XP Q1 2025: 7% Revenue Growth Misses 10% Guide, Fixed Income Surges
- Capital Efficiency & ROE Upside: Executives highlighted an improving ROE with guidance pointing toward further increases as risk-weighted assets grow at a slower pace than net income, bolstered by share buyback programs and disciplined capital management.
- Diversified Retail Revenue Growth: The Q&A emphasized robust retail performance driven by fixed income—now the largest retail revenue driver—and expected uplift from new verticals like credit cards and insurance, providing a diversified and resilient revenue base.
- New Vertical Expansion: Discussion on initiatives such as the consortium business and enhancements in private banking underscored emerging, recurring revenue streams with significant growth potential, setting the stage for long-term value creation.
- Stagnant net new money growth: Management noted that net new money remained at BRL 20 billion in Q1 with no clear sign of acceleration, reflecting concerns amid high interest rates and limited advisor productivity improvements.
- Heavy reliance on fixed income revenues: Fixed income has emerged as the largest revenue driver, surpassing equities for the first time. This shift toward lower-margin products may hinder overall revenue growth if market conditions change.
- Q1 revenue growth below annual guidance: Q1 grew by 7% against an annual target of at least 10%, citing tough comps from the previous year. This shortfall raises caution regarding the company’s ability to achieve its full-year growth targets.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Revenue Growth | FY 2025 | no prior guidance | at least 10% growth in revenues for FY 2025 | no prior guidance |
Retail Net New Money | Quarterly | no prior guidance | BRL 20 billion per quarter | no prior guidance |
Return on Equity | FY 2025 | no prior guidance | ROE expansion for FY 2025 | no prior guidance |
Share Buyback Program | until December 2026 | no prior guidance | BRL 1 billion share buyback program | no prior guidance |
Capital Management | FY 2025 & FY 2026 | no prior guidance | more than 50% of net income | no prior guidance |
Tax Rate | FY 2025 | no prior guidance | slightly lower average adjusted tax rate for FY 2025 | no prior guidance |
New Product Revenue Target | FY 2025 | no prior guidance | BRL 1 billion in revenue from new products | no prior guidance |
EBT Margin | FY 2026 | between 30% and 34% by 2026 | 30% or higher by FY 2026 | no change |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Capital Efficiency and ROE Improvement | Discussed extensively in Q2, Q3, and Q4 2024 with a focus on improving ROE, capital ratios, and the impact of the 4966 resolution | Q1 2025 emphasized a higher ROE (24.1%), improved BIS ratio to 19%, and detailed share buyback and capital discipline initiatives | Consistent improvement with increasingly positive sentiment as capital efficiency and ROE dynamics strengthen. |
Retail Revenue Diversification with Fixed Income Focus | In Q2–Q4 2024, retail diversification was highlighted with fixed income showing strong growth and a rising share in revenue | Q1 2025 detailed fixed income becoming the largest revenue contributor and reinforced the multi-product diversification strategy | Increasing focus on fixed income with continued diversification and robust revenue growth in retail. |
New Vertical Expansion, Consortium Business, and Private Banking | Q3 and Q4 2024 discussed new verticals, consortium business, and private banking with moderate detail; Q2 2024 had no mention | Q1 2025 provided detailed outlooks with ambitious targets in credit cards, insurance, consortiums, and fund administration for private banking | Emerging as strategic growth drivers with expanded initiatives and more explicit forward-looking guidance. |
Credit Card Business Performance and Customer Engagement Trends | Q2–Q4 2024 covered incremental improvements in credit card TPV, shifting product margins, and customer engagement metrics | Q1 2025 highlighted a 7% growth in TPV with upcoming product launches and significant improvements in engagement metrics (e.g. increased adviser productivity) | Optimistic outlook with new product initiatives expected to drive stronger performance and enhanced customer engagement. |
Net New Money Growth Trends and Volatility | Q2, Q3, and Q4 2024 reported strong net new money (NNM) growth with discussions on robust inflows and some volatility aspects | Q1 2025 reported BRL 24 billion in retail NNM (79% YoY growth) with stable inflow targets and no explicit mention of increased volatility | Consistently strong inflows; the emphasis remains on growth even though volatility is less stressed in Q1 2025. |
Operational Leverage, Cost Control, and Margin Expansion | Q2–Q4 2024 emphasized record efficiency improvements, expanding margins (EBT & EBITDA), and disciplined cost control strategies | Q1 2025 reported the lowest efficiency ratio (34.1%) and significant EBT margin expansion, reaffirming cost discipline | Continued operational excellence with positive margin expansion and robust expense control. |
Risk Management and Capital Adequacy Challenges | Q2, Q3, and Q4 2024 detailed strong capital ratios, BIS improvements, lower RWA growth, and effective regulatory measures | Q1 2025 reiterated a strong capital position with a BIS ratio at 19% and effective risk management via regulatory changes | Stable focus; risk management remains robust with effective capital adequacy practices maintained across periods. |
Macroeconomic Environment and Interest Rate Sensitivity | Frequently addressed in Q2, Q3, and Q4 2024 with discussions on high interest rates, currency expectations, and their impact on revenue mix and client portfolios | Not specifically mentioned in Q1 2025 earnings call | Topic no longer mentioned in Q1 2025, suggesting a potentially lower immediate concern or a shift in focus away from external macro variables. |
Competitive Pressures from Incumbent Banks and Fintechs | Q2–Q4 2024 discussed competitive pressures, noting both challenges and XP’s digital and product advantages against incumbents and fintechs | Not referenced in Q1 2025 earnings call | No current mention, which may indicate that competitive pressures are less top of mind or have been effectively mitigated in recent strategies. |
Independent Financial Advisors (IFA) Channel Productivity and Commission Costs | Q2, Q3, and Q4 2024 examined productivity improvements, regulatory changes (e.g. IFA-to-employee transitions), exclusivity agreements, and commission cost ratios | Q1 2025 continued to discuss IFA channel productivity improvements and commission cost management with a focus on quality and targeted growth in different channels | Consistent focus; ongoing transformation with enhanced productivity while managing commission costs remains a strategic priority. |
Revenue Growth Shortfalls versus Guidance Targets | Q2–Q4 2024 noted solid revenue growth with guidance alignment, while discussing seasonal shortcomings and the need for second-half recovery | Q1 2025 acknowledged a 7% YoY growth (below full-year 10% guidance) but stressed seasonality and improvement later in the year | Maintaining conservative guidance; early shortfalls are recognized but are expected to be offset by stronger performance later. |
Expense Pressures Including Rising Effective Tax Rates and Increased Provisions | Q2–Q4 2024 highlighted rising effective tax rates due to revenue mix shifts and adjustments in provisions as expense pressures (with mention of BRL 90–110 million in provisions) | Q1 2025 did not emphasize expense pressures; instead, it noted lower effective tax rates (14.6%) and SG&A discipline with no specific mention of increased provisions | Reduced emphasis on expense pressures in Q1 2025 suggests improved cost management and a less burdensome tax/provision environment compared to previous periods. |
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Revenue Outlook
Q: Will revenue exceed 10% growth eventually?
A: Management explained that although Q1 was seasonally low, robust retail initiatives—especially in fixed income, credit cards, and new verticals—should drive overall revenue growth of at least 10% by the year’s end ( ). -
ROE & Payout
Q: Will ROE improve and payouts rise?
A: They expect ROE to climb as risk‐weighted assets grow slower than net income, and the current 50% payout is considered conservative with potential for an increase over time ( ). -
Product Mix
Q: When will fixed versus equity balance stabilize?
A: Despite current seasonality affecting equity volumes, fixed income has become the largest revenue driver, and as market trade volumes recover, the product mix should rebalance favorably ( ). -
Take Rates
Q: Are take rates and SG&A trends sustainable?
A: Management noted that while certain compensation dynamics and seasonality lower take rates in Q1, SG&A expenses dropped by 10% QoQ, and overall trends are expected to normalize based on historical patterns ( ). -
Retail Inflows
Q: Will net new money increase soon?
A: Net new money held steady at BRL 20B in Q1, and although adviser productivity improvements are underway, no significant acceleration in inflows has been observed yet ( ). -
Asset Breakdown
Q: What share comes from fund services?
A: Fund services account for BRL 248B of the disclosed BRL 1.8T in assets, underscoring their critical role in supporting institutional and private bank clients ( ). -
Consortium Revenue
Q: How significant is consortium revenue this quarter?
A: Consortium revenue is modest now, structured through recurring fee shares, but as the portfolio builds, it is expected to exceed BRL 100M this year ( ). -
Bank Inflows
Q: Do midsize bank inflows affect overall funding?
A: The impact from specific bank funding, such as from Banco Master, is minimal; overall, management focuses on broader market volume improvements to boost equity revenues ( ).
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