XP, Inc. Q1 FY2025 earnings call

• Client Assets plus AUM and AUA achieved BRL1.8 trillion with 13% year-over-year growth, along with 2% year-over-year growth in advisers and active client base.
• Gross revenues grew 7% year-over-year to BRL4.6 billion, ABG grew 16% to BRL1.3 billion, and net income reached a record high with 20% year-over-year growth.
• ROE was 24.1% with 340 bps expansion, and capital ratio was 19% with a 130 bps quarter-over-quarter increase.
• Ended the previous share buyback program of 1 billion and launched a new 1 billion share buyback program.
• Retail strategy features a strong product platform, multichannel distribution improving productivity and client satisfaction, and retail cross-sell with growth in credit card, insurance, and retirement plans.
• Wholesale bank gained market share in DCM and Institutional Broker Dealer, with corporate securities book growth.

Client Assets plus AUM and AUA achieved BRL1.8 trillion, posting a 13% growth year-over-year. Advisers numbered 18,100, representing a 2% year-over-year growth, and the active client base was 4.7 million with a 2% year-over-year growth. Gross revenues posted BRL4.6 billion with a 7% year-over-year growth. ABG grew 16% year-over-year to BRL1.3 billion. Net income reached an all-time high quarterly figure of BRL1.236 million, a 20% year-over-year growth. ROE was 24.1% during the quarter, with a 340 bps expansion versus Q1 '24. Capital ratio was at a comfortable 19%, an increase of 130 bps quarter-over-quarter. Retail revenues grew 10% year-over-year, Corporate & Insurance Services grew 11% year-over-year, and Other posted a minus 24% year-over-year growth. Fixed income became the largest revenue in retail for the first time, growing 4% year-over-year to BRL1.15 billion.

Expected ROE expansion in 2025 as risk-weight assets grow slower than net income. Continue the share buyback program. Payout ratio to be over 50% in 2025 and '26, with risk-weight assets growth slower than net income leading to slightly higher ROE.

Market volatility may impact business performance, new regulations may bring compliance challenges, and competitive pressure may affect market share.

Q: On ROE and payout, asking if can continue to increase ROE towards 30% and if 50% payout is conservative.

A: Victor Mansur stated that ROE is expected to increase as risk-weight assets grow slower than net income, and the 50% payout ratio is conservative.

Q: On take rates and SG&A, asking about seasonality and efficiency.

A: Victor Mansur mentioned SG&A expenses were flat year-over-year and 10% lower quarter-over-quarter, with efficiency ratio improved; take rates affected by seasonality and business mix.

Q: On fixed income and ECL, asking about equity market stabilization and ECL increase.

A: Thiago Maffra said fixed income would continue growing with the mix, and the ECL increase was a one-off.

Q: On revenues guidance and tax rate, asking about revenue growth and tax rate change.

A: Thiago Maffra stated revenues expected to grow at least 10% with retail growth, and tax rate change due to business mix.

Q: On retail inflows and affluent market, asking about inflows and affluent segment.

A: Thiago Maffra said retail inflows were stable, and investment in the affluent market was ongoing.

Q: On assets breakdown and consortium, asking about fund services in assets and consortium details.

A: Thiago Maffra said fund administration AUA was BRL248 billion, and consortium was growing fast.

Q: On inflows and equity revenues, asking about inflows impact and equity revenue drivers.

A: Thiago Maffra said Banco Master was not impactful, and equity revenues needed volumes and fund offerings to pick up.