XP Inc. Q1 FY2026 earnings call

• Overall Operational & Financial Results

  • Total client assets (AUM + AUA) reached 2.1 trillion reais, 21% year-over-year growth. The firm ended the quarter with 18,300 advisors (1% YoY growth) and 4.8 million active clients (2% YoY growth).
  • Gross revenue hit $4.9 billion (+8% YoY), adjusted EBT reached $1.4 billion (+8% YoY), adjusted net income reached $1.3 billion (+7% YoY), ROE was 21.7%, and the BIS capital ratio was 20.7% (well above regulatory guidance range).
  • A new R$ 1 billion share buyback program was announced, alongside R$ 500 million in dividends to be paid in June 2026. Total capital distributions announced in 2026 so far are nearly R$ 2.5 billion including prior programs.
  • A planned CFO transition was announced: outgoing CFO Victor Mansour will remain a partner supporting new ventures, and incoming CFO Gustavo Alejo (a seasoned banking executive with 30+ years of credit and corporate experience) will join to support the growing bank segment within XP's ecosystem.

• Client Growth & Net New Money

  • Organic retail net new money was $19 billion, and corporate/institutional net new money came in at -$4 billion, for a total of $14 billion in Q1. Retail net new money hit the firm's guidance target of ~$20 billion per quarter.
  • FGC-related client inflows were not counted in net new money, but retention of these inflows hit ~80%, demonstrating strong advisor execution and brand strength.

• Retail Business Strategy

  • XP has implemented tailored service models for segmented client groups: core retail clients get a new goal-based investing and managed portfolio value proposition that is margin-accretive; high-net-worth clients get an agnostic, full-service wealth planning offering; private banking clients get a full-suite wealth offering covering both individual and corporate needs, and is gaining market share and driving cross-selling opportunities.
  • The firm continues to invest in product expansion, channel growth, and technology to improve client experience and advisor productivity.

• Risk & Capital Management

  • VAR declined 3 basis points sequentially to 14 basis points, total risk-weighted assets grew 3% quarter-over-quarter to $122 billion, with credit RWA flat and market RWA growing only 2%. Risk profile remains well-controlled.

• Strategic Ambition

  • XP remains focused on becoming Brazil's leading investment platform by 2033, with a strategy built to deliver consistent double-digit long-term growth through product diversification and disciplined execution.

XP restructured its reporting to split business into two main segments: Retail and Wholesale (formerly including the incorporated Institutional business). Total gross revenue for Q1 2026 was $4.9 billion, an 8% year-over-year increase and a 7% quarter-over-quarter decrease.

• Retail Segment: Total revenue of $3.8 billion, 10% year-over-year growth and 2% quarter-over-quarter decline. Equity revenue reached nearly $1.2 billion, up 22% year-over-year and 13% quarter-over-quarter, representing 31% of total gross revenue. Float and new verticals included in the other retail line are growing rapidly in revenue contribution. Revenue was impacted by spread widening in the corporate credit market in Brazil.

• Wholesale Segment: Combined business lines grew 26% year-over-year. Corporate segment revenue reached almost $500 million; higher volatility increased demand for trading solutions, with derivatives and FX driving revenue growth. The incorporated Institutional business grew both year-over-year and quarter-over-quarter, benefiting from higher trading volumes. Issue services revenue declined in line with retail fixed income trends, driven by lower volumes of taxes and fixed income offerings.

• Full-year 2026 revenue growth guidance is maintained at double-digit, even after accounting for Q1 spread widening impacts. Excluding Q1's one-off spread impacts, underlying growth would have already hit double-digit in Q1.
• The 12-month efficiency ratio is expected to normalize through 2026, ending the year at a flattish level relative to 2025.
• BIS capital ratio guidance is maintained at 16-19% for end-2026; management remains committed to reaching this range from the current 20.7% level.
• NPS is expected to return to its historical normal levels by the end of 2026, after temporary one-off impacts from third-party partner events.
• Fee-based/flat-fee AUC is expected to grow to 50% of total individual AUC within the next 3-5 years, up from the current 25%.
• Credit spread compression is not expected to occur in Q2 2026, with potential recovery beginning in Q3 or Q4 2026 if market conditions stabilize.

• Increased global market volatility starting in March 2026 pressured local Brazilian market sentiment and caused material widening of domestic credit spreads, which negatively impacted Q1 2026 revenue. While spreads stabilized in May 2026, continued volatility could delay spread recovery and pressure near-term revenue.
• The gradual pace of the Brazilian interest rate easing cycle (slower than previously anticipated) could limit improvement in investor risk appetite and asset turnover velocity in the near term.
• Take rates are partially dependent on product mix and investor sentiment, which are outside of management's full control, creating near-term revenue volatility.
• Debt capital market (DCM) activity remains suppressed amid ongoing credit spread widening and net redemptions in credit funds, limiting near-term revenue from this segment.
• NPS remains depressed in reported results due to a moving average methodology that still incorporates temporary negative impacts from third-party CredEvents and BancoMaster issues, though recent monthly NPS has recovered to near-normal levels.

Q: What is the rationale for the CFO transition, how quickly will credit spreads recover, and will this CFO change signal a strategic shift to a banking-focused model?

A: The transition was well-planned over six months to add a CFO with deep banking and credit experience to support the growing wholesale and retail banking projects XP has been developing. There is no change to XP's long-term strategy, which remains the same as it has been for the past three years. Management does not expect full credit spread recovery in Q2 2026, but other business lines will more than offset the smaller April spread impact, and no material full-year impact to top-line growth is expected.

Q: What is the planned future mix between dividends and buybacks for capital distribution, and what is your outlook for DCM performance for the rest of 2026?

A: Currently, more than 75% of 2026 announced capital distributions are allocated to buybacks; this mix reflects the current share price and shareholder base preference, and future allocations will continue to depend on market conditions and stock price. Credit spreads stabilized in May with early signs of returning retail demand for corporate bonds, but spread compression is not expected until the second half of 2026 at the earliest.

Q: If revenue growth is slower than expected, will management cut costs to hit efficiency targets, and what is the progress on the shift to fixed fee models?

A: Management remains committed to delivering a flat full-year efficiency ratio relative to 2025; while the base plan is to continue planned investments, cost adjustments can be made if revenue conditions deteriorate. Currently, 25% of individual AUC is under flat/fee-based models, which are growing faster than transaction-based models, and management expects this share to rise to 50% within 3-5 years as advisors and clients embrace the model.

Q: Why is reported NPS still low, and when will it return to normal levels?

A: Reported NPS uses a six-month moving average, so it still incorporates the trough levels from late 2025/early 2026 caused by one-off third-party client issues. Current monthly NPS has already recovered to ~70, near historical levels; reported NPS will improve in Q2 and return to normal levels by Q3 2026.