XP Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Key Initiatives: Launched new client service model, improved client segmentation with new app, and new credit card offering.
• Client Metrics: Client assets up 16% year-over-year to BRL 1.9 trillion, active clients at 4.8 million (2% year-over-year growth), advisers at 18,200 (slight decrease).
• Retail Strategy: Focus on democratizing wealth planning, fee-based model at 21% of total retail AUC, credit card TPV up 9% year-over-year to BRL 13.1 billion, life insurance written premium up 25% year-over-year, retirement plans client assets up 15% year-over-year to BRL 90 billion.
• Wholesale Bank Evolution: 10% market share in debt capital markets distribution, XP broker-dealer maintained 17% market share, strategy to warehouse corporate bonds for Q4 and early 2026.

Segment Performance

• Client Assets (AUM and AUA): BRL 1.9 trillion, a 16% year-over-year growth.
• Total Advisers: 18,200, a slight year-over-year decrease due to advisers becoming employees and stricter policies.
• Active Clients: 4.8 million, a 2% year-over-year growth, with growth in core segments like high income and private banking.
• Gross Revenues: BRL 4.9 billion, a 9% year-over-year growth.
• EBT: BRL 1.3 billion, a 10% year-over-year growth.
• Net Income: BRL 1.330 billion, a 12% year-over-year growth, a new record.
• ROE: 23% for the quarter, flat year-over-year.
• Capital Ratio: 21.2%, a comfortable level.
• Retail Revenues: BRL 3.7 billion, a 6% year-over-year growth.
• Institutional Revenues: BRL 304 million, flat year-over-year.
• Corporate & Issuer Services: BRL 729 million, a 32% year-over-year growth, a historic record driven by strong capital markets activity.

Guidance

• Client Assets: BRL 1.9 trillion, 16% year-over-year growth expected to continue.
• Net New Money: Target of around BRL 20 billion per quarter in retail.
• EBT Margin: Aim to reach 30% by end of 2026, with investments in sales force, technology, and marketing expected to impact short-term efficiency but drive long-term growth.
• Capital Return: BRL 1 billion share buyback program and BRL 500 million dividend announced for 2025.

Risks

• Challenging Year: 2025 has been challenging with market dynamics and regulatory changes affecting adviser numbers and client acquisition in some segments.
• Market Volatility: Potential credit spread volatility affecting corporate bond warehousing strategy and DCM activity.
• Regulatory Changes: Impact on adviser classification and conversion to employees, affecting total adviser numbers and service quality.

Question and Answer

Q: Should we expect similar performance in Q4 for wholesale business? What about the warehousing strategy risk?

A: Thiago Maffra mentioned Q4 wholesale performance should be strong, with warehouse strategy to hold high-quality assets and sell in early 2026. Victor Mansur noted credit spreads may widen but portfolio turnover is higher than industry, reducing susceptibility to volatility.

Q: Clarification on corporate 46% QoQ growth and SG&A expenses related to bonuses and hires?

A: Victor Mansur explained corporate growth tied to DCM activity and hedge solutions for issuers. Bonuses and hires related to investment banking performance and sales force expansion (500 new employees).

Q: Sales force hiring vs. decreasing adviser numbers? Financial expenses decrease?

A: Thiago Maffra explained conversion of IFAs to employees and focus on high-quality 'AAA' advisers. Victor Mansur noted financial expense decrease due to debt reorganization from corporate to bank, reducing cost of debt.

Q: Fixed income revenue drop and EBT margin guidance?

A: Thiago Maffra attributed fixed income revenue drop to mix change (more CGs with daily liquidity) and shorter duration. Victor Mansur and Thiago Maffra noted EBT margin aim to reach 30% by end of 2026, with investments impacting short-term but long-term sustainable.

Q: Buyback intention, IOC in equity business, retail inflows?

A: Victor Mansur said buyback program open, waiting for best opportunities. Thiago Maffra noted IOC not seeing big portfolio change yet, retail inflows expected to stay around BRL 20 billion quarterly.