% year-over-year for the year.

So — and as the base is growing in nominal terms, this year is going to be much bigger than last year. Another point, consortium that we released last year, the revenue was almost zero. It’s going to be, I would say, more than 100 this year, global accounts, digital accounts, all of them, they are growing at a really fast pace. If you see the numbers, it was 99% year-over-year, and we believe we can go close to that number this year, okay? And the last part is corporate will continue to grow this year, but it will be partially offset by Issuer Services, but Corporate itself will grow this year. So that’s how we get there and how we grow.

Victor Mansur: Thank you. Taking the second part of the question here about tax, basically, the explanation is business mix, revenue mix. In the 4Q, we had a stronger investment banking issue services line and do seasonality and as expected for everyone else in the market, the Issuer Services business in this quarter was not as strong as the last one. And we supplemented that if the secondary market and warehousing strategy that pay lower taxes than the investment banking business. And basically, over the year, if this scenario is the same, we should have a slightly lower average adjusted tax rate over 2025 against 2024.

Gustavo Schroden: Okay, guys. Super clear. Thank you very much.

Andre Parize: Oka. Next question is from Mario Pierry, Bank of America. Mario, you may proceed.

Mario Pierry: Hey, guys. Thanks for taking my questions. I wanted to focus a little bit more on the retail inflows of BRL20 billion. Because we have seen increased activity B3, we’re seeing volumes picking up. Are you seeing any signs of improving inflows? If you can discuss a little bit about the inflows that you saw throughout the quarter and what you’re seeing at the beginning of the second quarter, I think that will be helpful because, right, you’ve said many times in the past that you’re working to improve productivity of the advisers, but it feels like inflows growing less than or a slower pace than advisers. So just trying to get a better sense from you. Are you seeing increased productivity that are really happening now? And if you’re seeing better markets leading to higher inflows? And second question, also related to — you discussed in the past of drawing to the affluent wealth market? Do you have any data to share with us on that segment? Thank you.

Thiago Maffra: Thank you, Mario for your question. What happened is, I would say that we are still at the same BRL20 billion level, okay? We didn’t see — of course, the number was BRL20 billion and we have been talking that’s a fair number for now and will be the same thing for Q2. I cannot say about Q3 and Q4, but that’s a good proxy for next quarter. We didn’t see an improvement yet on the level of net new money. Again, interest rates they are at peak right now. It will take some time for investors to start moving money from the CDs from the banks to the platforms. We didn’t see that accelerating yet. So that’s the color we have right now. You mentioned the number of IFAs if you see, it has been flattish I would say, for the past quarters, especially on the B2B channel.

Why? Because we have been focusing a lot on the quality of the IFA advisers. So we have been reducing a little bit the number of IFAs, okay? It’s increasing on the B2C channel. It’s increasing on the consulting, but it increased on the B2B channel on the first — on the last quarters. We have been focus on expansion on the B2B channel again. So we expect the number of IFAs on the B2B channel to start growing again. We have seen a lot of improvement on the B2C channel. Our challenge here on the productivity side that you mentioned. But our challenge here is how to roll is out to the B2B channel. We have been implementing a lot of tools, training and so on, and we are confident that we are going to capture that in the future. But to be honest with you then capture yet, okay?

So that’s why you’re seeing. We mentioned that came from the new channels. So meaning 40% came from the B2B channel. So we didn’t see the improvement there yet, but we are really focused on that, and we expect that we will capture the benefits in the near future.

Mario Pierry: Okay. That’s clear. And the strategy of the affluent wealth market?

Thiago Maffra: Yeah. That’s a good question. We have been — as you saw in the past, we have been investing a lot on the – especially, on the private bank business here. We hired a new CEO for the Private Bank, Cesar, who had a lot of experience running the Citibank, private banking in the U.S. for U.S. clients. He brought a lot of new guys, new leaders for the business. We had, in the past years, zero or negative inflow on that business. And last year was a little bit slightly positive, and this year is going to be much better. So it’s going, but it’s a long process because when you talk about private bank business, it’s about building a franchisee. It’s a long-term investment and long-term business. And we are looking very carefully and investing a lot, but it will take some time, make to bring results from the private bank, but we are confident.

Mario Pierry: Okay. Thank you.

Andre Parize: Okay. Next question is from Olavo Arthuzo from UBS. Olavo, you may proceed.

Olavo Arthuzo: Hi, guys. Thank you for taking the question here. I have basically two questions. And my first one is very, very straightforward because you started to provide the breakdown of total assets. So very quick here. I was just wondering how much the fund service represents of the total assets that you guys disclosed it for this quarter? And my second question is, regarding your growth strategy because after launching the banking initiative a couple of years ago of the checking accounts and then the credit cards, I think one of the main current ones is the consortium, I think that Maffra mentioned. And the numbers, if you take into consideration the whole industry for the consortium have been impressive so far in terms of profitability.

So if you could just elaborate a little bit more on the consortium front, especially, thinking about the main goals numbers like the penetration of the product, the ticket and I think your slide number 10, that constructs within those BRL205 this quarter, if I’m not wrong. So how much does the consortium represent on that number for the quarter? So net-net, any more detailed color on this would be very helpful, and thank you very much guys.

Thiago Maffra: Yeah. Thank you, Olavo. I didn’t get your first question. So I will start for the second one, and then you repeat your first question. About consortium, it represents a very small revenue yet because the way we recognize the revenues basically the upfront fee, it goes to pay commission. So we make zero when we sell consortium. Then, we have an agreement with the administrators, and we receive a fee monthly by monthly because we have a revenue share with them. So it’s more like a recurring revenue during the term of the consortium. So it’s a business that we have to build the portfolio to then capture the revenues. We started building the portfolio last year, I would say half of last year. For some of the months, we already produced more than BRL1 billion per month, okay?

So it’s growing fast. And the way we work the product to be honest, before knowing the product, we didn’t like the product because of everything you heard. But once you start working with consortium, as I would say, I structured credit, then it’s a good approach. We don’t sell consortium as investments for sure, of course. But as a structured credit, it can be very accretive to our clients. We have been doing a lot for private bank clients even for owners of big companies and so on, because you have very cheap interest rates implied when you do the structured way of doing consortium. So that’s why it’s growing really fast. Again, this year is going to be above BRL100 million. It can go to double of that in revenues. So it’s growing really fast.

It’s going to be a very important revenue stream for the new verticals in the next years. And if you can repeat your first question.

Olavo Arthuzo: Yes, of course, definitely. It’s related to the assets that you guys started to disclose this quarter, which you mentioned the BRL1.8 million. How much does fund services represents of the total assets? Because I understand that the take rate of this type of assets provides a low yield. So just to understand the breakdown of that assets under custody that you have?

Thiago Maffra: Yeah, for sure. Yeah. The most important part of the strategy of having the fund administration business is to provide a full ecosystem to our customers especially the institutional clients and private bank clients because that’s part of the investments we have been doing to grow on the private bank business. Why? Because imagine that you have an exclusive fund, discretionary fund here. And XP has to rely on providers to give us the NAV and all the portfolio metrics and so on. And every day, we had problems with that — with the SLA and with the accuracy of the information and so on. So it’s really hard to build a private bank business and institutional business without having fund administration. So that’s the main reason why we built the business.

As we mentioned, fund administration can go from 5 bps to 20, 30 bps for alternative funds, maybe 70 bps, but that’s a low ROA, but the most important part here is to provide a full service to our customers. And the number we opened the number on the slide, if you check there the number was BRL248 billion in AUA, that’s the fund administration part.

Olavo Arthuzo: That’s the number I was searching for. Okay. Thanks. Great, Maffra. Thank you very much.

Andre Parize: Okay. So next question is from Tito Labarta from Goldman Sachs. Tito, you may proceed.

Tito Labarta: Hi. Thanks, Parize. Good evening, Maffra and Victor. Thanks for the call, taking my question. A follow-up question just on the inflows. As you mentioned on the slide, right, you distribute around 50% to 60% of midsize banks funding is distributed through XP. And just given some of the news flow with some of the midsized banks, I guess, Banco Master in particular, but just has that had any impact on your inflows or you are able to replace one bank with another bank’s funding just to make sure that that’s not having any impact on inflows for you for now? And then my second question, I guess following up a little bit on revenues, particularly equity revenues. I guess what should be the most important driver? Is it just the equity market is doing better.

I mean, we have seen good performance this year. Is it B3 volumes picking up? Is it more just focused on volatility or is it the rates coming down, right? Just to get a sense of what should be — we be looking for in terms of like what can boost those equity revenues at some point in the future? Thank you.

Thiago Maffra: Yeah. If I got your first question, your concern was about if Banco Master was representative on the net new money, so it was not, okay. So not even in revenues, as we mentioned in the last call, it was less than 1% of the total revenues. So it was not relevant. We will see no impact on revenues or on net new money, so no impact.

Tito Labarta: Great. Thanks.

Victor Mansur: Tito, talking about revenues, I think conjunction of factor is you need to see volumes picking up and probably you’re going to see volumes pick up. If the performance of that has improved over the years. So I think those things come hand-in-hand. And the second is prime offering from listed funds as REITs, real estate funds. That’s also important factor inside of the actual lines. And you’re going to need to see the market improving a little bit. and those fund is trading above issuing value. I think that is it.

Tito Labarta: Okay. Perfect. Great. Thanks, Maffra. Thanks, Victor.

Andre Parize: Okay. Thank you for participating for our earnings call. We are in an hour now. I’m going to end the call. So we’ll be available to answer further questions. Just look for us from the IR team. Thank you so much, and we keep in touch until the next quarter.