XP Inc (XP) Q2 2025 Earnings Call Highlights: Record Net Income and Strategic Growth Initiatives

Gross Revenue: BRL4.7 billion, 4% growth year over year. Net Income: BRL1,321 million, 18% growth year over year. Return on Equity (ROE): 24.4%, 230 bps increase year over year. Diluted EPS: 22% growth year over year. Capital Ratio: 20.1%, 110 bps increase quarter over quarter. Retail Revenue: BRL3.6 billion, 9% growth year over year. SG&A Expenses: BRL1.56 billion, 10% growth year over year. Efficiency Ratio: 34.5%, improved by 161 bps year over year. Assets Under Management (AUM) and Assets Under Administration (AUA): BRL1.9 trillion, 17% growth year over year. Credit Card TPV: BRL12.4 billion, 8% growth year over year. Life Insurance Written Premiums: 45% growth year over year. New Products Revenue: BRL256 million, 146% growth year over year.

Warning! GuruFocus has detected 5 Warning Signs with XP.

Release Date: August 18, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

XP Inc (NASDAQ:XP) achieved the highest net income in its history, reaching BRL1,321 million, representing an 18% year-over-year growth. The company posted a 24.4% return on equity (ROE) during the quarter, marking a 223 basis points expansion compared to the second quarter of 2024. XP Inc (NASDAQ:XP) reported a 22% growth in diluted earnings per share (EPS) year over year, driven by its share buyback program. The company's total gross revenues for the quarter reached BRL4.7 billion, representing a 4% increase year over year. XP Inc (NASDAQ:XP) continues to expand its ecosystem, with new verticals such as global accounts and consortium contributing to a 146% growth year over year in new product revenues.

Negative Points

The company's earnings before taxes (EBT) decreased by 5% year over year, reaching BRL1.3 billion, due to positive impacts in the previous year. Net new money from corporate and institutional clients was negative, with a BRL6 billion outflow, reflecting challenges in the current macroeconomic environment. The corporate lending strategy faces challenges as banks demand reciprocity in terms of investments for credit lines, impacting XP Inc (NASDAQ:XP)'s ability to retain corporate funds. SG&A expenses increased by 10% year over year, driven by higher marketing and technology investments, impacting the company's efficiency ratio. The company's fee-based model represents only 5% of total client assets, indicating a slower adoption compared to developed markets like the US.

Q & A Highlights

Q: Can you provide more details on your capital generation and the potential for increased dividends and buybacks? A: Victor Mansur, CFO: We anticipate net income to grow faster than risk-weighted assets, providing leverage. We haven't distributed as much net income this quarter, but we expect to maintain our target of distributing over 50% of profits through dividends and buybacks. The decision between dividends and buybacks will depend on stock price and board discussions.

Story Continues

Q: How does corporate lending fit into your overall strategy, and do you see it as a missing component in your ecosystem? A: Victor Mansur, CFO: Corporate lending is part of our strategy to originate and sell products. We expect the corporate book to grow, but we plan to securitize and sell these assets. We maintain a risk appetite and won't increase our portfolio beyond that.

Q: Can you elaborate on the initiatives to accelerate net new money in the second half of the year? A: Thiago Maffra, CEO: We aim for BRL20 billion per quarter in retail net new money. Initiatives include channel diversification, product innovation, and increasing IFA productivity. We are confident in achieving this target, especially with potential macroeconomic changes like interest rate cuts.

Q: What are your expectations for revenue growth in the second half of the year, and how do you plan to address potential shortfalls? A: Victor Mansur, CFO: We expect higher revenues in the second half due to more business days, new verticals, and product mix improvements. We remain committed to cost control and efficiency while continuing to invest in strategic areas.

Q: Can you explain the impact of the fee-based model on your revenue and take rate? A: Thiago Maffra, CEO: The fee-based model is growing but still small. It may lower the take rate slightly, but it usually results in a higher share of wallet. We offer various models to serve clients best, and being agnostic to models is a key differentiation.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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