XP Inc. (XP) Earnings Call Transcript & Summary

So good morning, everyone, and welcome to 2023 XP Investor Day. I'd like to start with a quick video. [Presentation]

So I'm Andre Parize, the Head of Investor Relations. I just joined XP in November, but some of you may already know me from the industry. Prior to joining XP was the CFO at Getnet Brasil and acquiring business from Santander, where I help prepare the company for its listing. Prior to that, I was the Head of IR of Santander Brasil. Given my background in banking and fintech, I was well aware of the strong reputation and performance at XP. So I'm very excited to be here today as part of the team, which includes our senior executives as well as our Founder and Chairman, Guilherme Dias Benchimol here today with us. Before I begin, I'd like to walk you through the agenda. We have designed the event in 5 parts. First, we will begin with a high-level overview of company's strategy and performance and outlook from our CEO, Thiago Maffra. Then we will deep dive, we will do 3 deep dives actually. Then Guilherme Sant’Anna, our Executive Director for retail and distribution, will discuss our retail investment business. After a short break, José Berenguer, our CEO of XP Bank will discuss our broader XP ecosystem. Then our CFO, Bruno Constantino, will discuss our financial performance and outlook, and this is a really good moment. We have a lot of numbers here. And during the -- important to say that during the presentations, we have some videos that I will provide you with more detail on the subjects of the day. And at the end, we will hear some closing remarks and we will do a live Q&A session with the audience and for those participating online. [Operator Instructions] And finally, we have some disclosures that are also available in our website in the presentation can be found. So with that, I would like to thank you again. Hope you have a great event. And now I turn it over to Thiago Maffra.

Thank you, Andre. So I'm sure that was not very easy for you to join us in 2 weeks and put like an Investor Day together. So thank you very much. We are very happy to have you on board with us. First of all, I would like to welcome everyone for joining us today. I'm happy to have you all here at NASDAQ headquarters in New York or online from Brazil and around the world. As Andre mentioned, I want to begin talking about our strategy and outlook. As many of you know, XP has evolved a lot since the IPO. We have made the company much stronger over the past few years and I believe that we are very well positioned for the future. So I want to share some of my thoughts on about where we are today, how we got here and why we are so excited about the outlook for 2026. But first, I would like to talk a little bit about the most important thing for me, our culture and people. They are my top priority because they are the key compact advantage that allow us to innovate, develop products faster and provide higher quality services to win. In order to reinforce this competition advantage, we prioritize is at the top level of the company. We have developed what we call XP management system to incentivize and align everyone in our team. We treat people like partners and owners instead of just employees. And everyone is a true believer in our long-term mission to disrupt the banks and improve people's financial lives in Brazil. As I think about the future, I believe our next phase of growth will be driven by XP's ability to deliver higher quality experience for our customers across their financial journeys. The way I like to think about our next phase, it's a very clear strategy based on these 3 pillars. First, in retail investments, we want to continue differentiating ourselves from the banks by providing a much higher quality advisory services. To achieve this, we are implementing upgrades in our solutions to help our advisers to provide a smarter and more assertive investment advice to our customers. And we have created some new incentives for our advisers to reinforce this new approach. On the second pillar, in retail cross-sell, we will keep creating higher quality engagement with our clients through the cross-sell of other financial products. We believe this will help us to gain share of wallet with our clients and we are also developing more products to serve them across their financial lives, making XP their primary financial institution. And finally, we want to provide higher quality solutions to our corporate and SMB customers, which are poorly served by the banks and represent a big new opportunity for XP disruption and penetration. Starting with our core business, retail investments, I believe we have 2 main messages to keep in mind. First, our focus will continue to be on individuals on investors or high-income clients, meaning we have around 30 million potential clients. We are not going down the pyramid will keep our folks. Second is how we keep gaining market share in the next years through a higher quality advisory service. We'll talk a lot about quality today. For me, higher quality in investment adviser is key to keep differentiating XP from the other platforms and banks. I'd like to see our compete advantage in 3 ways during the life of XP. The first wave was basically a product differentiation. We were the first large open platform in Brazil, enabling XP customers to access a much wider range of investment products. Differing from the incumbent banks who only provide their own products back there. In our second wave, we have created the largest and best trained distribution in Brazil with more than 17,000 financial advisers as we speak, here and including all the channels. In our second -- and today, our competitors are still trying to mimic to copy what we have did on the first 2 waves. But we have already moved beyond to our third wave of differentiation, which is quality. We are now focused on separating ourselves further from the banks by elevating the quality of everything we do. We are working on providing a superior financial planning to our customers, understanding the whole financial needs and goals and helping them to build the best portfolios to get there. So while our competitors are still focused on selling products, we are already selling investment solutions and there is a huge difference from that. For example, we have developed a software application called XP Genius. It was actually a copy from [indiscernible] from BlackRock, which enables us to have better asset allocation to our clients. Optimizing their portfolios, matching their goals more closely to their investments and conducting higher quality financial planning overall. This is just one example and you guys will hear a lot more examples during the whole presentation today. But this type of high-quality advice has already led XP to be recognized as the best financial advisory firm in Brazil for the past 5 years. So that's our biggest differentiation. Quality serves of financial advisory. To position XP for the next wave, we have scaled and invested in the business intensely since the IPO. We have increased client assets over 3x, grown our market share about 500 basis points and triple our client base to over 4 million investors since the IPO. We have also expanded our capabilities to become a hub for a growing range of financial entrepreneurs. As XP evolved, we also foster the evolution of the advisory profession in Brazil. Empowering different types of entrepreneurs from financial advisers to wealth managers, consultants and brokers. Today, we are not only an IFA platform, we have a lot of different types of channels in our platform. We are a hub for any type of entrepreneur in Brazil. When we look at the numbers and evolutions since the IPO, we believe we have delivered a good execution and a solid growth despite all the headwinds in the macro environment. As you can see on the presentation, as a result of these headwinds that we have faced more specifically during the last 2 years, time deposits have grown massively since 2022. As clients look for lower risk investments and safer yields. And as a result, at the same period of time, the net outflow of money from equities, fixed income, multi-market funds, they have compounded over the same time frame. We are still in the middle of the storm and we believe it will take more time for individual investors to start move from just time deposits to more diversified portfolios but we believe the worst is already behind us. I believe we went through this period quite well and we did that by focus on what we can control, expecting our distribution and empowering our advisers making sure we maintain the biggest and best prepared distribution force in Brazil, while at the same time, improving the efficiency of our operations. Improving our internal controls, implementing more cost discipline and enhancing our capital allocation. I believe these measures are producing benefits to XP that are compounding over time. Some of these benefits, you can see in our numbers and others may be more difficult to appreciate for now. But overall, I think today, XP is a much stronger company and better positioned to grow in the next market cycle. I believe this slide speaks for itself. We want to dominate the investment market in Brazil, meaning that we have to double our market share looking like a long-term ambition here. But we believe by the end of 2026, we can reach 14% to 15% market share. If we go back 2 years, we used to gain more than 100 bps per year in market share. If we look at the last 12 months, we are going probably to do like 40 to 50 bps. So we believe with this new market cycle, we can go back to higher market share gains. Our second pillar is to build more engagement with our clients through the cross-sell of other financial products. Here, we have 2 main drivers: first, reinforce the investment business by providing a superior and a more complete value proposition by having a full financial solution, we expect our premium clients to concentrate their financial lives at XP. And second, these new products expand our addressable market and bring more resilience since they are less correlated to price -- market price of assets. As you know, the cross-sell of our new vertical products has been very successful. After the IPO, we began to roll out card, retirement plan, insurance and loan products to our client base. And we have increased our revenues over 14x since then to BRL 1.8 billion on the last 12 months base. But we are still at the very beginning and we expect our performance to remain strong for the future, especially as we continue to develop and launch new products. For example, we began to scale FX, digital account, global investments in 2023, and we have more financial products that may be add to the lease over time. Here, you can see that probably the main difference from the KPIs that we released in the past, we are adding some new products and we will do so in the future as we create new products. As I mentioned earlier, the main purpose of these new verticals is to reinforce the investment pillar and increase the value proposition for our customers. We want to be the primary financial institution for our clients. As you can see on the presentation, cards can create better client retention, more asset inflows and stronger financial relationship. As I mentioned, our penetration is still at very early stage. Credit card has been our most successful product so far with a 20% penetration. Just for a matter of reference, the incumbent banks have up to 90% penetration in cards and 20% penetration in insurance. These numbers prove that we have a long way to go and that we are only at the beginning. In fact, we believe we will be able to generate another BRL 2 billion to BRL 3 billion in revenues from the cross-sell of our new vertical products by 2026, reaching BRL 4 billion to BRL 5 billion in total revenues in 3 years. Our third pillar is corporate and SMB. I like to see this business as an expansion of our investment ecosystem. We create strong relationship with corporate clients because we gave them an alternative for funding through capital market access. On the other side, we create relationships with the SMB companies by giving access to better investment service. Once we became a bank back in '19, 2020, we increased our product offering and leverage these relationships to cross-sell other products. We already start to capture this opportunity, being able to create a relationship and serve over 50,000 corporate and SMB clients. Since the IPO, we have grown our revenues in this segment by 60x. We reached BRL 800 million of revenues in the third quarter, looking at last 12-month base, by providing just a few serves. Corporate derivatives, FX and loans, imagine what we can do as we start to roll out more products. I'm also very excited about this strategy because this market segment is probably still 10 years behind what we see on the retail segment. The corporate and SMB segment is very large, poorly served and ready for disruption by some of the same innovations and approach that enabled us to disrupt the retail investment segment. In addition, we already have some of the foundations in place that can provide us with the right to win in this market. Our product penetration in this segment is very low. Even in FX, which are most penetrated product, we think there's a lot of room. Our strategy going forward is very exciting and Jose Berenguer, will talk a lot about it on his part of the section. And I'm sure you guys will be very excited. As you can see, we came from 0 since the IPO. It was less than BRL 100 million in revenues to almost BRL 1 billion, showing the investments we have made are starting to pay off. I believe we will be able to generate another BRL 1 billion to BRL 2 billion in revenues from corporate and SMB segment by 2026 reaching a total of BRL 2 billion to BRL 3 billion in total revenues in 3 years. This will come from the rollout of more products, higher penetration and strong client relationships. XP has evolved a lot since our IPO. We have expanded our business lines, diversified our growth drivers and evolved our value proposition for a third wave of growth to stay ahead of the competitors. I believe we are a much stronger company today bigger, more resilient and more efficient. And now we are much better positioned for the next market cycle. I hope that this brief overview helps you understand a little bit about our strategy. So with that, I will turn it over to Guilherme Sant’Anna, who will discuss the next session. He will deep dive into retail investments. Thank you.

Thank you, Maffra. Good morning, everyone. So I'm the Director for Retail and Distribution at XP. I've been with XP for the last 7 years. Before that, I was a management consultant for 13 and I'm going to walk you through some more details of what Maffra presented just now. But before I want to share with you guys a teaser of our new campaign, which emphasizes our main differential, which is our investment adviser. So please if you can put the video on. [Presentation]

Calling this the x-factor campaign. So we believe to have the most comprehensive and competitive platform in XP. In the last 20 years, we convinced we built the broader, the most democratic platform for the regular investment in Brazil. On top of that, our ex factor is our capability of developing individual and enterprises advisers, right? So those 2 things gives us a lot of confidence that we can unlock a lot of future opportunity going ahead. So this figure shows that by 2028, we expect to have BRL 11 trillion of total addressable market in Brazil, coming from BRL 6 trillion today. That translates into at least 16 million -- 25 million new clients for XP. Most important in that is that the clients are very much underserved in Brazil, right? 20% of their asset allocations are allocated on low-yield deposits, 40% of our prospects say that they don't invest because they lack knowledge or because they don't have a help from a specialist. That leads us to our third opportunity, which is we can expand still a lot our advisers network, right? Today, we have 48,000 individuals working with the investment professional in Brazil, most of them work for banks. And a lot of them come to work for us and they tell them they're unhappy because they are limited in buys by a limited offering of products. They are unhappy because they're working on a traditional incumbent high ERICO culture. And so we can see there's a huge opportunity to invest in entrepreneurship and that's something we're going to invest a lot in the future. But I would like to tell you something that's very, very important for us, right, when we compare an independent adviser with a bank manager, right? An independent adviser, he will work 24/7 right? He will answer a phone tonight. He will go to dinner with his clients. He will travel in the weekend with his clients. Now try to call a bank manager after 6:00 p.m., that won't happen, right? So that gives us a lot of confidence that we can promote a lot more entrepreneurship with independent advisers in Brazil. So not that I told you about opportunities, I would like to walk you through the main differentials that we have in our platform. We have the most diversified low-cost and high-quality platform in Brazil, right? We can help the clients with all his journey, how his financial journey. We have helped to unlock the independent wealth manager industry in Brazil. So we have the most comprehensive fund platform. We invested a lot in our journey on the content and learning journey for the client. And most important, we invested a lot on the last mile, which is the relationship, the lifelong relationship that adviser provides to our final client. So this is the Net Promoter Score for all the 4 million clients, which is something very relevant for us. But before that, I would like to show you before I continue, I'd like to show you testimonies from our own clients so you can see how they feel about XP impacting their lives. [Presentation]

So we're very proud of what we are building and how we are transforming Brazilian investor markets. And we can provide a superior client experience because we have the broadest and most innovative platform in Brazil, right? So we were able to turn sophisticated exclusive products that were only available for high net worth clients to retail and to the general public, right? For instance, we're the first issuer of a private equity fund and venture capital fund that reached more than 40,000 individuals. That's a very relevant number for us because private equity funds normally go to 200, 300 individuals. We also are very proud of developing the capital markets in Brazil, right? So we are creating vehicles that are giving access to agricultural infrastructure incentivized assets, sports, media, entertainment, all kinds of assets that weren't liquid before. So this is also helping to develop the capital markets in Brazil. On top of protecting and reinforcing our core business, which is investment business, we are also investing a lot on [indiscernible] and complementing our offering with cards, deposits, insurance, loans, retirement, global investments and foreign exchange. So with this, we expect to make our clients to close their accounts with incumbent banks, right? So now he can do everything with us. In the last 5 years alone, we launched 9 new verticals, right, retirement plan, secured loans, credit card and so on. Just to give you some examples of how fast we are able to scale and to develop very good experience products in our market, just in the credit card alone, we have 3 cards and the top 10 best cards in Brazil being XP the #1, right? Retirement plans, we have the most -- the largest offering, right? We have more than 300 independent funds in our platform, we grew by 10% since 2019, and there's a lot more to come. So as I was saying, we aim to have a 360 offering for the client, right? So you can invest money with us, he can save money with us, spend money, borrow money and protect these assets, right? So with this, we can start penetrating in all the numbers that Maffra showed before. So we can serve the client across all his life, all his financial journey. I want to show you some videos of our partners that lead our products be used in Brazil so they can give you some more details on some of the products that we are launching. [Presentation]

I'm Glenn Hazen, CPO of XP. I would like to talk to you about the XP digital channels and how we strive to offer the best digital experience for all types of investors. XP is the largest investment platform in Brazil, offering a wide range of financial products in a single app. We've seen with access to equities, fixed income, funds, retirement plans, banking, insurance and credit. In the app, clients can monitor their portfolio performance and asset evolution with a consolidated view, by strategy or by asset with just a few clicks. We are one of the only players in the market to present this level of information and transparency in our retail app. Through our proprietary XP genio system, we offer tailored product recommendations based on the client's financial goals, risk tolerance and financial profile. Hi, I'm Luca Sabikilli, and I lead XP Investment Solutions. As many of you know, we have long been the premium provider of open investment solutions for affluent retail investors in Brazil. I would like to explain how each of these investment products provide clients with superior value. First, within our equities product, we are market share leaders in client assets and overall equities transaction volumes. We offer many different products that support our client in making the best decision in the equities allocation. For example, automated equity portfolios allow retail clients to automatically follow market experts recommendation in stock picking, allowing for easy and fast execution. With the trade advisory, for example, we offer exclusive and specialized advisory to our trader clients, providing them with superior client experience within XP's platform. Second, within fixed income, we offer clients a complete portfolio of products that help them manage their liquidity and safely invest for the future, such as by offering competitive spreads and a complete suite of fixed income products, we are now market leaders in the secondary market for corporate bonds in Brazil with approximately 60% of market share. Third, when we talk about derivatives and structured products, XP has the largest offering in Latin America, which allow for investments in local equity, offshore, equity, commodities and currencies. Lastly, at XP International, we aim to democratize and empower retail clients to invest across the globe and easily connect their portfolio investments to the best and most suitable investments in the world. Through a remarkable and simple digital experience, our clients have access to a comprehensive global portfolio in the XP app from thousands of NASDAQ and ICE stocks and a wide lease of corporate bonds and U.S. government treasuries to hundreds of mutual funds and distinct global strategies and teams. We truly believe that breaking geographic barriers and creating a globally diversified portfolio, enhance the robustness of our client assets while reinforcing XP ecosystem. Hi, I'm Matt Pinheiro, Banking Service Director at XP. In early 2021, we first launched our premium banking solutions to provide our retail investor clients with a digital offering to manage their wealth and finance. In the same app, they used to manage their investments. Since then, we have added several installations, including XP card that has both debit and credit card functionality and was voted the best card in Brazil for 2023 by [indiscernible]. Just 2 years after its initial launch, digital account, which allows clients to manage their everyday spending we think the same app in our latest innovation, global account, which integrates all other solutions with international reach make it easier to spend a bit. Now we have a full banking suite of products and help clients to manage their finance, spend more effectively, pay their views and easily spend [indiscernible] and we are very proud of our progress so far. We now have reached over the BRL 37 billion in TPV in the last 12 months. Over than 1 million active cards and over than 860,000 active digital accounts, representing a 20% penetration of total active clients. I'm Christian Iris, and I'd like to share with you our vision to create a better client experience through our credit offerings. In less than 3 years, we have built a credit portfolio of roughly BRL 20 billion by leveraging our unique position in the market. The goal here is to satisfy both short- and long-term liquidity needs for our retail clients using the financial asset as collateral in order to offer lower cost credit options. Some of the main products that we offer are the personal collateralized loan, a flexible and convenient way to access funds for personal purpose using security as collateral, a market marketplace, a transparent and simple way for clients to find the best market options for their home using funding and balance sheet from other financial institutions. The express fund redemption, a fast and easy way to withdraw funds from their investment without waiting for funds redemption periods and the overdraft for checking accounts, a handy and predicable way to cover unexpected expense using the checking account as collateral. We have earned our client trust by helping them build wealth with our investment platform. Now we are offering credit to help them fund their financial goals. We are built to focus on high-quality borrowers with security financing, so we can maintain relatively low capital requirements and credit risk. Hi, I'm Roberto Teixeira, Head of Insurance and retirement plans at XP. At XP, we offer our clients the best long-term investment solutions combined with the best wealth [indiscernible] planning. We have both proprietary solutions with expanded rights in a marketplace of third-party products, including some of the most trusted insurance careers in the world. Now let me tell you a little bit more about our retirement plans. Over the last 5 years, we have built the most complete portfolio of plants with more than 300 retirement funds giving our clients more choice and more suitable options to feed the retiring objectives. This has helped us grow assets and accost to more than BRL 68 billion and generate more than BRL 350 million of annual gross revenue. For insurance, we first began distributing our flagship hole and term life insurance products through our marketplace a few years ago, shortly after we expanded our insurance offering to include home, surety, auto, affinities and other P&C insurance to better protect our clients. We have also built our own life insurance operation, which has just one year old, but already close to more than 30 million premiums issued. We believe that by offering complementary products such as insurance and retirement plans into XP platform. We enhanced the overall experience of investors, clients in XP ecosystem while helping them save and plan to their future.

I'm very proud of all these products because we are all very scalable. We could see all the experience in the apps. There's no secret spread, excels spreadsheets behind. So we'll be able to be efficient and also launch a lot of new experience for our clients. So now I would like to tell you a story about our secret sauce, which is the adviser value proposition, right? We are in a unique position to replicate and expand our network. We've created the profession as it's known in Brazil today. We have more than 17,000 as Maffra said, of professionals and our direct and indirect channels. They are taking financial knowledge, taking investment knowledge to the Brazilians. And we are investing a lot on enhancing other tools to get them more productivity, more client focus and more capability to serve the clients even better. This picture gives a dimension of our ecosystem, right? This is our 2023 expert event. We were able to gather more than 40,000 people in this event. We also do a lot of smaller events through Brazil. And this is very important for us because we are able to gather entrepreneurs, wealth managers, clients and especially advisers, right? So this is a moment where we gather and where we can see the numbers that we are producing, right? So the figure on the left shows how we keep growing our IFA network despite the fact that we are -- we go through different economic cycles and headwinds and on the second on the right, we can see that by number of advisers, the top 20 advisers in Brazil, 17 are with XP and 3 were XP before, right? So you can buy -- you can pay a large check and buy an IFA. But you create one from scratch. It's a whole different game, right. We also diversifying our channels rapidly. So we grew a lot our internal advisers network with high productivity. We also invest in creating what we call wealth services channel, which we have areas and also family offices, multifamily offices. On this channel alone in 2 years, it became the second largest in Brazil in terms of assets under custody. And this channel also positions us really well for the future in terms of fee-based model, right? If we replicate what happened in the U.S., I think we are very well positioned strategically for the future. We also launched our Broker as a Service project. This is a real example of a partner in Brasil, Azimut, which is the first release of our white label solutions. So this is very important for us because it unlocks a whole new level of opportunities. This gives [indiscernible] to our partners, reduces costs, they can customize their experience according to their strategy. And we already have 2 actually operations on this solution, and we hope that we can grow this a lot further. When we think about advisers journey, we take it very serious. The task of developing them in all levels, right? So we created the XP University, where we have a portfolio of programs to improve onboarding of new advisers, improve efficiency, commercial efficiency, improve their knowledge about products, about specific client segments. And more important, since we have more than 400 strategic partners in Brazil, they're going through some challenges that XP went through 10 years ago. Right? So they have management challenges. They have people, management challenges, governance challenges. So we have a team of internal consultants that will help our partners to grow, help with our partners to improve their efficiency, improve their costs. So this is a very important thing and very strategic for us. And this -- these are things that enable us to create new enterprises, new IFAs from scratch. We have an obsession when we think about through teams of advisers, right? So we want them to be most of the time facing the client, right? If they are 100% of their time doing relationship, that's very good for us, right? If we improve from 70% to 90%, that's the same thing as high 30% of new advisers. So we think about his routines from the morning to the end of the day. How can he wake up and see his day planning, what routines can we suggest that he can execute so he has a higher probability to prospect and to gain share of all of his clients. There's a lot of technology, data intelligence behind this, so he can have a better routine. We also measure a lot of attrition. If the adviser is calling us, that's a bad time. Right? So we measure the percentage of contact rate that the adviser has with XP and we've been reducing that constantly year after year. I want to give you 2 examples of how we are enabling the adviser experience, adviser journey with technology and with data intelligence. The first example is the expert allocation tool, which is very similar to what Maffra said, Genie and Aladdin BlackRock 2, right? So he gets recommendations of the next best product to buy. Respecting clients profile, respecting clients' tolerance to risk. And it's very assertive, it's very accurate, right? The people that are heavy users get to 80% more net inflows and 45% more revenue. We also have other 2 that's called digital first. So these 2 in a live way tracks the behavior of the client in our platforms. So if we see that he's stops at some moment in the platform, the adviser gets a signal, we can call the client with the best offering at a better moment. So when we think about advisers experience, we measure the digital completeness, right? We compare ourselves with players in Brazil and players abroad. And because of everything I said, we are way ahead in terms of completeness of digital offerings for the adviser. The adviser doesn't have to call the client so much. It doesn't have to send e-mails because he can do everything on his app, everything on his hub platform. By the way, that's the name of the app that we use to give [indiscernible] to the adviser to ScoutHub. This is just some more information about what I said before, of how it can help advisers perform through time, right? So despite the fact that we have different channels, new advisers that on board with XP, they're continuing to improve their performance, right? So these are charts that show the first 6 months after registration, B2B channel, B2C channel. And in different years, we are always able to make them improve. As Maffra said, we're also being able, because of all the verticals we launched to reach at least 50% of share of at 3x faster than 2 years ago. And we are also in a historical low of churn of clients. Right? So we compare this year with the same period last year, we are 15% lower in terms of churn. This is a low historical low. I want to share with you guys some of the testimonies now of the advisers, internal ones and also our external partners. Some of them just became top 20 advisers in Brazil. They only have 3 years with us. So let me show you some of their stories. [Presentation]

So I think we are in a unique position because we listen a lot to the adviser. Adviser he's -- he makes us to raise our bar. So we have a team that makes focus groups with all the advisers that are heavy user in some part of the platform that makes us learn and improve in a very fast pace. So everything that we presented here has a very important premise right? We can only talk to the client with excellence. We can only interact with the client and allocate its portfolio with a high-quality level, right? Finance and investments are typically complex subjects in Brazil. The key to earn clients' trust to deliver long-term portfolio returns with a professional present, trusted advisers, right? So that's why we measure through our MPS service what the clients like and what they don't like, so we can improve, right, the level of trust, the level of professionalism of the adviser with this client. Also with our growing capability of diversifying our allocation, we're improving the returns, we're improving the lifetime value from the clients. So if we continue to get more information from the client and that's why we're embedding in our hot platform, financial planning experience where we get specifically specific goals and objectives from our clients. We think we can match those things and win the game in the long term because this is going to be the most important thing in the long term. So to end the presentation, I would like to share very quickly with you guys, our growth strategy, right? So in the last 7, 8 years, our main strategy was through digital acquisition of clients. We invested a lot on Facebook, Google. 3 years ago, we started creating our hunting advisers network, mostly in the Southeast of Brazil. And now we are convinced that if we continue regionalizing our model and building some off-line structure, right? So we tested local lounges: the first in Manaus, it was a very huge success. We already launched Brazilian last month. So this is very important because the advisers that are spread out in Brazil, they are working from home. And when they talk to some clients, they want to be in a place that they can trust, that they can interact with adviser. So we're scaling up this strategy, right, with more -- with 10 lounges more in the next 2 years, 1,000 more advisers. And this figure shows you how we have a gap to close throughout Brazil, right? So we continue with the digital acquisition strategy. We continue with our market -- with our partnerships and marketing strategy as well, but the regionalization of our offering is going to be very important strategy to continue to grow. So with this, I end my presentation. I hope I gave you some light on how we believe that we can win the game in the long term. So we're going to continuously improving and innovating our platform, democratizing investments in Brazil, further improving all the services that we provide to our advisers and successfully executing our adviser and marketing expansion plan through Brazil. Thank you very much. I'll be available in the Q&A. So now we have a break right?

Thank you, Guilherme Sant’Anna for the high-quality info. And now we have a break of 15, 20 minutes, okay? This is a great moment that you can get along or talk to our senior executives and answer some e-mails, enjoy. Thank you. [ Break]

Okay. So let's start. Good morning. My name is José Berenguer. I joined the firm around 3.5 years ago. In total, I've been doing banking for 38 years. So I can say I'm a banker by profession. I did pretty much everything in a bank that you can imagine. And I've been here, I've been hired to run the bank. And the question is why such a dinosaur like me decided to join the firm decided to join the firm -- decided to join XP. I was witnessing what was taking place in the market. The transformation that XP caused together with some other players as well. And I wanted to change myself and I wanted to do something different. So here I am, I'm very proud of what we've been doing, very happy with the positioning of the company. And I'm going to talk about one of the things that made me come to XP, which is our ecosystem. And by the way, I went to see Guilherme and I offer myself -- do you remember that we're doing the IPO. I was with JPMorgan. I was the CEO of JPMorgan in Brazil. We're doing the IPO and I told him, "Listen, you have a great opportunity. Let me join you to help." He said, "Okay, let's finalize the IPO and then we'll talk." And then he called me in January 2020, right before the pandemic started and I came. So that's the story. I'm not here to talk about myself, but I wanted to give you this perspective. So the dinosaur is here, and I think I'm helping to build the most successful wholesale and banking operation in our market. Let me use that. When I started to think about the move -- sorry, -- so that's right, we already had the powerful ecosystem for retail. We had a very successful retail business. And the pillars were basically 3. Open architecture, financial planning and the content, our own content, the content that we offer to our clients. And this is very important because we had literally no financial education in the markets in Brazil when we helped people learn how to invest. So this was our existing ecosystem back then, and I'll talk about what happened with this ecosystem as we move forward. So the first phase, what I call the complementary capabilities or the extension of the ecosystem based on 2 things: wholesale banking here and asset management. And why this happened? Pretty simple. We had demand. Clients were demanding these type of things, these type of products. And we have to create that to offer to our client base. So this was the beginning of the expansion or the extension of the ecosystem. We brought at that time new clients. We brought wholesale clients, we bought corporate clients, and we've brought institutional investors into the ecosystem. We started doing ECM and DCM, mainly DCM. And then we expanded the platform or the ecosystem based on those businesses. Then came what I call the new or the vertical expansion of the ecosystem, which is we had the ecosystem with 3 types of clients and we decided to put new products into this ecosystem. So here you have cards, loans, insurance, retirement plans, digital accounts, ForEx, Sant'Anna and Maffra talked about it, serving basically in the beginning retail investments, and then we started to expand this into wholesale clients as well, including corporate clients and SMBs. And the question is super simple, why did we do that? So we were banking a corporate client, issuing a bond for the client. Why not do the hedge with us? Why not do the foreign exchange transaction with us? So we had to expand not only into retail, but into wholesale as well. So this was the expansion vertically based on new products that we offer to this client base. And last but not least, what is the ecosystem today. So we have a very, very competitive advantage and significant advantage compared to the other players. Why? Because we have new technology. We don't have legacy systems. We don't have rigid systems. I'm sure you guys know that most of the retail banks in Brazil, the large retail banks run their current account or the account systems and the lending systems based on very old technology. Our technology is new. So it's easy to change, easy to transform, easy to adapt to the needs of our clients. And that's a very important competitive advantage. The second advantage I want to mention is the agenda of the regulator. I invite you guys to pay attention and to have a look at what's going on in Brazil in terms of the open finance -- what we call the open banking/open finance initiative. It is the most aggressive initiative worldwide. It's going to transform the lives of people, of the way people buy and use the financial system, and it's going to deeply impact the players, including ourselves. So we need to be prepared for that. And I guess, people need to pay attention and learn about what is going on. Things like instant payments, which in the beginning was kind of a joke by the market, the market will say, well, the Central Bank will never be able to create a system and the system is not going to work and it's the most successful instant payment system worldwide. And as of yesterday, the Central Bank created a new feature that will help people to pay their dues using the instant payment platforms. So this is a huge transformation. This is changing the way banks and the system deal with the clients and it will be very important to follow the next steps and what will happen in the future. Another important thing, we started our business not based on credit we don't send a credit card, and there's nothing wrong with this model, by the way. We don't send a credit card to a client and extend credit to the client, so the client comes to us. We started our business asking clients to invest with us. We do credit, we do guarantees, we do loans, but this is not our most important pillar. Our most important pillar continue to be investments and the things around the investment landscape. And as Maffra said, we are not going to be a universal bank. We are going to continue to be disciplined in terms of our client base and in terms of what we do. Let me explore a little bit our competitive advantages, and I divide this in 3 parts. The first part is what I call the superior value proposition. What is it? In terms of retail, 3 pillars: more products, better products, better advice and long-term relationships. Remember, the client came to us to invest. The client came to us to think about his or hers future. The second is corporate institutional investors. So we have a unique market-making environment. We work pretty much like an exchange. There are some markets, and I think you saw the video in Guilherme Sant’Anna's presentation from our partners. In some markets, we have 60% market share in market making. And this is because of the retail initiative, the retail business that we built, but also the institutional and corporate clients flows that we have. So the competitive advantage that we have in corporate institutional investor has to do with distribution and trade execution as well. No one has the distribution capability that we have. Second, efficiencies. I talked about technology, but this is important here. It's important here to mention the -- and I mentioned before the market making, the ability to recycle risk. We are starting to extend loans. We are starting to do guarantees. We're starting to be bigger in credit but no one has the capability to distribute the risks like we have. And we are planning to further enhance this capability to be able to service the client without having to pile up credit risk in our balance sheet and the product distribution that I mentioned before. On top of that, technology, no fixed costs, no branches, just focusing on our clients like Sant'Anna said, ideally, 90% of our time should be focused on our clients and not focusing on operational products. And lastly, the financial advantages, which have to do with, as I said, lower cost execution because of the reasons I just explained, less balance sheet consumption and at the end of the day, generating more revenue. So these are the competitive advantages that I wanted to highlight for you guys. And this has to do once again with this powerful ecosystem. Now I think the best way to describe how the ecosystem works and how the ecosystem is important to our clients, is to send or to show you a video with some of the testimonials from our client base, please. [Presentation]

Well, these are great examples. And I think they illustrate what for me is the most important thing in our business -- in the wholesale business which is we have to be the first call. I don't care about league tables. I can show you the league tables, I can slice the league tables and manipulate in a good way the league tables the way I want to be #1 in this and that. But what makes a difference is to be the first call from our clients. It's whenever the client has a problem, has a need, he needs to think about XP Inc. always. That's what matters to me and that's what matters to the team. Now I talked about the ecosystem. Now I'll do a little deep dive in wholesale banking, what we do, the areas and the strategy. When I think about investment bank or -- when I think about wholesale banking, sorry, I think about 4 different buckets. First one is investment banking, capital markets, M&A, access to capital is a new way of doing or funding and providing access to cheap capital to the client base. So we are very competitive. I'm going to show you some league table figures later on. So this is the first pillar. The first thing I wanted to talk about. The second thing is the global markets, market-making franchise. What we do, we face clients against our balance sheet, we do market making on all types of instruments, and this is within global markets. One of the specific thing that is very important to mention is that this is a very low risk initiative or business, and I'm going to talk a little bit about as we move forward. Then we have the broker dealer. The broker dealer is also a market-making platform with the same client base, retail, wholesale, institutional, part of the ecosystem. But instead of facing our books, the broker-dealer do the transactions or -- does the transactions facing a CCP, a central counterparty, being an exchange or being another type of a central counterparty. And then banking products. And in terms of banking products, as we highlighted before, we've been developing a lot of new products in the last years, and there is more to come. So I could highlight things such as foreign exchange derivatives credit and credit once again has to do with loans, has to do with guarantees and other things. Digital accounts and once again, we are building the digital accounts using new technology and not legacy systems. So this is the way we are organized. This is the way we think about wholesale banking. Leadership position. This shows that we already have a very well-established wholesale platform. We have a lot of room to grow but this is a reality. This is what we have today. So we're #1 in structured notes. And this is important because structural notes typically is a way to buy Vega, to buy cheap volatility and trade is volatility with other types of investors. And we try to be very, very efficient in terms of pricing. We don't want to be compared with the incumbent banks. So we try to provide the best pricing to our client base. We are #1 in rates volatility, #1 in index offshore volatility. Number two, in securitizations of what we call criss and cross. These are real estate and agricultural loans transactions, we securitize them and sell. Number three, DCM offerings; and number 3 in ECM offerings. I will not talk about the way we sliced the timing of these league tables, but this is 2023. Most importantly, things like investment Bank or businesses like investment banking, we are a number -- we're among the top 3 players into 2023 in terms of fees generation. And everything started with retail. Remember, the retail was the beginning of the whole thing, the whole ecosystem, and we built on top of that to create the large ecosystem once again with wholesale and institutional clients. Now from my perspective, I think we're going to deliver, we already delivered and we will continue to deliver. It's a matter of time that we're going to replicate the success or the -- not the success but the efficiency we had in delivering good products and good services to our retail client base in wholesale bank. And I divide this in 3 reasons, and I'm going to talk about and why we'll be successful to 3 reasons. The first one is the wholesale franchise, which is, as I said, is already a reality. It's a combination of the unique retail platform and wholesale distribution. Here is interesting to mention that if you look at these 2 types of clients on a separate basis, you won't have the total appreciation of how important is to be integrated. In other words, the sum of the parts is lower than the actual value of this ecosystem of having both types of clients together. We have sophisticated retail. So this is the wholesale franchise based on retail and based on an integrated ecosystem. Broader access to capital, the second pillar. The Brazilian market was a market concentrated in loans, in credit from the banks, and you saw that the testimonials, we helped to develop the capital markets or to further develop the capital markets in Brazil. So we can use all sources of funding to provide the most appropriate structure to our clients. And we need to be the go-to provider for corporates and SMBs, first call. Last but not least, lower risk. Client flows allow us to be very, very efficient in recycling risk, market-making capabilities, which translates into lower capital consumption, lower risks. Let me focus a little bit on our Market Making platform. Why is it so powerful? You can see here deal flow from the institutional client base, local and international investors, retail recycling risk. So this is the way we approach our market making business, we structure our Market Making business, and this is why it's so important to the ecosystem and to attract and keep clients within our platform. We are a leader in most of the markets that we operate. There are some days, and I have some colleagues here from the broker-dealer that we do more than 50%, 5-0 percent of the volumes in the Futures Market in Brazil. There was a monetary committee meeting 6 or 7 months ago. And the day after, we did 52% of the interest rate Futures Market within our system. It's huge. So this is what we call unparalleled profitability and low-risk combination powered once again by our clients. Let me talk a little bit about risk. And I've been saying that we can be efficient in terms of capital allocation because of the low risk consumption. And this is a good example. This is the market making performance since January 1. As you can see, is a straight line, very little volatility. And it's important to say that there is no correlation with where the market is going. So we make money if the market is going up, if the market is going down, if the market is flat. So -- and the VaR consumption is quite low. And I invite you to look at the numbers from the competitors, these are public figures. You can see the -- in the reports. And you find out that our VaR, Value at Risk with a 95% confidence interval is very, very low. Now what does this mean in terms of numbers? These figures here are related only to products ex investments, ex investments. This is important to highlight. So as Maffra said, and I'm going to be repeating what he said, we started with a very small base in 2019. We reached almost BRL 1 billion this year. And we are confident that we're going to reach BRL 1.8 billion to BRL 2.8 billion in 2026, how or where. As you can see on the right side, we're going to grow the client base, we're going to expand credit portfolio once again with the premise or with the strategy of holding very little risks in our books and scaling up new products such as the digital account, foreign exchange and insurance. In terms of digital account, if you look at the reports -- the P&L reports or the quarter results from the incumbent banks and some of the banks are in Brazil and here in the U.S. as well, cash management became also -- became again a good product. And we are planning to be very efficient in cash management and digital banking for our SMB and corporate clients by having a very, very new platform that we'll be able to compete with incumbent banks. Now I'm going to finalize my presentation before I turn into -- or give the floor to Bruno, talking a little bit about myself again. And the dinosaur like I said, a young dinosaur, I left my comfort zone and came to join this firm. I'm super confident that we're going to deliver what I just highlighted here. This is a baseline. We think that we'll be more efficient and be able to deliver more than we delivered. I'm very honored to be part of this journey. We are transforming the lives of our clients in Brazil and this means a lot to us, to all of us. I'm happy to be with our partners and colleagues here and at the firm in Brazil. So I'm looking forward to delivering those plans and what we just described here. And remember, we are just beginning. We like to say that, "The impossible is just the beginning." And when we think about where we were in 2019 or where we were in 2010 or 2005, and what happened is amazing. So it's an honor to be here. It's an honor to be with my partners and colleagues. So thank you very much for your attention. And I now invite Bruno to come here and talk about the numbers. He's going to connect the dots and explain how the figures get together.

Good morning, everyone. [Foreign Language] For those who don't know me, I am Bruno Constantino, CFO of XP Inc. I have more than 25 years in the financial market, out of which 11 of those years, I've had the pleasure and the honor to be with XP that became my life. During this session, is the last model I'm going to talk. I don't have nice videos like Guilherme Sant'Anna and José Berenguer presented. It's only about the numbers. But I promise all of you I'm going to be brief here. The way we have structured this model for blocks. Number one, we're going to talk about our achievements since the IPO. Number two, we are going to talk about a deep dive in retail unit economics showing the potential for cross-selling and also the impact in our numbers and clients' LTV. Number three, we are going to deep dive in our balance sheet. As Berenguer just presented, the wholesale bank unit, something we didn't have at the IPO time. We understand it's important to give some highlights and share that with the market here. And finally, number four, our road map for 2026. So without further delay the achievements. I believe the numbers speak for themselves. Our gross revenue increased by 3.2x from BRL 4.7 billion to BRL 14.8 billion. It's not being a straight line. We all know that. those 4 years, the first couple of years, they were amazing for the core business, investments, the last 2 years a headwind. But the result of those 4 years combined together, 3.2x increase in the revenue. When we look at the bottom line, net income, 4.5x higher than at the IPO time. And the net margin expanded by more than 700 basis points. Now let's go back to what we said at the IPO time in 2019. We said that our revenue should grow in the midterm at a CAGR of 35%. Those 4 years, we have delivered 33%. We also said that our adjusted net margin, not net margin, adjusted net margin would be between 18% and 22%. Our net income margin reached 26% as of third quarter this year, last 12 months. And we have done more than investments. We have done a lot since the IPO as we showed here in this morning in terms of new verticals in corporate and SMB. What we have here in this slide is the number, putting together all the new verticals for retail investors in order we can take care of the whole financial life of our investor clients, plus corporate and SMB revenues ex investments. We can see that at the IPO time, more than 97% of our revenues were investments. As of today, 18% of our revenues come from other businesses other than investments. So this diversification and resilience of our business model is something that this number speaks for itself. But of course, all those new businesses, they come with an expense growth. We had to build a bank from the ground. We had to hire a lot of corporate bankers to get into the corporate and SMB market and so on. So when we look at our expenses, and we look at the efficiency ratios that we have, what you can see is that we have picked our expenses when we were building the foundation that, by the way, is ready. So now when we look forward, it's more business as usual. And we have also adjusted the costs after building all those new verticals to levels similar to what we had at the IPO time. For example, on the left, the efficiency ratio at the IPO time was 37.6% as of today, 37.3% when we adjust the efficiency ratio by share-based compensation, why? Because at the IPO time, we didn't have that expense. So just to compare apple to apples. Our efficiency ratio would be more than 400 basis points lower as of today. When we go to the right of this chart and look at the comp ratio, it's the same message. At the IPO time, 24.8% as of today, 25.7%, adjusted by share-based compensation, it would be 22% or 280 basis points lower than at the IPO time. The message here is one, cost discipline. That's something we are going to continue to pursue in this company. We understand it is a competitive advantage for the long term. And as you're going to see at the end of my presentation in the road map to 2026 and in our EBITDA margin guidance, there is efficiency gain embedded in our assumptions. Now let's deep dive in retail unit economics. I'm going to share some of the achievements and also some cohorts and numbers with you. Here, we have the main KPIs for investments. As Maffra stated at the beginning, we want to achieve leadership in investments in terms of client assets. We are not there yet. It's a long journey. But when we look what we have delivered since the IPO, I think the execution has been in the right path. More active clients at 4.4 million as of today or 187% growth at the IPO time. More advisers, as Sant'Anna presented, 14,300 IFAs in our ecosystem with a 70% market share in this industry, by far, the leader in the industry. And more client assets, BRL 1.1 trillion of client assets in our ecosystem or 11% market share. Still a lot of room to grow there. When we look at other things that we have done beyond investments to become this full financial platform, we have done a lot. I'm not going to waste time here, Sant’Anna already presented. I just want to highlight at the bottom of the slide, our capability as an ecosystem to scale new verticals fast. When we look at the credit card business, the most advanced new vertical that we have in terms of revenue and volumes and so on. Only credit cards, we are close to 1 million. If we add debt cards, we reached more than 1 million clients in our ecosystem. All the other products, our intention is to replicate the success in cards, which by the way, we believe this is still in very early stage. Maffra mentioned a 20% penetration in credit cards compared to more than 90% of penetration in the incumbent banks. But when we look at the other products, they are in much earlier stage than cards. Now let me share the cross-sell view in our retail unit client base. On the right of this chart, we have our cross-sell index, 1.7, 1.7 , meaning that investments is one. We have 7 other products in that ratio that could be at maximum 8, we are at 1.7. So a 70% growth since the IPO, because of the IPO, we just had investments, right? But it still a low cross-sell index when we look 3 years ahead. On the chart, the cohorts here, we have separated advised clients from self-direct clients. When we look at both charts and only B2B and B2C at XP brands, so we are not talking about the 4.4 million clients in XP ecosystem, just B2B and B2C at XP brand. But when we analyze the data here, it tells us 2 things. Number one, each newer cohort cross-sell more than an older cohort which is intuitive, in my opinion, considering that we have been evolving the number of products and the features and the experience of our clients over time. The second message is that over time, advised clients, they have the ability to cross-sell more than self-direct clients. That's also intuitive in my opinion. If we consider that among those 7 different products compared to investments, we have some complex types of products like, for example, life insurance, that a human on the other side makes the difference in terms of conversion ratio. Now let's see what is the potential for cross-selling. Here, we have the blue line and the green line. Blue line is the penetration in B2B and B2C of our advised clients at XP and the green line is the penetration of self-direct clients. When we look at those numbers since first quarter '21, all of them went up. So yes, the penetration is going really well at the advised clients, we have 54% penetration at XP, but I invite you to think differently here. Look at the potential. Advised clients at XP, we have 46% of our advised clients only with investments, nothing more, huge potential. When we look at the self-direct clients, same message, 58% of our self-direct clients at XP only with investments. And what is the potential for cross-selling. What is the impact better said, of the cross-selling in our numbers. Here, we brought 2 metrics: ARPAC and churn. So ARPAC is average revenue per active client and the churn, the clients that evade our platform. When we look at ARPAC, for those clients that consume 2 products, one of them being investments, the ARPAC goes up by 39%. If the client consumes 2 products, other than investments, the ARPAC goes up by 74%. But more importantly than the ARPAC in view is the lower churn. For those clients that consume 2 products other than investments, the churn reduces by 43%. And what is the consequence of the higher ARPAC and the lower churn is this last slide for the retail unit economics. With more cross-sell, more ARPAC and better retention, which means lower churn, the result is a much higher lifetime value for our clients. And that's the opportunity we have in front of us. Now my third session here is about the balance sheet, as I highlighted at the beginning. And it's important just to give a context here. At the IPO, we didn't have to pay too much attention at our balance sheet. We were a broker-dealer and investment platform, and we didn't have the bank yet. We were building the bank as of 2020. Right now, because almost anything in XP scales really fast, the bank became more relevant. So it's important to give those highlights and share the information here with you. how do we see and how do we manage our balance sheet. First thing to say is in a conservative way. We are, by nature, conservative here. We have an important disruption to continue in the investment business. And the way we approach risk has to be in a very conservative way. What you can see through our time is that having said that, we've been optimizing our capital allocation. Here on the left, we have our managerial BIS ratio, our capital ratio. At 2021, it was close to 27%, very, very high. Fast forward to today is still a very high level. 22% lower than the 27%, but it's still a very conservative level of BIS ratio. And we have optimized that capital allocation through distributions to shareholders. Since 2022 up to today, we have distributed BRL 6.3 billion to our shareholders, either through buyback or dividends. Looking forward, we expect our BIS ratio to be in the range of 16% to 19%. Still a very conservative level but as I said, that's how we approach risk. But our balance sheet will continue to grow. And then the question is, are you becoming more like the incumbent banks? The answer is no. We have a business that is more likely incumbent banks but in a different way. We are using the capital market development with XP at the center of it to make this transformation happen. But yes, we can carry some risks in our balance sheet going forward. So how does XP compare to the incumbent banks. Here, on the left, we have our total RWA. So the first message here is clear: BRL 78 billion of total RWA as of third quarter this year compared to more than BRL 230 billion of total assets, which tells us that we have a lot of our total assets that are low risk type of assets, which is true. Number two, when we look at the ratio of our RWA divided by our total assets, it's been pretty much stable at 30% to 34% of total assets. And when we compare that ratio to the incumbent banks, it's outstanding that we are very different than the incumbent banks. They're ratio of RWA divided by total assets range from 50% to 70%. In our case, 1/3. Another way of looking at this difference is by the composition of the RWA. In our case, operational risk is much more relevant than in the case of the incumbent banks. Not that we take more operational risk in absolute terms for -- because of the size of the banks, of course, they have more operational risk in absolute terms. But on a relative basis, in our case, operational risk is more relevant. And in their case, credit risk is more relevant. So this tells how different we are compared to them. As of third quarter, we had a 45% credit risk in our total RWA. We can grow that number over time if we think there is a good capital allocation there or opportunity. But again, we are not going to go the way the banks are between 70% to 90% of credit relevance in total RWA, different business models. Now that I talked about credit RWA, I want to share with you a new line here. The first 2 lines in terms of credit exposure, you're very familiar with it. Here, we have our total low-end operations, basically, the BRL 20 billion in credit and the credit card adding BRL 7 billion more. So we are talking about BRL 27 billion of credit exposure, out of which 88% is pledged. The third line corporate securities, they are not part of loan operations, but they do have a credit exposure, and we wanted to highlight that and give full disclosure. What is embedded on that line. Investment banking and market making activity that Berenguer just mentioned before, and also some corporate credit that because of the nature of the transaction is not considered a lower operation, but there is a credit risk embedded on that, 2/3 of that $13 billion comes from investment banking and market-making activity. There, everything has a short duration in our balance sheet. The turnover is really high because that's a full business. The other 1/3 of that BRL 13 billion, the most relevant one is the energy transactions that we do against our corporate clients, which the risk that we carry is really low. It's a third-party -- there is a chamber that concentrates the risk if any client defaults, it's going to have a problem to continue living without energy because there is physical deliveries there and so on. So it's a low risk business. And it's not embedded in low in operations because of the nature of this business. It's not a financial asset. So the accountability pattern does not let including loan operations. So our total overall credit exposure is more to BRL 40 billion than the BRL 27 billion that you have in mind. And we thought it would be important to give this disclosure, and we will continue to do so going forward. And lastly, in the balance sheet part, how does XP manage liquidity, again, very conservatively. The best metric is the liquidity covered ratio and the high-quality assets. So the LCR of XP as of third quarter this year, 217%. And everything that I've been said here is about XP consolidated as a group. And our high-quality assets goes to BRL 50 billion of third quarter. Now the last part, our road map to 2026. What I'm going to talk about here is basically summarizing everything that we said during this morning about the 3 pillars that Maffra presented at the beginning: Investments, our core business and the most relevant one; new verticals for retail clients to become dominant in investments and the third pillar, corporate and SMB. The starting point here is third quarter 23 last 12 months. Our total gross revenue, BRL 14.8 billion with an EBT margin of 26%. When we look at that BRL 14.8 billion, it is divided in those 3 pillars, just to make the connection with the pillars it is divided in: BRL 12.2 billion, first pillar, investments, the core; BRL 1.8 billion, new verticals, the second pillar and the BRL 0.8 billion in the third pillar, corporate and SMB ex investments. When we look at the core investments, we expect that by 2026, we're going to have BRL 5 billion to BRL 7 billion more of revenue. If you do a math that I bet all the analysts have done already, at the midpoint of this number, we are talking about growing from BRL 12.2 billion in revenue to BRL 18.2 billion in revenue. If you do the CAGR math of those 3 years, we are talking about 13% CAGR. That's the more mature business that we have. Again, with still in our understanding, a lot of room to grow, but that 13% CAGR in an industry that grows between 9% and 10% of CAGR means that we are going to gain more market share, as Maffra presented earlier, moving from 11% to 14%, 15% in the next 3 years, and that's what embedded in that assumption. Also a better turnover and mix in revenues. Do not forget that this more mature business has a huge operating leverage and that probably we are in the worst part of the cycle as of today. Moving to the second pillar, new verticals. We went from nothing to BRL 1.8 billion, really fast. But those new verticals, they have different maturity over time. As I mentioned, cards is more advanced. We have new business that we just launched second semester last year, beginning of this year. So we believe the cross-sell is a huge opportunity. What we are saying here is that BRL 1.8 billion is going to grow additional BRL 2 billion to BRL 3 billion in the next 3 years, which means a CAGR around 30%, 31% as we are today, but it's still with a lot of room to grow after that. And finally, the newest one, our third pillar, corporate and SMB that we are at BRL 0.8 billion as of today. We are saying that in 2026, we are going to add ex investments in the corporate and SMB sector, BRL 1 billion to BRL 2 billion additional on top of that BRL 0.8 billion that would give us at the midpoint, a CAGR around 38%. So it makes sense because investment is bigger. The CAGR is smaller. New verticals is more advanced than corporate and SMB, huge potential for cross-sell, so the CAGR is higher and corporate and SMB because of the low base has a higher CAGR in those 3 years. And then we would reach a total revenue between BRL 22.8 billion to BRL 26.8 billion, at the midpoint, we are talking about BRL 10 billion additional of revenues in 3 years from now. When we go to the margins and say, okay, you're going to grow the revenue. And what about the efficiency? What's going to be the margins over time? We live from 26% pretax margin as of today, and we believe we can achieve something between 30% to 34% pretax margin as of 2026. How we're going to do that? Efficiency control, cost discipline, that's a must, as I said, but also bear in mind that the turnover in mix for the core has this operating leverage that I mentioned. So we expect a better environment moving forward, nothing aggressive, but better than we are today. And also, consider that the new verticals, by nature, they have a J curve. And as we move one year forward, compared to the previous year, the J-curve reduces the impact. And the next year reduces even further and then become positive impact. So when we look at where we are in the cycle, and the high operating leverage that we have, plus the J curve of the new verticals, plus the cost discipline that we have in our company, we believe the pretax margin between 30% and 34% is totally achievable. When we do the math considering the midpoint here of all the guidance that we gave, we are talking about total revenue growing at a CAGR of 17% in those 3 years and pretax growing at a CAGR of 24% in those 3 years. So with that, I end my presentation and now I invite Maffra for the final remarks, and we're going to be here for Q&A. Thank you very much.

Thank you, Bruno. Very good presentation. In our final segment of the day, we are going to open it up for questions. But before we begin, I want to share some of my final thoughts. We have covered a lot of content today, and I hope that it has been very helpful to understand our strategy for the next 3 years. But we have also been very careful to not give too much information to our competitors who are trying to copy us every day. As you think about the content and our guidance I would like you to keep in mind that while we can't control what's going on, on the market, the market cycles, we are very well positioned for the future. From a market perspective, we are bigger, stronger and better company overall. Our business model has evolved to become a more diversified and more resilient we have more channels for growth, a more diversified and more resilient company and a better balanced mix -- business mix of revenues. And now we can pursue a much bigger revenue opportunity. Our model has been tested in a very tough market cycle, but it has proven to work. We also have done a lot of work internally, and we are now a much more efficient company and getting better every day. So I believe XP will continue to create value for our shareholders, growing our EBT, as Bruno mentioned, above 20% CAGR for the next 3 years. But none of this would be possible without the unique culture and the people that we have at XP. I think this is the most important competitive advantage that we have. The best executives, advisers and tech developers are attracting to our culture. That's why Jose Berenguer, CEO of JPMorgan Brazil; and Andre Parize CFO of Getnet, who are here today, who presented here today joined us. And it's also why our clients join us, we serve them better, smarter and with the best quality in Brazil. So now we are going to open for questions and I will turn the microphone back to you, Andre. So not sure, but probably. So thank you very much, guys.

So we're going to start with the Q&A session. We're going to start from you guys in the audience, and then I'll revert to the people online. But please Berenguer, Sant'Anna, Maffra and Bruno, they are coming in I guess, right? Okay. So one more minute. Okay. So we're going to take questions from the audience. So could you please I mean, first, everyone say your name and the company you work for so I appreciate it. Thank you.

Good morning, everyone. Thank you for the presentation, Jorge Kuri from Morgan Stanley. I wanted to ask you about the competitive landscape, both from the incumbents as well as the challengers like yourselves, evidently, you have a pretty attractive market share story ahead of you that you pointed out in that north star of doubling your market share is -- it's ambitious, of course, and I'm sure the incumbents don't want to lose any market share. And so can you talk about -- where do you see the incumbents today in terms of their own transformation, evidently, they're not sitting on their hands. They're trying to cap some of your best offerings and try to defend market share like that. Can you just give us a sense of where do you think they are? What are they still missing and why your competitive advantage are source that you can deliver on this market share so that's one big picture. The other one -- I'm sorry, it's just like pretty mundane, but your tax rate is super low. You have you're running a 5% tax rate for this year. And so as we think about your 2026 guidance, which on pretax basis is a very strong CAGR. But if the tax rate instead of 5% is 30%, then it's a very different number. And so how do we think about the potential outcomes for the tax rate in that period?

So thank you, Jorge. I can start answering the first part of the question, then we'll take the second part and feel free to complement myself on the first part. When we look at the landscape, the competitive landscape in Brazil today, we have the incumbent banks, and we have 2 -- mainly 2 other players, I would say, Safra and BTG that's the landscape in Brazil, okay, of competition. The other is smaller investment platforms. The [indiscernible] went through very well through this market cycle. So most of them, they have been consolidated or they are dying, okay? So with that in mind, of course, we see some of the especially the big banks, we have Itaú with the [indiscernible], Santander with AAA. Of course, they are trying to improve to get better on investments, okay? But I believe they are working -- remember the 3 waves that I mentioned here, product, distribution and quality. They have been working to close the gap in the first 2 waves, okay? Product and distribution. They have opened the platform 2 years ago, some of them not even of the incumbent banks, they not even have an open platform yet, okay? So that's the way we like to think. They're working on distribution. So now they have 1,000, 2,000 dedicated advisers for investments. So [indiscernible] is small, and it's not their priority, okay? The priority of the banks is credit, okay? So selling investments is basically a way of funding the credit portfolio, okay? So why they are worried about us taking market share from them because if they lose the funding, they lose the credit business, okay? But we are born and raised an investment platform. That's our core business. That's everything we do every day, okay? So we don't want to be a credit bank. We want to be an investment platform. And we'll continue to be that, okay? And in order, of course, to keep the gap that we have in investments, that's why we are investing have been investing in the past year or more on the third wave, okay? So we talk every day about financial planning, how we create better tools to really help our customers to do planning for their whole financial life. That's completely different from selling a time deposit, okay? And even on the first 2 waves, there are 2 gaps because, of course, they reorganized the adviser sales team, but they are not very well trained, okay? We hire people from these banks every day. Once they come here, we have to put them on the XP University to teach them how to build the portfolio, how to deliver a portfolio, teach them what's bond, okay? That's the level of difference okay? Of course, they are closing the gap on the first 2 waves, but we are opening the third one, okay? And even the first 2 waves, even broadened, okay? If you look at the international account, we showed like a video here, it's very hard to open an international account at Bradesco or Crassa or so on or even Itaú, they bought Avenue okay? It's not fully integrated. We had the option to buy Avenue. It was on the table, but we preferred to build from the ground because for us, experience, the quality is key, okay? So that's the difference. Investment is sort of DNA. We have the best train. We have the best products, okay? And we have just financial planning, goal like -- and mindset that's completely different from selling just abroad, okay? And even the open platform from the banks today, if you look at the XP. Our portfolio is basically 85% the portfolio for our clients, 85% independent products, 15% our own products, okay? If you go to the banks, it's exactly the opposite, okay? It's 85% their own products, 15% like third-party products and get like a portfolio recommendation for your first portfolio in any of the banks, you'll see product from the bank 1, 2, 3, 4, then one fund, okay, from a third-party vendor. That's not who we are, okay? So we are born an open platform. And for us, we don't have this conflict of the funding, we don't need to pay less for the customer to have a bigger spread on credit because that's not our card business, okay? So for me, that's the main difference.

Maffra, if I may add, looking at the wider financial markets perspective, Maffra described very well the landscape for the investments or core business activities. But I think the game will be a game about cost, cost, cost and quality moving forward. When you look at the banking system as a whole. And I think the scenario is gloom and doom for the incumbent banks, I would say. They'll have to accelerate the closure of the branches. They'll have to let go people, and they'll have to deal with the legacy systems that they haven't been able to deal with. So I think it's going to be important to follow what happens in terms of the cost structure of the players in order to assess their ability to keep returns at the same level.

And just one last thing regarding the first part of the question. And I know it's a subjective matter. So sometimes people don't like this answer, but at the end of the day, we have ecosystem of entrepreneurs. That makes a lot of difference. It's difficult to touch it, but when you see an adviser, his life is his client. He's not a hired bank manager that has work from 9 to 5. So that's very different, right? And we like to nurture that inside our company. So the velocity that we develop everything we do for the adviser, we feel responsible to help that advice because he's entrepreneur just like us. So how do we help him. So that mindset, I think gives us some steps ahead of the competition. It's very difficult to emulate if you're not the same thing. If you don't have that culture embedded in your DNA.

And you mentioned even about channels, we mentioned that we -- our goal here is to be a hub for different types of financial planners in Brazil, that's a differentiation because it doesn't matter if you are a wealth manager, an IFA or if you want to work at XP, we have multiple channels. If you go to the banks, they only have one channel. Okay? They don't open the platform for different players. So why? Because that's our life investments, okay? So it's going to be hard for them like to. Of course, they are improving. I totally get. We are not blind to don't see them improving in the past years, but we also improved, okay, so.

And they have a -- just last comment on that first part of the question, Jorge, bear in mind that they all together, despite the success of XP and other platforms in the investment business in Brazil, together, those 5 banks, they still have more than 70% of market share. So with everything that we said, plus this very high market share combined, it's hard not to be a donator of market share. To your second part of the question about effective tax rate, that's why we gave the pretax margin guidance and not the net income margin guidance. We know that the effective tax rate is harder to forecast because it depends a lot on the mix of revenues.

But one point, they adjust...

Yes, yes. I'll, I'll get there. So just to your point about the low effective tax rate, remember that because we invest in Brazil through funds, the accountability, the way we recognize our revenues in our accountability, in our P&L is net of taxes already. So the normalized tax rate is much higher than the 5%, 6% you mentioned. It's closer to 20%, between 17% to 20%. What I can tell you is the following. Going forward, we do expect our effective tax rate, the accounting, One to be higher over time. Is that going to go to the 20%, 30% that you mentioned? I doubt it. But it's going to go up. And it's reasonable to assume that why is reasonable? Because if you look at 2022, for example, we had a higher net income than EBIT. That's not sustainable. Why we have that? Because of the macro, we had some losses. We have more than 60 companies in our group. We have losses in some of them. You recognize a deferred tax asset and that brings a net income higher than EBIT in 1 year, but that will not continue going forward. So to your question, we don't have an effective tax rate guidance here to give. It's a pretax margin guidance but you should expect a growth in the effective tax rates going forward, but nothing skyrocketing like the numbers you mentioned.

Yes. And even because we mentioned that we were going to have a better management of the capital allocation. Part of that is to leverage a little bit more the bank and do more business on the bank, meaning...

45% they can expect.

Yes, they can expect. Some of the business line that we do outside of the bank today, should be done on the bank, but they are P&L positive because we can use less capital, we need less debt. We have tax [ shoots on ], but higher EPR.

Thank you. Okay. Next question, [indiscernible], please.

Tito Labarta from Goldman Sachs. A couple of questions also. One, I guess, if we look very impressive growth not just the last 3 years, the last 5, 6 years, I mean, the last 5 years, more than 10x revenue growth. But from that perspective, it's a very different business when you're 10x higher than before. So how do you think about the challenges today versus being very small and disruptive. So what are the main challenges going forward to be able to continue to grow and get to the market share that you foresee? And then second question would be, I guess, on the guidance, looks broadly in line with consensus, if you look by 2026, some downside, some upside there. But what would be the upsides and downsides, right? You gave the range, right? What would have you be at the lower end? What would have you be at the higher end? And also on the margin, right, [indiscernible], you mentioned a lot of focus on costs, what will be the difference between 30% [ EBIT ] margin and 34%? And one technical, just to clarify, that should be on the net revenues, not on the gross revenues?

That's not revenue. The top line that we showed here is a guidance is gross revenue. Thank you for reminding that margins, net revenues always. Yes.

Well, I can take, start the first part of the question. It's important to, that's why we break down in three pillars because we have completely different mature levels in each of these pillars, right? When we go through new virtuals and to corporate and SMBs, I believe, we are at a very early stage, and we don't have like a big size yet to worry about market share size and so on because we just mentioned that we were zero, 3 years ago in Corporate and SMB, BRL 800 million now, that's still nothing compared to the market, okay? So when I look to two pillars, I don't see that problem yet, okay? Because the stage that we are on this business. When we go to investments, of course, we have today 11% is completely different when you have 1%, okay? But if we go back, what you mentioned like 5 years, our CAGR used to be 60%, okay? That's why we are saying that our CAGR is going to be 13% and not 60% anymore, okay? Because we are, we have a much bigger starting point, okay? Of course, it's going to be harder to grow, what we grew in the past. But when we look and we decompose the number, as Bruno mentioned, among increasing market share, increasing the, Imagine that we have BRL 1.1 trillion today and that in Brazil, we can assume that 8%, 9% or 10% will not make much difference Growth because of the SELIC rate, we will get to BRL 1.5 trillion, BRL 1.6 trillion, without bringing any new money, okay? So if you decompose all these numbers in new clients, the growth of the SELIC rate and the market coming back a little bit. We can talk, Bruno can give you guys some more numbers on that. But we lost more than BRL 1.5 billion on transactional revenues on the core business. Why? Because what we just mentioned, people buying time deposits, people buying low-risk assets. We lost more than BRL 1.5 billion, okay? So if we assume that the word, we're not going to be in the last 2 years for the next 3 years. We have a lot of growth just to unlock here from without doing nothing, so when we decompose these numbers, Bruno will kill me here, but I believe 13% in investments, it's the low range here, okay? Because it's nothing, okay? So that's my view.

I mean what could go wrong for our guidance not to be achieved is for the macro to continue like it is today. That's what, I mean, that's the main concern, I would say. We do not expect that. Do we have a very optimistic view about the macro embedded in our guidance. No, we don't. We have a cautious positive outlook for the macro with a gradual improvement next year, picking up in 2025 and 2026. The number that Maffra mentioned, just to give you the potential of the leverage, we were doing a lot of exercise before the Investor Day looking at our internal data. When we look at 2021, the last year of the boom market in the transactional part of our revenue, which by definition is recurrent. It's important. I've been with XP for, as I said, more than 11 years. I've never seen 1 single day where we didn't make a transactional revenue, every day, in everything fixed income, equities, futures, commodities and so on. But of course, the transactional revenue is more volatile by nature. So when we look at 2021, the transactional revenue and compare as of today, the ARPAC for our clients that transact on a daily basis with us roughly 2 million clients, [ BRL 120 ] lower as of today. You can assume whatever you want. You can say, okay, but you had the COVID, so the turnover was higher. I don't believe it's going to come back. I don't care. But just as a math calculation you multiply that BRL 120 by 12, you reach BRL 1,440 per year. You multiply that by 2 million clients, we are talking about almost BRL 3 billion of revenue, additional to what we have today. It's just a math equation. It's not a guidance. But to give you a sense about the guidance that we gave, where the midpoint is BRL 6 billion for investments, and here, I am considering retail clients. Remember that in investments, we have SMB clients that invest with us and so on, corporate clients as well that invest with us. What Berenguer presented it's outside the investment world. So we believe we are in good shape to deliver the guidance that we gave. In terms of the new verticals, what could go wrong there is our capability of execution. If we, we believe we have differentiated products, we have the hardest parts already done, which is investments. We got the trust of the client with our brand, with our ecosystem. So to move forward into banking, it seems a natural step to be able to take care of the whole financial life of the client, our strategy. So we believe, again, we are in good shape to deliver that, but what could go wrong, our execution. We cannot penetrate. We cannot, that's not what the numbers tell us as of today. but that's what could go wrong in my view.

Great. And just on the margin side, what have you be on the lower end or higher end?

That, I would say, the macro cycle because that's where the operating leverage plays an important role. It's more mature. So depending on where we are, how fast the cycle moves that's what could take us to the top or stay at the bottom of the range.

This is Neha Agarwala from HSBC. Just quickly, you talked a lot about costs, and it seems like in your guidance as well, there's some cost efficiency gains baked in, in the coming years. Where do you specifically see rooms for gaining cost efficiency? So just if you could talk about that briefly. Then about the new verticals on the Retail side, right? So we expect strong growth in that in the coming years. But today, if we look at the new vertical revenues, is predominantly coming from the credit cards, which is mostly your interchange fee. So what kind of diversification should we expect on the new vertical side? Where is that revenue growth going to be driven from? Because I think you mostly reap the benefits on the credit card side. But there's a limit to it, you want to diversify that revenue. So how should we expect that revenue growth coming from? And that revenue composition to look like by 2026?

Yes. So first question about the guidance?

Cost.

The cost discipline and the efficiency gains. Look, we have reduced a lot and improved better said, our efficiency ratios. We expect to continue to do so. There is operating leverage in our business. So as Guilherme, like to say that a lot, it's become a successful entrepreneur is about three things. grow your revenues, control your costs, so your expenses should not grow as fast as the revenues and deliver a good quality to your clients. So there is operating leverage as we keep growing our revenues we expect our costs on absolute terms, they will grow, but less than the revenues, basically efficiency gains. And also, we have done a transformation in the company. We have been investing a lot in technology and as any investments when you do the J-curve and then you will reap the benefit of it going forward. We expect our efficiency ratio to keep improving, not as fast probably as when we peaked when we were building the foundation for the new verticals, but a continuous improvement of our efficiency.

Yes, just to add to this point, Neha, I believe the most important part is operational leverage, okay? Because we don't need to hire anyone else. You mentioned credit cards, for example. We don't need to hire anyone else or, it's very marginal. We need to hire CX people, center people, but it's very marginal. We don't need to invest a lot to scale any of this business, okay? But we already have all the SG&A on the numbers, okay? So most of these new business lines that we've shown here, there's two [ margins, negative ], okay? Because it's a J-curve. We expect credit cards to be the first positive month, which is December, okay? So why? Because you have to invest ahead of the revenue. So that's probably the main one. But the second one is, during, we already mentioned that many times, but during the bull market, we did some mistakes. We are like expanding and creating a lot of new business lines. It's very hard to grow and especially in a bull market in a very efficient way because you are more worried about the next revenue, about the next product, okay? So we did some mistakes. We reduced more than 1,000 people in the company. Without breaks anything, without like leaving anything out of the table. So today, we mentioned a lot that the company today is much better than it was in the past, the internal controls, the metrics that we use, the XP management sees them. Today, we have guidelines, really clear guidelines on efficient cost compensation ratios. So that's the way to not do the same mistake in the future. okay? And as Bruno mentioned, we have a lot of, we have done, started the transformation back in '18, accelerate in 2020, 2021. okay? Today, we have the whole company, the whole organization, reorganized in a different way, okay? So we have to simplify like 35 business units inside the company that we have put everything together, [ multi-singularities ] and so on. And we believe that's much more efficient, okay? And we have with Marina one of like a programs, what we call end-to-end digitalization, basically getting all the journeys from our customers. And here, we have two good effects. We to make the journey of our customer, the experience much better. But at the same time, we reduce cost because everything done through technology. If you go back, if you go to, inside XP and look some of the process. We still have some process that are not the best ones, not the most efficient ones. So we have a whole end-to-end digitalization in the company program that we'll keep doing that for the next years that will capture more cost efficiency.

I would say that's the best example, you're sitting beside [indiscernible], our senior partner and responsible for asset management services. I think we gave this example in one of our earnings calls about the potential of operating leverage in the funds platform, as an example. The performance fee of the funds, how is it [indiscernible] as of today? Not very good, right? If it performs really good in the future and we get more revenue through the performance fees of the funds that we distribute in our platform, we need zero headcounts, additional head count to make that happen. That's a huge operating leverage that, so we have many examples like this one in the more [indiscernible].

I think we always executed traditional cost reduction playbook, right? So synergies, end-to-end automation, span of controls, but we were growing a lot in 2 years ago, we still grow, but we were growing a lot and, when hiring a lot of people. And I think we got a lot better in the last 1 year, executing with discipline, display book. So a lot of the examples that the guys said for example in my area, right? So the content rate from the clients to call XP, each time we reduce it a little bit more, we don't have to have more CX people at the same level we had before, right? So the adviser with the two, that I said in terms of digital first, asset allocation, an adviser he could have 100 clients in his client base. Now he can have 200 and do the same level of service for his clients. So these things, we're getting more disciplined. And after we launch the new products, we start to export the synergies. So we launched the product. Now it's fully automated, fully operational, how can we explore synergies with other products. So this is the mindset that we are getting better at each year. to execute better the cost control playbook. So as we mature, I think we will get even better.

Paul [ Trejo ] from Capital World Investors. The presentation. Question for Jose and Guilherme, Modal acquisition, integration systems, potential disruption, combining two banks, Jose, any comments around that? And what it can bring kind of upsides as well? And then [indiscernible] as well kind of, is it a different client base, different asset base? And does it add to the mix that you already have in terms of the retail business?

I think I'll start. The integration is pretty much done. It is a simple integration compared to at least what I lived before. For instance, [indiscernible] in the past. The product offering from Modal is pretty similar to what we had internally. So it is an easier integration, although we still have some challenges that are being tackled. But I think from the wholesale perspective, the most important thing in Modal is what they brought to the table, which is a platform to service clients, smaller clients and fully integrated with our IFA network. Which is gold mine in my view. Remember that we normally, we are very efficient with large clients, but we are more efficient with smaller clients in which, in this case, as we take the client by the hand, we prepared the client for the capital markets. We do a debt transaction. We do eventually an IPO. So the origination of these smaller clients is important. And the integration with the IFA network that Modal had is better than what we had at XP. So I'm very bullish on the case of using this integration to generate more deals in IB. And once the client comes to the firm to do an IB transaction, the client becomes a client for all the products that we mentioned before, including private bank in the case of shareholders and C-level. So I think it's, in terms of wholesale, the most important thing that I wanted to highlight in terms of the integration is this business that they had before or they have at Modal which was better than the one that we had at XP.

So the way I like to think about Modal is basically, we are shutting down all the systems they have, everything, 100%, okay? One or other small parts, some products they had, we are basically putting on the Ecosystem, okay? But, we are not going to keep any of their systems or their Platforms or anything, okay? So that's one important point. Modal used to have 1,600 people 1,700 people at the beginning our goal is to go to as low as 200 people, okay? 200, 250 okay? We are going to maintain most of the people on the wholesale part because what Jose just mentioned, it's basically they have some operations that's basically a people business, for example, with special situations business. We didn't have that in-house they had. So basically, we're keeping these people to do these kind of transactions. When we go to the retail part, it's basically a portfolio of clients that will put on XP system, okay, on our Platform and to a full integration. I believe the retail client part, it's almost done, okay? We will probably finish by January or February. And then we have some other system parts that go probably should the mid of the next year. But to see the real synergies is probably just in 2025. I believe in 2024, it's already going to be accretive when we look EPS, okay? So the deal is going to be accretive because we will see at least part of the cost reductions and the revenues, okay? So, but full integration in terms of like synergies, 2025.

And before you jump into the subject, Sant’Anna, we also acquired people. And as Maffra said, we're going to continue to reduce the number of people, but we brought people with a lot of expertise in banking, which is good for our moment and the development of the new products that we just mentioned. So the CEO of Modal, Christian, he appeared in the video, is now running several banking products. He's a great guy, very experienced and some other guys, who came, he's member of our executive community. Exactly, member of our ExCo. So in terms of people, the transaction was also accretive. They brought -- already several good people with different skills for the firm.

And we will keep the Modal channel using the white label that you guys saw here. So there is no extra cost or operational work because it's a white label. It's the same thing we do for HECO today. If you look at [ HECO ] today, it's just a white label from XP, okay? So it's just another channel. So we'll keep Modal brand as a white label mainly focus on traders on clients that trade a lot.

Just to, I think Maffra, as Jose said, everything, but just to give you some more color on the part that we are now serving better the small businesses and new enterprises that we are able to serve with this new IB team that came with Modal, right? So in the retail side, it's full integration. There's no new technology or products that we are able to offer. So we added like 40 IFAs and almost 100 advisers they had. But [indiscernible], they are spread out Brazil, right? So they're entrepreneurs, and they're relating themselves with big clients that we don't see them in [indiscernible] in Sao Paulo, and they always have the demand to do DCM to have some M&A deals. And RIB was looking to bigger tickets and bigger clients, right? So the IB team that came, the investment banking team that came at Modal. We have a very positive outlook for them to connect with IFAs, and we can unlock a lot of new operations, a lot of new innovation in terms of products. So I think that will be the main, in new revenue streams.

On average, we get 25 new transactions into the filter every day coming from the IFA network. And having this team now helps us to be more efficient in terms of converting these leads into transactions. Of course, you have everything coming into the future, but it's a very powerful team to execute deals with smaller clients.

Okay. Thank you for now. I'm going to take questions from the webcast. First is from Chad Batista, UBS. XP has added about 2,700 of new IFAS in the last 12 months. But at the same time, the net new money showed a material slowdown. On average, each IFA received about BRL 6 million in the last 12 months. So the situation is probably tough for the new IFAs. Can you comment about the situation on the IFAs in Brazil? Do you see room for consolidation of the IFAs in Brazil in the coming years?

Let me take that one. So there's a lot of, there are some factors that explain those numbers that Thiago described. First of all, we talk a lot about net new money, right? But, when we think about the total added money less the churn, that is what generates revenue, right? So that wasn't necessarily affected this year. The amount of gross new money wasn't so impacted this year. right? So we added a lot of new products, new verticals that also generate revenue that are not custody based fees. So FX, insurance, credit cards, there's also a lot of volatility on the enterprise business, right? So the volatility also adds on to this factor, right? So that's another factor that we can use to explain. But at the same time, we also were able to develop advisers at a lower cost. In 2 last year, we hired a lot of bankers from the banks that we have to pay signing fees, and they were more expensive than our longer history. So the IFAs are being able to hire cheaper, right? Paying less to the new advisers, they're forming in the base. And so that's, all those factors explain how they've been able to perform in this scenario. Also, as I will say in my presentation, the IFA's partners, they are learning how to control costs. They've been able to reduce costs as well, just as we are, so this helps all of them navigate right through this phase. And, but we are -- we want to do better. So we're taking a lot of initiatives. We're doing a lot of things that will help the advisers to have new -- net new money ways of [indiscernible] and to complement the way they make profits in their enterprise.

Okay. So our next question is from Yuri Fernandes from JPMorgan. Two questions. Dividends, capital distribution versus credit growth? What are the variables for dividends versus buybacks? You mentioned growing wholesale trade finance and some other credits. How does it affect your outlook for [ 15, 16 BIS ratio ] and excess capital expectations?

I can start here, feel free to jump. We also have [indiscernible] that works in our -- is a senior partner in our Executive Committee as well. Feel free to add. But, at the end of the day, what that presented in terms of the wholesale bank strategy, we're going to increase the credit exposure, nothing similar to the banks, as I said, but we have ways to mitigate that capital. When we look, when we look at our earnings going forward and we look at the potential for growth and how much of the earnings that we generate that we need to retain to be able to grow is not that much. So basically, that's why we are comfortable about the expected BIS ratio that we laid out of 16% to 19% going forward. And that's why I said you can expect future capital distributions going forward. We do not want to establish a policy or guidance here, because we believe experience is still in early stage of our long-term journey. And we want to keep the flexibility to ourselves. That's basically, the reason why we are not establishing a policy, but you can assume that for the next years to come, we are going to continue to distribute capital to shareholders either through buybacks or dividends or mix of both. I don't know if you...

No, I think you covered it, spot on.

Okay. Perfect. So next question is from Mario Pierry, Bank of America. How do you think about inorganic growth opportunities? And how do you create incentives for the IFAs to cross-sell the other retail products?

I can take the first part. Yes. We don't have any big M&A on the road right now. So you cannot expect any big M&A. Of course, we are always open to see good opportunities in the market, especially when we buy portfolios. I imagine that we have one of the small broker-dealers that we mentioned earlier here that they are going through a very tough market and they want to sell a portfolio. Of course, on the right price, it makes completely sense for us because it's more of the same. But we don't need to do any M&A right now to build new verticals or to bring capabilities. We prefer to do more things organically because every time that you buy a company, it's very, very hard to integrate, okay? So we have good experience on buying portfolios. We have bought more than 23 portfolios during the past 5, 7 years. So that's very easy to do. But once you buy a company to fully integrate it, you keep systems, to keep new products or verticals. That's very tough. And that goes a little bit against what we just mentioned about quality, about the best experience. So in our view, we prefer to grow organically to build the verticals organically. Of course, if we need to bring some capability that we don't have, and there is a shortcut that makes sense, we will analyze. But that's not our preferred way, okay? So, and we don't have any big M&A in mind right now.

Our point rationale for M&As work much better than reality. That's the fact.

So in the cross-sell part, how we pretend to incentivize our distribution network. So basically, almost all of the products the distribution network they share some of the revenues with us. So they're naturally aligned in terms of cross-selling and everything. But the main thing is that they know that everything we are doing reinforces the investment business. So if we are able to penetrate a client with a credit card, he knows that he will have a bigger probability to increase the share of wallet. Same thing for insurers, safety for retired plan. So we spend a lot of energy showing them those numbers, right? They are [indiscernible] show the lifetime value of the client, and the churn. So we naturally did an architecture of incentives that they understand that will be good for them in the long run, mainly an investment business.

And there is the flip side of this question that today, some of the IFAs, they do some business or distribute some products that we don't have in our ecosystem. So they are already spending time in making money on these products, and we don't have, okay? One example was insurance and until a few months or years ago. We have been adding more insurance products because it's very similar to investments if you go to a whole life and so on and the IFAs, they already do, another example, not even know how to say in English that but, [indiscernible].

It's kind of a savings lottery you invest and then there is a lottery if you get number...

It's very popular in Brazil. It's a way of people to save money during a period of time. The IFAs they do a lot that today, and we don't have the product. So we have been work in the opposite way around how we serve better our IFAs, how we bring products that they already do outside of our ecosystem to inside the ecosystem, okay? Mortgage is one good example. They do a lot of mortgage for all the banks, okay? So now we have a partnership, a channel, so we are able to bring at least part of this revenue stream side in our eco systems. So we have been working on this road map to bring more and more revenues that they already do to inside the ecosystem.

Mortgage is a good example because the client normally -- if we don't have the product decline, we have to have the down payment and the bank that will provide the loan will ask the client for investments as well. So by having mortgages in our ecosystem, we can keep the money for or the down payment money and the money that is going to be asked by the other bank.

Great. I'm going to take three more questions. We're running on time. So the next one is from Daniel Vaz, [indiscernible] Hi, everyone, congrats on the event. I want to understand further on the market share gain you expect to be around 50 and 150 bps per year? If you could break it down between increasing in share of wallet versus client adds which should be more relevant to reach this goal? Also, in which cluster of clients do you expect to grow the most to achieve this goal? Private Bank, Affluent, Corporate, so on and also, do you expect a tap into the ultra-high segment?

I can start and you guys can help them and myself. To be honest, we intentionally didn't open the breakdown for these numbers. But of course, we want to grow in both of them, okay? We are not, we always mentioned that we have around 50% share of wallet on the current customers. That's why we have been building the new verticals to reinforce the investment business to increase share of wallet. We mentioned a number today here that we are able to increase from 50% to 61%, 62% share of wallet when we start to cross-sell more than two products, okay? So that's one way of growing our AUC. The other one, of course, is to bring clients from the banks. So we are going to invest in both of them. We will grow both. When we go to the different segments, we have been doing a resegmentation of the company. Today, we have six segments, three that we call retail, BRL 0 to BRL 300,000, BRL 300,000 to BRL 3 million, BRL 3 million to BRL 10 million. That's retail, BRL we are talking here. And then we have the private banking [ BRL 10 to BRL 30, 30 to 100 and 100 plus ]. So of course, the way we serve the products, the pricing everything is completely different, okay? The way we have to serve the clients, [ BRL 300,000 less ], it's what we call digital first. The middle is more of the same we do. And private banking Jose Berenguer has been investing in a lot of his own time like to how we become a very good private banking in Brazil. We know we have some gaps compared to one or two platforms, okay? But we are investing a lot to close these gaps. So we have very different plans for the, let's say, three different segments here. They're digital ones, the middle ones and the high-end ultra-high clients, including the whole resegmentation that we did in the company last month, okay? So, and then we have a different account loads, different pricing, different products, different channels, to takes customers, different account loads. So we have been reorganizing everything to have more suitable services for different type of segments.

Just to complement, Maffra mentioned this segmentation in the individual side in the corporate SMBs, we have a similar segmentation or segmentation. And it's important to mention that corporate clients in [indiscernible] corporate clients are clients with revenues of BRL 700 million and above. We have a 72% of this client base has an account with us. And when you go to the middle market, which for us is BRL 100 million of revenues until BRL 700 million, we have only 21%. And, so I think this gives you a sense of the opportunity we have in terms of penetrating in this client base and also cross-selling the products that we mentioned here.

Okay. Great. Next question is from [indiscernible]. I'd like to explore how XP is looking at the alignment of interest of the key talents in the long term. In the past, XP had a pure partnership model, and now you have a long-term incentive program, RSUs and PSOs. What are the key learnings from the two different models? Is there a space to improve in the current program? What are the main KPIs for the long-term incentive plan, in line with the guidance you are presenting today?

I can start here. We have been a public company for 4 years now? [indiscernible]. 11th of this month. So we, I would say that we are still learning how to be a public company and how to do long-term incentives. But I'm very happy with the model that we have implemented this year, and I believe now we are on the right spot, okay? Before the IPO, we had a close partnership, what we used to call XP control. A lot of people that are seeing the company that are still our partners. They have been there before. So basically, it was a partnership that we buy and sell shares from each other, okay? And there was like valuation that was a multiple of EBITDA plus, plus equity. So, and when we became a public company, we had to change that because otherwise, we are going to be struggled on the partnership as the company starts to grow. So the RSU was the two that we chose back there like to create our long-term incentives. But as I mentioned, we are still learning. And I believe there were some adjusts that we need to make it better, okay? So we did this year. So we changed from a model that we give people RSU, and we went like to a matching program. Today, we have a matching program that we, for, there are 2 different matching ratios, 1 to 1.4 and one to 2, so every year, we have rounds with the partners, we are at new partners, and we give dismatching to people. Why that's, in our view, a very good model because then people have to put their own money, okay, for us in order to match and you have people with [indiscernible] the game. People are not getting their bones and buying a new car or a house or investing outside of XP. They are buying XP shares, okay? So that's the way we think about it. And the partnership for us is something very unique and strong. I mentioned in my first slide, that's probably the largest, the biggest advantage that we have in the company, is the partnership and the people. People at XP. You have been with us for 2 weeks and you can give your testimony of what you saw different from the other banks that you have been, but it's a culture that people are really owners of the company. We are really partners, they feel partner, the few owners of the company. So that's hard to see in other places, okay? And for me, it's one of the, if not the largest differentiation of the company. I remember Guilherme used to say it had to pick one, factor of our success was the partnership. So that's why we care a lot about the partnership. And when we talk to our partners today, I believe we found the right spot this year, okay? But it took 3 years, we have done some adjustments during these 3 years. But now I feel very confident that we have I would not say the final model because everything can change down the road, but we have a very good model now.

And I think part of the noise came from the fact that we had several years of just liquidity events and shares moving up, you guys know that we went from 50% to almost 10%. And I think this helped to boost the noise in terms of the partnership model that we have. But I fully agree with Maffra, what Maffra said. I think we have the right model. We have people motivated this an important tool in our culture.

Me too, 100% in those few areas. I would never see , I never seen anything like that. For sure. So much team work. Everybody with the same objectives and goals. And the last question, okay? So it's from Robert Marshall Lee, [indiscernible] Capital, it's initially like for Bruno. How do you see the shape of the balance sheet changing over the next 5 years? What's the best use in terms of risk versus reward?

I don't see the shape of the balance sheet changing that much. It's what I presented in the balance sheet session. For example, credit RWA as a percentage of total RWA as of today is at 45%. I expect it to see it growing over time to 50%, maybe 55%. We don't have a number to give. But what I said stands we are not going to be at 70% to 90% of credit RWA in our balance sheet. Why not? Because XP, again, is at the heart of the development of the local capital markets. We believe that by developing the Brazilian capital markets, we not only help the economy, but we help the investors to have better products. The companies to have more access to capital and so on. So the turnover of our portfolios through capital markets, helping the local capital markets to developed cells, it's in the center of our business model. So yes, it will evolve a little bit. It will be different than it is today, but not that different. And for sure, not like the banks. Otherwise, we would be replicating the balance sheet model that the banks have in Brazil, and that's not what we want to do with our company.

This is really important because since today, we presented much more figures from the balance sheet. The questions are fair, to compare with the bank. You're not going to be like in common bank. This is not a project.

No, we have a part of our business that looks like. We are going to give disclosure, but not exactly like them. We have a different business model, we believe in our business model. And regarding the question about risk reward, that's something we have been improving a lot since the IPO capital allocation. It's not that in the past, all the capital that we are located, they were the most efficient way. When I look, and of course, we can make mistakes of capital allocation looking forward. But when I look out the systems and the management and the governance that we have in place as of today and I compare to 4 years ago, in terms of deciding how to allocate capital, the risk reward questions and so on, we are much better than 4 years ago. No doubt about it.

Even the networks that we manage the company today, they are completely different from what we used in the past. You guys remember you talk a lot, we are talking earlier today with both, we use adjusted EBITDA in the past. It makes sense in the past because it was an intermediation company without use of balance sheet. Today for some of business lines, still makes sense, but for others not, okay? So today, we talk and manage the company using different metrics, EDT, return on [indiscernible] , capital allocation, Basel index.

We killed everything that is adjusted. So it is what it is net income, share-based compensation that I showed here is not a cash expense. But we understand it's diluted for shareholders. So we should consider in our corporation, in our efficiency ratios and so on. XP's a very transparent company. So we learned the business changed over time. We adapt and we evolved. So capital allocation is something that I believe we are much better today. Again, we can improve going forward, we always can but we are much better today.

If I may just highlight that it's not capital allocation, capital discipline, discipline, it's much better. And also, we are developing a system. It's being implemented to measure ROE by client and not by transaction, which is also important in managing long-term relationships with the client.

I have one last question over here. Do you have a microphone?

Can you hear me?

Yes, go ahead.

So you are talking about capital. We are going to have a change in the capital ratios in Brazil, in which we are going to increase the capital allocated to operational risk. Since, as you mentioned, you are particularly affected by operational risk, should we expect that to have an impact on you? And does that 16% to 19% forecast that you have on capital ratio include that? Or we have to see?

The, the changes will take place as of January 25 sorry, as you know. And actually, the new guidelines by the Central Bank will make our operational risk allocation slightly lower. So for us is better than compared to the incumbent bank.

Because you can compensate the increase in some parts, but they also led you compensate in some other parts that are important for us.

And just bear in mind, Carlos, that what I showed here is being as a consolidated balance sheet when we think about regulatory demands, we are talking about the prudential conglomerates only. So it's not apples-to-apples.

And operational risk in Brazil is, there is a fruit in Brazil called [indiscernible], which is fruit that you only find in Brazil. And operational risk for banks in Brazil is also [indiscernible] because of the labor issues and stuff like that. But I think the, I think, I'm sure the model will be better for us and slightly worse for the incumbent banks.

Okay. With that we conclude our event. Thank you so much for joining us. this morning. We're going to be available to answer much more questions. Me and the IR team for sure.

Now your job starts.

This is the time. This is the time. So thank you once again, and I hope you have a great day.