XP Inc. (XP) Q4 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary indicates strong financial performance with a 22% growth in total client assets and a 25% increase in life insurance premiums. The company also announced a share buyback program and dividend payment, signaling confidence in financial health. The Q&A session revealed optimism about future growth and strategic initiatives, though some concerns about NPS and tax hikes were noted. Overall, the positive financial results and strategic plans, including AI investments and market expansion, suggest a positive stock price movement over the next two weeks.

Key Financial Performance

Gross Revenue BRL 19.5 billion in 2025, up 8% year-over-year. Growth attributed to initiatives implemented during the year and earlier, showing positive responses.

EBT (Earnings Before Taxes) BRL 5.5 billion in 2025, up 10% year-over-year. Growth driven by disciplined execution and platform enhancements.

Adjusted Net Income BRL 1.3 billion in Q4 2025 and BRL 5.2 billion for the full year, representing a 15% expansion year-over-year. Growth attributed to operational leverage and disciplined capital allocation.

Return on Equity (ROE) 23.9% in 2025, representing a 94 basis point expansion versus 2024. Growth driven by disciplined capital allocation and strong profitability.

Adjusted Diluted EPS Increased by 18% during the year, reflecting consistent buyback execution and net income growth.

Retail Revenues BRL 3.9 billion in Q4 2025, up 8% year-over-year and 4% sequentially. Full-year retail gross revenue reached BRL 14.6 billion, up 8% versus last year. Growth supported by float for investments and checking accounts, new verticals like credit card, retirement plans, and insurance.

Corporate & Issuer Services Revenue BRL 895 million in Q4 2025, up 49% year-over-year and 23% sequentially. Full-year revenue totaled BRL 2.7 billion, up 19% compared to 2024. Growth driven by robust activity in the DCM space and cross-selling broader solutions to corporate clients.

SG&A Expenses BRL 1.7 billion in Q4 2025, growing 10% year-over-year and 4% quarter-over-quarter. Full-year SG&A totaled BRL 6.3 billion, reflecting investments in technology and adviser network expansion.

Efficiency Ratio 34.7% for the last 12 months ending Q4 2025, stable compared to 2024. Stability attributed to operational leverage from technology and innovation developments.

Total Client Assets (AUC, AUM, AUA) BRL 2.1 trillion in Q4 2025, representing a 22% growth year-over-year. Growth attributed to net new money inflows and crossing the BRL 2 trillion threshold.

Net New Money BRL 32 billion in Q4 2025, with BRL 20 billion from retail and BRL 12 billion from corporate and institutional clients. Retail inflows impacted by SMB dynamics, while individual client inflows totaled BRL 23 billion.

Credit Card TPV BRL 14.6 billion in Q4 2025, up 11% year-over-year. Growth driven by new products targeting high-income and private banking segments.

Life Insurance Written Premium Grew 25% year-over-year in Q4 2025 after enhancing offerings with new coverage.

Retirement Plans Client Assets Posted 17% growth year-over-year in Q4 2025, reaching BRL 95 billion. Growth driven by cross-channel campaigns and client initiatives.

Other New Products Revenue Collectively grew 21% year-over-year, generating BRL 258 million in revenue in Q4 2025. Includes FX, global investments, digital account, and consortium.

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Operating Highlights

New Products: Launched a proprietary dollar-backed stablecoin targeting clients seeking to diversify or hedge against FX volatility, providing 24/7 liquidity. Reintroduced crypto services fully integrated into the platform, operating as a virtual asset brokerage. Expanded life insurance offerings with new coverage and introduced travel, home, and credit line insurance.

Market Expansion: Achieved a milestone of BRL 2.1 trillion in client assets, representing 22% growth year-over-year. Expanded presence with 800 investment centers across 23 Brazilian states and the federal district. Gained market share in private banking and credit, with a focus on high-income and corporate segments.

Operational Efficiencies: Invested in AI and proprietary technology to enhance adviser productivity and client satisfaction. Developed tools like the XP Service Model Index and expert allocation model to improve client outcomes and operational efficiency. Maintained a stable efficiency ratio year-over-year despite increased investments in technology and adviser network.

Strategic Shifts: Transitioned to a fee-based model for 23% of retail AUC, emphasizing tailored client servicing. Focused on democratizing wealth services and expanding credit offerings for individuals and corporates. Strengthened corporate governance with changes in shareholder structure to align long-term management goals.

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Risk or Challenges

Market Share Pressure and Margin Compression: The company has faced market share pressure and margin compression in the retail segment over the last two years, which could impact profitability and competitive positioning.

Challenging Environment for Retail Net New Money: Retail net new money has been impacted by small and medium enterprises (SMBs) withdrawing investments, creating a challenging environment for growth in this area.

Regulatory Concerns: The company expressed concerns about potential regulatory changes in the financial system, which could impact competition and operational dynamics.

Economic Uncertainty: The company acknowledged a challenging environment for 2026, which could affect growth and financial performance.

Operational Costs and Efficiency: Continued investments in technology and adviser network expansion have increased SG&A expenses, which could pressure efficiency ratios if not managed effectively.

Dependence on SMBs and Retail Clients: The withdrawal of investments by SMBs and the reliance on retail clients for net new money growth highlight vulnerabilities in these segments.

Credit and Warehousing Risks: Increased warehousing of fixed income securities, particularly corporate credit, poses risks if market conditions deteriorate or if these assets cannot be distributed as planned.

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Guidance & Outlook

Retail net new money: XP expects retail net new money to reach BRL 20 billion per quarter in 2026, despite a challenging environment.

Cross-sell products: XP plans to continue innovating and expanding its product offerings in 2026, including launching new insurance products (travel, home, and credit line insurance), expanding life insurance coverage, and introducing a proprietary dollar-backed stablecoin and reintroducing crypto services.

Credit and SMBs: XP aims to expand its credit offerings for individuals and corporates while maintaining a conservative approach. For SMBs, XP plans to leverage its adviser network to broaden its product portfolio and address day-to-day financial needs.

Capital management: XP expects to maintain a BIS ratio target range of 19% to 16% by the end of 2026, while sustaining strong returns and a conservative capital structure.

Efficiency ratio: XP anticipates keeping its efficiency ratio stable in 2026, supported by operational leverage from technology investments.

Wholesale banking: XP plans to continue investing in its wholesale banking franchise, focusing on structured solutions, corporate product offerings, and strengthening its position in DCM and real estate solutions.

Technology and AI: XP will enhance its AI-driven capabilities to improve adviser productivity, client satisfaction, and governance, supporting scalable growth in 2026.

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Shareholder Return Plan

Dividend Payment: BRL 500 million in dividends were paid in 2025.

Share Buyback: BRL 1.9 billion in share buybacks were executed in 2025.

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Key Q&A

Q:Why does the company aim to become Brazil's leading investment platform by 2033, and what metrics define this goal?

A:The company aims to lead in market share by 2033, based on internal plans and projections that indicate achieving this in 7 years. The strategy involves democratizing wealth planning for retail clients, changing the business model, and focusing on different strategies for private banking, affluent clients, and retail clients.

Q:What does the entry into the controlling group mean for the CEO and the company?

A:The CEO stated that nothing has changed in his behavior or management approach. The change strengthens alignment among executives, while previous shareholders remain on the Board. It is described as a natural evolution with no significant impact on the company.

Q:What is the company's view on the CVM's recommendation about the internalization of orders?

A:The company views it as very positive, as it allows for the inclusion of other assets and instruments, benefiting their RRP business and generating more revenue and results for market making.

Q:Why did the company experience a tax hike this quarter, and is it related to tax losses carryforward?

A:The tax hike is due to a revenue mix shift towards banking activities like investment banking and corporate banking, which have higher tax rates. It is not related to tax losses carryforward, which is explained by the revenue mix.

Q:How is the company addressing the decline in NPS from 70+ to 65 points?

A:The decline is attributed to two events: Ambipar structured notes and Banco Master issues. The company expects the impact to be temporary and notes that retention rates for Banco Master are higher than usual, indicating a positive inflow of money.

Q:What is the outlook for 2026, particularly for Corporate Solutions and Issuer Services?

A:The company believes the strong performance in Corporate Solutions and Issuer Services is sustainable. However, the impact of foreign-driven risk asset performance on revenues is uncertain, and fixed income performance depends on Central Bank interest rate cuts.

Q:Will the company update its guidance for 2026?

A:The company does not plan to update its guidance, as it believes it is on track to meet its revenue and margin targets for 2026. It expects revenue growth of 17% to reach the low end of the guidance.

Q:What are the company's investment priorities for 2026?

A:The company will focus on adviser expansion, technology investments (including AI), and international and corporate platforms. Efficiency is expected to remain stable, with investments aimed at improving productivity and customer service.

Q:How does the company view the role of AI in its business model?

A:The company sees AI as a tool to enhance human advisers' performance, not replace them. AI is used to improve productivity, customer service, and operational efficiency, particularly for lower-value segments.

Q:What changes has the company made following the Banco Master episode?

A:The company has reviewed its internal controls and credit analysis but notes that clients did not lose money due to FGC coverage. It continues to distribute products deemed suitable for clients and has not observed significant changes in client behavior or investment decisions.

Q:Review of Unclear Management Responses

A:Management avoided providing a clear answer on the potential adjustments to the payout policy and the specific impact of AI on the company's strategic shift to a B2C model. Additionally, there was some vagueness in discussing the sustainability of revenue growth and the exact measures to address the NPS decline.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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