XP Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 14, 2023

There are 7 speakers on the call.

Operator

Good evening, everyone. I'm Antonio Perez, Investor Relations in XP, Inc. On behalf of the company, I'd like to thank you all for the interest and welcome you to our 2023 Second Quarter Earnings Call. Today, we have here with us our CFO, Bruno Constantino and our CEO, Thiago Maffer. We will all be available for the Q and A session right after the presentation.

Operator

And whoever wants to ask a question can please raise your hand on the Zoom tool and we will attend you on a first come, 1st serve basis. We also have the option of simultaneous translations to Portuguese. So there's a button on the Zoom if you want to turn on the translation. And before we begin our presentation, please refer to our legal disclaimers on Page 2, on which we clarify forward looking statements. Additional information on forward looking statements can also be found

Speaker 1

on the SEC filings section on the IR website. So now, I'll pass the word to Thiago Maffre. Good evening, Maffre. Good evening, everyone. Thank you for joining us today on our 2023 Second Quarter Earnings Call.

Speaker 1

It's a pleasure to be here with you tonight. I would like to start with a brief introduction to this quarter's operational and financial highlights and now to give you a bit of context of where we are in terms of our long term strategy we talked about in the last quarter. In the Q2 of 2023, we achieved a key milestone, surpassing CNY1 1,000,000,000,000 in client assets. Client assets have grown at a 30% CAGR since the IPO. Coupled with this historic milestone, we estimate we have gained approximately 30 bps in market share investments for individuals year to date and approximately 60 bps in the last 12 months, despite a very tough macro environment condition.

Speaker 1

For the 2nd quarter, earnings before tax was BRL968 million, up 12% year over year, where Our continued efforts to improve operation leverage resulted in 198 bps of additional margin expansion. Net income was BRL977 million, up 7% year over year, driving our net income margins up 91 bps year over year. Annualized retail take rate was 1.3%, up 9 bps quarter over quarter. Return on average equity, a key profitability measure for XP, rose 334 bps sequentially to 22% and our diluted earnings per share of BRL1.83 increased 24% over the Q1. Moving to Page 6.

Speaker 1

We were happy to see the market trends and our profitability improving the 2nd quarter. Following a challenging first quarter, we have started to see a recovery in capital markets activity. We are pleased with the recovery in G same volumes, and we have started to see some activity in the equity capital market as well. Specifically, we saw the follow on offerings window open in late June and continue to see positive trends into the Q3. On August 2, the Central Bank started Its monetary is in cycle, cutting the CELIQ rate by 50 bps, the first cut in 3 years.

Speaker 1

When we look to the second half of twenty twenty three, we are encouraged by a more positive market environment. We believe stronger capital markets activity and lower sales lead by the end of the year should favor our core investments business. However, the recovery may take some time as well as this will depend on further interest rate cuts and also retail investors shifting back to reserve assets. On the profitability front, EBT and net margin improvements in the 2nd quarter reflect better market trends combined with 3, cost controls. This operating leverage resulted in minor improvement in both EBT, a quarter over quarter increase of 123 basis points and net margin a quarter over quarter increase of 213 basis points.

Speaker 1

These improvements are in line with our focus to drive ROE over the next years, both through earnings growth and capital distributions to shareholders. Let's move to Slide 7. We are very pleased with the positive momentum in our operating trends, such as client assets, active clients and total IFAs. In June, we hit the historical mark of EUR 1,000,000,000 in client assets, With less than 12% market share in investments for individuals, I believe we are still early in our growth trajectory. IFA net additions were over 1,000 in the quarter, reaching more than 14,000 in total.

Speaker 1

This comes from several factors such as new educational partnerships, helping to hire and train new investment advisers, lower churn in the IFA network and overall improvements in our onboarding methodology for Interface, reducing onboarding time from nearly 1 month to less than 1 week. With the potential market of swing in the coming quarters, We will keep focus on the quality and expansion of our sales force, both internally and externally. Next to Slide 8. This positive momentum in operating trends coupled with our cost control discipline drives the recovery in our financial results for the quarter. As I mentioned earlier, our gross revenue has improved 3% year over year, totaling BRL 3,700,000,000.

Speaker 1

Our EBT has improved 12% year over year, totaling BRL 968,000,000 and net income has improved 7% year over year to EUR 977,000,000. Moving on Slide 9, we kept making progress across our strategic initiatives. New verticals continue to grow rapidly, accounting for 11% of total revenue. We are pleased with this progress, enhancing our relationships with our clients and diversifying our revenue streams. Additionally, we had the closing of Banco Model acquisition on July 1, and it will already impact our results in the Q3, but we do not foresee any material impact.

Speaker 1

We are very excited to have the Model team joining us and integration is happening as I speak. Since day 1, our teams are working together to explore XP and Model better and enhance our service level and efficiency for better serving our clients. One of our main goals is to have everything integrated, including Modal's client base using XP's backbone and capabilities by the end of this year. We believe this will provide us revenue synergies since XP's ecosystem has a strong cross sell capability and cost avoidance over time. We will provide on our progress in the coming quarters.

Speaker 1

On Slide 10, let me highlight where we are in terms of long term strategy we have discussed on previous calls. You might recall that we discussed 3 key areas of focus. 1st, leadership in Vebs. We have continued to gain market share investments throughout 2023, despite the tough macro environment reaching 1 trillion inclined assets. We also had the strongest net new IFA signings since the IPO, further expanding and strengthening our sales force 2nd, superior product offerings.

Speaker 1

Melior Escartones named XP as the best credit card in Brazil. Considering we only launched the product In May 2021, we are especially proud of this recognition and the success we have seen in the market. Also, we launched travel platform into our cards experience, where clients receive extra investment back from in app purchase. And third, client focus. We always put our clients' interest first.

Speaker 1

This is reflected on our an EPS score that was 76 this quarter, one of the highest in the industry. We continue to differentiate ourselves in the market, offering premium quality and service levels throughout our ecosystem. I believe this is one of our main competitive advantages over our peers and we are 100% focused on maintaining and even extending this advantage in the future. Now I will hand it over to Bruno to discuss this quarter's financials. Thank you.

Speaker 1

Thanks, Mafra. Good evening, everyone. It's a pleasure to be here with you again. Moving on to Slide 12. Starting with gross revenue, on the left part of the slide, we reached 3.7%, 12% growth quarter over quarter and 3% growth year over year.

Speaker 1

The sequential growth in gross revenue has been led by retail, especially fixed income, We can further detail on the next slide. In terms of mix between segments, Retail has continued to gain relevance and represented 78% of total revenue, benefiting from our long term strategy to become a full financial service platform, especially through our new verticals. Institutional and Corporate and Insurance Services remained at 10% 8%, respectively. Other revenue has been stable over time, representing around 4% to 5% of total revenues. On the next couple of slides, we are going deeper into retail revenue.

Speaker 1

Starting with Slide 13. When we look at our core, we can see that we delivered revenue in revenue to BRL578 1,000,000, a growth of 74% quarter over quarter due to higher volumes in both primary and secondary markets Scenarios in Corporate Bonds Credit Spreads. After our Q1, relevant corporate credit events negatively impacting DCM activity, we saw a more normalized capital market in Q2. As expected, we also had a sequential seasonal improvement of 9% quarter over quarter in the Fund's platform, reaching BRL 341,000,000 due to the recognition of performance fees, which tend to be recognized at the end of every semester. Also, we had a subdivision in equity revenue of MXN 1,100,000,000, flat quarter over quarter, with lower daily average trades for equities and futures, but higher volumes in structured notes.

Speaker 1

Moving to Slide 14. All of our new vertical products continue to grow well, reaching a total of BRL398 1,000,000 in 2nd quarter, plus 54% year over year and 9% quarter over quarter, representing 14% of retail revenue. The main highlight of the quarter has been cards revenue, which has grown in line with TPV to BRL 232 1,000,000, a growth of 40% quarter over quarter and 100% year over year. Cardi's penetration in total estimates has also increased 2 88 basis points this quarter to approximately 24%. Coming back to total Retailer revenue, We've updated this slide to include 2nd quarter results.

Speaker 1

2 key messages. 1, XP is a cyclical grower company. All retail revenue, which is BRL 1,000,000,000 behind the peak in 2021, has potential for upside as the market recovers and 2, new verticals have a decisive role In diversifying our business, if we compare the last 12 months revenue with 2021 revenue, New verticals have increased approximately 156%, while our core has decreased 12%. In summary, potential for growth as the market recovers plus a more resilient and diversified business model. Moving on to Slide 16.

Speaker 1

Total SG and A excluding revenues from incentives has remained under control, Reinforcing the annual guidance of BRL5000000000 to BRL5.5 billion, leaning towards the mid to the bottom of the range. People expenses represented 72% of total SG and A in 2nd quarter and 70% in the last 12 months. The ratio between people and non people expenses is still over time 70%, 30%. We expect higher SG and A in the 2nd semester compared to the 1st semester due to seasonality and well time low expenses in the Q1, but keeping our efficiency ratios improving, as we are going to show in the next slide. Cost discipline, the key to improve our competitive advantage and the CLF of XP is aligned to achieve that goal in a sustainable way.

Speaker 1

The 2 main KPIs we monitor are: last 12 months efficiency ratio defined as SG and A ex revenue from incentives divided by net revenue and 2, compensation ratio, defined as people SG and A by net revenue. We read it in the last 12 months than quarterly numbers to avoid seasonal impacts. Both ratios have continued positive trends in the quarter. Efficiency ratio decreased from 40.4% to 38.3% amortization ratio decreasing from 28.5 percent to 26.8%. This cost control discipline has played an important role in our operating margins, which we are going to talk on next slide.

Speaker 1

Moving on to EBITDA, a good product for Earnings Power. This quarter reached BRL968 1,000,000, a 12% growth year over year and a 19% growth quarter over quarter. Our EBIT margin has also improved in the quarter, increasing 198 basis points year over year and 123 basis points quarter over quarter. This was driven by improving operating leverage and is in line with our annual guidance between 26% 32%. On the next slide, our net income has also increased BRL97 1,000,000 this quarter, up 23% quarter over quarter and 7% year over year, while our net margin has improved 213 basis points year over quarter and 91 basis points year over year to 27.5%.

Speaker 1

This has been a result of both top line growth and increase in operating leverage we talked about in the past few slides. Lastly, I would also like to highlight our return on average equity that has increased 334 basis points essentially to 22%. As I have stated in the beginning of the call, we are determined to gradually increase our ROE over the next few years, both through consistent earnings growth and capital distributions to shareholders. Now both, Mahfra and I would be happy to take your questions.

Operator

Thanks, Bruno. So moving on to the Q and A session, we have many hands raised. As usual, we will attend you on a first come, 1st served basis. The first one is Mr. Jeffrey Elliott from Autonomous.

Operator

Hello. Thanks very much for taking the question. The inflows, Clearly, they're better this quarter than in the Q1, but they're still quite a bit below what we were used seeing previously. Can you give us a sense, are you seeing inflows continuing to recover? And then can you point us to a normal rate of monthly inflows that you'd expect going forward?

Speaker 1

Hi, Geoff. This is Hi, Geoff. First, when we think about the inflows, I rather think about total client assets and why is that? Is total client assets surpassing the mark of BRL 1,000,000,000,000 is more relevant for revenues than inflows. That's a point important to bear in mind.

Speaker 1

2nd, inflows, As I have also mentioned in previous calls, it's a component of total inflows minus outflows. In total inflows, they have been good. We had like all time high in the last quarter, the second quarter, but so the outflows have also grown as well, bringing the net inflow to a better number in the Q1, but it's still short compared to the boom market here. We believe that individuals, they are lagging in the process of bringing money into riskier assets. We are not there yet.

Speaker 1

We don't know when we are going to get there, but it's a cyclical part of the business. So yes, we, in the future, expect inflows to grow. But in the short term, we don't have a guidance and misstatement is look at total client assets more than 2 inflows. And just so Good evening, Santiago. Just to complement Bruno here.

Speaker 1

One way I like to think about it is We are at the very beginning of the easing cycle in Brazil. And if you think about the next, let's say, 1, 2, 3 years, we'll in our opinion, we'll have another good cycle for investments, a good macro environment in the next years. And for us, it's more important when you look the scenario than quarter by quarter, okay? What I'm trying to say here is, we believe we are very well positioned with the company very organized to capture this good momentum that we have ahead. So it's hard to say if the net inflow will change this quarter, next quarter and in 3 quarters, But we believe that at some point, with this macro scenario ahead of us, at some point, we will have a good environment for investments again.

Operator

Next one in line is Eduardo Hosmer from BTG.

Speaker 2

Hi. Can you hear me?

Speaker 1

Yes, we can.

Operator

Yes, we can.

Speaker 2

So congrats on the numbers. I have questions. The first one is regarding your market share growth. The company has expressed the goal of doubling it's AUC. But when we look to your market share in the core high income segment, you have almost 20%.

Speaker 2

So can you provide more details about your plans for expansion in this segment as well as in the high net worth and also the lower income segment? This would be the number one question. And the second question relates to your ambitions beyond investments. What's the company plan? How aggressive you are willing to expand in loans, for instance, at the bank, anything here would be appreciated, right?

Speaker 2

So thanks a lot, and again, congrats on the numbers.

Speaker 1

Thank you, Hosmer. The way I like to think about investments, as we mentioned, we have 11% market share of individuals, okay, and 8% if you consider companies, okay? Itau is the leader in the market with more than double that we have, okay? So And when you look at the different segments, if you look high net worth clients, we have, I would say, about 5% to 6%, in the middle, closer to the 20% that you mentioned. And if you go to the retail clients, We have 2%, okay?

Speaker 1

And the way of serving these clients in these different segments, they are completely different, okay? One easy way to think about it, if you go to high net worth clients, you have an account load of 20, in the middle 100,000 to 200, At the bottom, almost 2,000, okay? So the strategy that we have for the different segments are completely different, okay? We start at the middle of Gispiramid, okay, the affluent clients. So that's why we have almost 20% market share, but we believe we can continue to grow here, okay?

Speaker 1

And of course, we have plans on the upper part and the lower part. The lower part, we have what we call digital first. Here basically is how you use technology, CRM, intelligence data to have a higher account load per banker, but at the same time, giving a very good service compared to the market, okay? In the middle is more of the same. And at the top, We are talking about high net worth clients.

Speaker 1

So here, different from the other parts is more personalization, more value added, so different strategies, and we believe we have the right path for these 3 different segments, okay, completely different financials, KPIs, completely different ways of servicing costs and so on, okay? And the second part about the new business, there we call that New verticals, okay. And we mentioned pension, credit, insurance and banking basically. But We have a lot more than that, that are new verticals inside the company, okay? Our asset management is growing very rapidly.

Speaker 1

We have the business, we have corporate, we have many other businesses that we don't give a highlight for them, but they are new, okay? So if you look at the percentage of these new verticals that didn't exist 3 years ago, Now they represent 11%, okay, and growing 50% year over year. So we believe we can continue this space for a longer period of time because the penetration is still very low. If you look insurance, for example, 1% penetration because we just launched the products. If you look credit, 1%, if you look account checking accounts, but looking the principal accounts, it's close to 1%.

Speaker 1

The product that's most penetrated is credit cards, 19%, okay? So we have cross sell metric here that we look very close. Imagine that we have classified from 1 to 7 products, okay, it's the way we look with the sales, people, FAs, internal advisers and so on. This number is 1.55 today. So it's still very low because these new verticals, they are new, okay?

Speaker 1

So in our opinion here, we have a lot of room like to continue to penetrate the current customers we have, okay? If I just may add, MAPFRE, to your point. The way we like to think, Arnaud, so to your question about Our ambitions, we have strong ambitions for the long term, that's for sure, but we also believe a lot in execution and in focus. And as Mahfra pointed, many new products and services that we have launched in the past 2 to 3 years, We believe there is a lot of work to do to cross sell and upsell in our ecosystem with our existing clients. And just bear in mind that we also added with Modal acquisition, 500,000 given or taken new clients into our ecosystem as of today.

Speaker 1

So we are talking about a little bit more than 4,500,000 total clients with that low penetration number that So I think it's there is a strong ambitions, but we need to go brick by brick executing.

Speaker 2

Great. Thanks a lot guys.

Operator

Thanks, Cosmo. Next one in line is Thiago Basiste from UBS.

Speaker 1

Hello?

Operator

Can you hear us?

Speaker 3

Can you hear me?

Operator

Yes. Yes. Now we can.

Speaker 3

Okay. Sorry, guys. So I have two questions and sorry for the issue. The first one, I'm trying to understand the dynamics for the earnings for next year for XT. And do you see room for further improvement in the efficiency ratio of the company next year.

Speaker 3

Probably next year, we will see a better top line. So my question is, we will see this operating leverage in the company? And the second one about Model. I think MAPFRE already mentioned that Model should be zero impact in the earnings in the short term. But do you believe that Model should be accretive for EPS in 2024?

Speaker 3

Or because of all the changes that we saw in the market, these should take a little bit longer to see a really positive impact from Modal on the ex the earnings.

Speaker 1

Thank you, Batista, for the question. So about your point on the efficiency ratio, the way I like to see is, As we mentioned, we believe we have a better macro outlook for the future, okay? Again, it will take some time because it's not a 50 bps That will make a total difference when you think about retail clients. Of course, if you think about capital markets, institutional clients, it change faster, okay? We start to see follow ons in the previous months.

Speaker 1

So but retail clients will take more time, okay? But when we look this positive cycle for the future, we believe we can have higher revenue growth rates in the future, okay? We'll have the company ready to capture this growth. On the other part, we spent the last, I would say, 2 years, 1.5 years inside the company, improving the level of governance, the way we manage the company. We have created the XP management system.

Speaker 1

So We have created a lot of tools and controls that we didn't have in the past to manage the company. So I believe we are better today for the this new cycle than we had like a few years back. And we've done a cost control. So when you put together like a good cycle that we probably will have ahead. Combined with cost control and better management and governance tools in the company, I believe we can have very high operational leverage in the future.

Speaker 1

So that's what we have been talking about with investors, we believe we can increase our EBT margins close to the high part of the guidance in the next years, we can increase our ROE close to, I would say, 30 in the next years. But again, it's something that will take time, 1 year, 2 years, 3 years. That's the time frame that we are doing here. Yes. And about Motal, yes, we believe it's going to be accretive for our EPS on 2024.

Speaker 1

We have been executing the integration that started last month, and our goal here is to finalize all the integration until the end of this year. So we are going to give updates in the next quarters. But yes, it's accretive and the momentum of the market getting better. Again, individuals take longer, so it's going to be a gradual improvement over time. But Model integrated with XP should benefit from that.

Speaker 1

And just to give you One example to make it tangible what Maf explained about the operating leverage of our business, I'd like to use the funds platform as an example. The funds platform in the Q2 of last year had a total of BRL175,000,000,000 of client assets. We all know that this year has been a tough for the funds industry as a whole. Our funds platform has reached at the end of Q2 BRL222 1,000,000,000 of client assets. Performance fees, so we have more client assets in the funds platform as of today than we had 1 year ago, but performance fees, the Q2 of last year was much higher than this quarter.

Speaker 1

We decreased the performance fees by 20%. So that's one example of the potential of the operating leverage that this business has. As the market recovers, if we get, for example, performance fees in the next semesters to come, We have more client assets and these, it's just the tax and it's straight to the bottom line, hire a single individual to make it happen. Great. Thanks.

Operator

Batiste, next one in line is Mr. Tito Lovarta from Goldman Sachs.

Speaker 4

Hi, good evening. Thank you for the call and taking the question. Couple of questions also. One, just first on the results, looking at the other revenue line, in particular, dollars 167,000,000 although up modestly compared to 1Q, but 1Q was impacted, I think, almost $7,000,000 From Americana, so I was a little surprised that that line did not maybe improve potentially more. It was actually lower if you factor in the Americana's impact.

Speaker 4

So if you can give any color on what happened there and how that should evolve from here? And second question, Bruno and Manfred talked about increasing ROE from here, kind of the main drivers, but also how much essentially increased that ROE? And what are your latest thoughts on the capital returns, whether buybacks, dividends and curious of what you're thinking there? Thank you.

Speaker 1

Okay. I will start with the other revenue. The other revenue is everything that is not in the segments that we highlight. So we can have many different things there, Thierryo. And When I made the presentation, I said it's stable over time between 4% 5% of total revenue.

Speaker 1

It hasn't changed that much. Specifically, in the Q2, we did have a negative impact in revenues Because of this pack that we had in our balance sheet, it didn't happen. And there was a negative impact, a little bit more than BRL 40,000,000 that it's a financial instrument, so impacted other revenue because it was not related to any the other segments. So it can happen from time to time, those different types of impacts, either positive or negative. So that's what happening in the second quarter.

Operator

Yes.

Speaker 1

And about the capital about the ROE, I believe, as Bruno mentioned on the presentation before, We have a mix of 2 things. We already mentioned the positive cycle, the cost control and so on that will probably impact and increase perhaps in the next quarters, but we also have huge excess of capital. So today, we have more than EUR 5,000,000,000 and we have a Basel Index of, I would say, close to 24%, okay? So it's a combination of earnings growth and adjust in the capital structure for the future, okay? So That's the combination that will bring us from, let's say, the current 2022 to something closer to 30.

Speaker 4

Thanks, Maher. That's helpful. Any color just on when you could return some of that capital and the form of returning it again through buybacks or dividends?

Speaker 1

2nd semester, we already mentioned in the Q1 that we would return shareholders either through share buyback or dividends or both, at least 50% of payout ratio that we did last year. We have already returned BRL916 million in the 1st semester of this year, and we are going to return more in the 2nd semester. But we have not decided yet the number. So whenever we do, we're going to announce to the market.

Speaker 4

Thank you, Bruno. Thanks, Marco.

Operator

Thanks, Jiro. So now we have the Neovasc from Credit Suisse.

Speaker 1

Can you hear me? Yes, we can.

Speaker 5

Yes. Thank you. So first, congrats on the results. I would like to go on the revenues or the results part. We talked to some IFAs last month, so which pointed to strong recoveries in revenues in June, right?

Speaker 5

So I'm trying to do a quarter breakdown in months. So how strong could June be compared to April, right? So it could help us to understand how results could have reached already in the Q2 considering like a full potential from June results? Or any details you could share with us in relative terms, it would be good as well. And second question, SBC expenses came in $30,000,000 to $40,000,000 below Q4 or Q3, All right.

Speaker 5

So this should this BRL 130,000,000 from Q2 be a more normalized levels considering the rightsizing you did in people or it had some still cancellation effects from Q1?

Speaker 1

Yes. Regarding your question about the months, we don't think it's the best way to analyze our business. There is a lot of volatility between months, even between quarters. So to take June compared to May or May compared to April and extrapolate that it can be misleading. So I would not recommend that.

Speaker 1

To your question about the share based compensation, we don't have a guidance, but I would say that the pattern around €130,000,000 to €150,000,000 per quarter, in other words, €500,000,000 to €600,000,000 per year, it sounds Reasonable. It depends on the price action as well because there is a component of the share based compensation there is related to the price actions. The other part is hedged. So it's hard to state an exact number. But yes, Q2 was a more normalized level than Q1, which we announced that it had like one off positive effects reducing the share based compensation and should not be extrapolated for the rest of the year.

Speaker 5

Okay. Thank you.

Operator

Thank you, Daniel. And now we have the last question from Niha from HSBC. Hi, Niho.

Speaker 6

Hi, thank you for taking my question. Very quickly on the impact from lower rates. Should we expect any negative impacts as policy rates go down, especially on the financial income part of the revenues? And second question is on competition. Any change in competitive dynamics, either more aggressive or competition softening?

Speaker 6

Any trends that you could highlight? Thank you so much.

Speaker 1

Regarding, Miha, the lower rates, we're more than welcome. It's a good macro environment, and it probably will generate a positive tailwind in our core business. Reminding that is a gradual effect because individual investors, they tend to be Lagging in that process, but it's positive. I don't see financial revenues being jeopardized by lower interest rates because market activity probably will enhance, so we're going to have a very good environment as we had in the last positive cycle. Okay.

Speaker 1

Hello, Neha. And about the second part of your question, competition. As you would like to mention, in Brazil, the concentration is still very high, 8% of the investments is still inside The same 5 big banks, okay. And when you look the macro environment that we had in the past 12 to 24 months, They were very positive for these banks, because they can offer some products that we don't have here as LCIs, LCAs, free of tax and paying 13.75%. So It's a very, very good macro environment for this kind of products.

Speaker 1

The banks, they issued more than BRL 1,000,000,000,000 in the last 12 months, Okay. So but this money is most of them is with a very high liquid, most of them daily liquid. So once the interest rates starts to go down, but again, it's not 50 bps that will make a difference. At some point, the individual investors, they will realize that they are not making 1% a month anymore with a very low risk with daily and they will change the products, change the portfolio, reallocate the money. So it happens in all the other cycles and will happen again.

Speaker 1

We have today more than BRL 2,000,000,000,000 on these bank CGs, LCIs, LCAs and so on. And we believe we can benefit once the interest rates are lower, okay? So That's for me the biggest point about competition in the last 12 to 14 months, okay, the level of interest rates and the bank products.

Speaker 6

Perfect. If I can ask, At what level of rates do you see money moving back into equities or new inflows coming in Maybe at around 8%, 9% or even 10% would be sufficient to see the move in your view?

Speaker 1

It's hard to say, Neha. But again, today, imagine that you're a Brazilian investor, You can invest at EUR 13.25 with very low risk daily liquidity. So you can make 1.17 percent a month, Okay. Doing nothing. So it will take some time, okay, for people to say, okay, I cannot do I don't have this level of interest rate anymore, so I have to take some more risk.

Speaker 1

I have to buy longer products. I have to buy a lower credit quality, okay? But we have products in Brazil with FIDC guarantee, this kind of stuff. So at some point, they will move.

Speaker 6

Perfect. Thank you so much, Thiago Bruno.

Operator

Thanks, Neha. Thank you for your question. It was the last one. So we would like to thank you all for participating in the call. Will be available, the IR team to discuss the results with you later and have a good night everyone.

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