XP Inc. Q2 FY2025 earnings call

• Key KPIs: Client assets grew 17% YOY to BRL 1.9 trillion, active clients grew 2% YOY to 4.7 million. Gross revenues grew 4% YOY to BRL 4.7 billion. Net income was a record BRL 1.321 billion, 18% YOY growth. ROE was 24.4% with 223 bps expansion vs 2Q '24. - Retail strategy: Integrated ecosystem with retail, institutional, and corporate divisions. Focus on fixed income platform, new verticals in various sectors, channel diversification, product platform improvements, and FFAs guidelines to improve productivity. - Wholesale bank evolution: GCM industry volumes were decent but not at last year's levels. XP broker-dealer was market leader. Corporate securities book was BRL 34 billion, with potential tax rule changes impacting DCM dynamics.

Client assets (AUM and AUA) totaled BRL 1.9 trillion, a 17% year-over-year growth. Total advisers were 18,200, flat year-over-year. Active clients were 4.7 million, 2% year-over-year growth. Gross revenues were BRL 4.7 billion, 4% year-over-year growth. EBT was BRL 1.3 billion, 5% lower year-over-year. Net income was BRL 1.321 billion, an 18% year-over-year growth. ROE was 24.4% during the quarter, a 223 bps expansion versus second quarter '24. Capital ratio was 20.1%, a 110 bps quarter-over-quarter increase. Diluted EPS had 22% year-over-year growth. Retail revenue was BRL 3.6 billion, 9% year-over-year growth and 4% quarter-over-quarter growth. Equities had ~BRL 1 billion, 7% quarter-over-quarter growth. Fixed income was BRL 988 million, 20% year-over-year growth. Corporate and Issuer Services: Issuer services were BRL 268 million, -30% year-over-year; corporate revenues were BRL 279 million, 14% year-over-year growth and flat quarter-over-quarter. SG&A expenses were BRL 1.56 billion, 10% year-over-year and quarter-over-quarter growth. Efficiency ratio was 34.5% last 12 months, improved 161 basis points year-over-year.

• Retail net new money target: Aiming for averaging BRL 20 billion per quarter. - Revenue growth: Expecting higher growth in the second half of 2025 than the first half. - Share buyback: BRL 1 billion remaining to be executed. - Capital distribution: Aligned with a 16%-19% ratio.

• Macro environment challenges: Impacting net new money in the corporate segment due to bank reciprocity demands. - DCM volatility: Potential tax rule changes affecting DCM market dynamics. - GCM competition: Aggressive pricing by some players leading to lower fees.

Q: On capital generation and dividends and buybacks, help understand capital generation and if there will be acceleration in buybacks and dividends.

A: Net income expected to grow faster than RWA, spare capital available with CET1 ratio at 18% vs industry average 12%, may announce rest of payout over the year with discussion between dividends and buybacks based on stock price.

Q: Regarding corporate lending and if it's important for the ecosystem.

A: Corporate lending is like other products originated to sell, credit portfolio grew to be securitized and sold, portfolio growth is to be sold, and risk appetite is considered.

Q: Details on initiatives to speed up net new money in second half and guidance for next year.

A: Initiatives include channel diversification, creating new products to compete with banks, increasing IFA productivity, and improving client service. Still pursuing guidance for next year with confidence in second half acceleration.

Q: Color on inflows in third quarter and EBT margin.

A: Confident in delivering BRL 20 billion net new money, EBT margin depends on product mix and tax rate, SG&A expenses invested in strategic areas with efficiency ratio expected to be flattish.

Q: On corporate portfolio credit and net new money of corporates.

A: Credit portfolio is originated to sell, corporate net new money affected by market dynamics of banks asking for reciprocity, impact on revenues not relevant but volatile.

Q: Breakdown of revenue growth between retail and other lines and fixed income revenue outlook.

A: Revenue growth in second half due to more business days, new verticals, and product mix. Fixed income revenue strong due to high Selic rates, but duration profile may change with interest rate trends.

Q: On nonpeople-related expenses and offshore tax.

A: Nonpeople-related expenses increased due to marketing and technology investments, offshore tax impact expected to be marginal.

Q: On corporate net new money decline and fee-based model impact.

A: Corporate net new money volatility due to bank reciprocity, fee-based model at 5% of AUC with potential to grow, expected to increase share of wallet despite lower take rate.

Q: On gross margin expansion and B2B channel.

A: Gross margin expansion due to factors like expected credit losses and sales tax, B2B channel productivity improving with ongoing efforts.