Let's just begin. Good evening, everyone. I am André Martins, the head of investor relations here at XP Inc. On behalf of the company, I would like to thank you very much for your interest in our webinar. Welcome to XP Inc.'s Third Quarter of 2021 Earnings Call. Today we have with us Thiago Maffra, our CEO, and Bruno Constantino, our CFO, and also the IR team, myself, Antonio Guimarães, and Marina Montemor. We will all be available for the Q&A right after the presentation. As most of you are already used to, you can raise your hand on the Zoom tool to ask your questions. We also have, because of the BDR and all the spin-off story that you know about, we have now the simultaneous translation to Portuguese.
You just have to click on the globe icon, and you can switch to Portuguese if that's better for you. Before we begin our presentation, please refer to our legal disclaimer on page two. On that page we clarify forward-looking statements and their definitions. The documents explaining why forward-looking statements might differ from actual results can be found in our SEC Filings section of our website. Now to begin the remarks and the presentation of the third quarter, please, Bruno, the floor is yours.
Okay. Well, first of all, let me apologize for my delay here. I was having problems getting into Zoom. Thank you for the patience. Thank you for attending our call one more time. Are we going to project the presentation, André? Yeah. I'm gonna try to be quick here in these slides so we can go as fast as we can to Q&A. I believe it's more interesting. The first slide, we can move to the first slide. Yeah. The opening remarks is, I don't know if you had time to read, Thiago Maffra's letter, but I think it's worth explaining all the investments we have been doing recently in our company and how we organize the big, pockets of investments, we focus. Yeah. Okay.
That's how we look and separate the investments we have been doing in the company. Number one is what we call the foundations. The foundations are mainly investments in technology, people. The headcount growth that we have had, most of it is in tech people. This is really important because it will allow our scalability and also our exponential growth going forward. The second pocket is what we call protect and expand our core business. Our core business has been, since the foundation of the company, investments. To protect and expand the core means innovating, bringing new products to the market, creating market that don't exist yet, reinforcing our ecosystem, investing a lot in the capital markets, and also in our distribution channels, either through our IFA network or our direct channels.
All of that controlling the costs so we can pass on to our clients this profitability in the core business. Third, the last one is build the future. That's where all the new businesses we have been investing a lot recently are. Banking, and by banking is the transactional part, the credit card, credits, insurance, and also SMB. That's how we segregate, and it's important to share with all of you because you're gonna see in our numbers the investments we've been doing, and we are gonna continue to do in the next quarters. Moving to the highlights of the third quarter this year. We picked three main highlights for this quarter. Number one, again, the results. We had our record results one more time.
It's our all-time high gross revenue, quarterly gross revenue, BRL 3.4 billion, and also our adjusted net income, more than BRL 1 billion one more time. Another point worth highlighting here is the gross margin. That's the highest gross margin we have had since the IPO, 71.8%. Despite all the investments we have been doing in our IFA network, which, as you know, impacts the costs and, by consequence, the gross margin. Another point is the net new money. The pace of adjusted net new money above BRL 15 billion per month is an important pace in our view.
Because as you remember, I kept mentioning the range between BRL 10 billion-BRL 15 billion of net new money per month, and now it's the second quarter that we consistently deliver numbers above BRL 15 billion per month. The second point, the improved, the governance that has improved after the merger with XPart. We more than welcome, I don't know how many shareholders, new shareholders we have here in our third quarter conference, but we would like, again, more than welcome all of you, to have 500,000 new individual as investors of our company. Is something that make us really proud. What I can tell you, as Maffra has said in his letter, here in XP, this is our life. We have no plan B. You can count on us that we're gonna be work really hard to make this company even greater going forward.
The last one, some product highlights. We hit the record pension funds inflows in this quarter. You can see that in our balance sheet, more than BRL 5 billion in our own insurance company. Those are the retirement funds, pension fund business. What is interesting about, in my view, is that this business has only two years. We started this company back in 2019. If you fast forward two years, we have grown a lot, but we only have 2.5% of the total AUC of this market, which is more than BRL 1 trillion of AUC. We have approximately BRL 26 billion of AUC, 2.5%, but we are able to get more than 50%, 50% of the net inflows of this business. It's a business that's gonna keep growing.
It's a very recurrent business, important one. It reduces the churn a lot as well. It increases the cross sell in our platform, and it's a business we are really optimistic about. We are very small yet. The other point is the credit card. The TPV of BRL 3.3 billion in this quarter, more than BRL 1 billion per month. With a base of client that is not big, it's less than 200,000 clients so far using our credit card. What does that tell us? That there is a benefit of attracting the right client in your ecosystem. With not many clients, you can make great numbers. We are very optimistic as well about our credit card business going forward.
Those are the highlights of the quarter, and now I think we can jump straight to the numbers, KPIs and financials, and then we go to Q&A. You have seen these KPIs, except for the financials. When we look at our core investments, total AUC BRL 789 billion at the end of September. The reduction compared to the second quarter is totally driven by mark-to-market. We had a positive adjusted net inflows of BRL 47 billion in the quarter, a very healthy number in our view. We kept the growth of number of clients reaching the mark of 3.3 million at the end of quarter in our three brands. When we look at the banking business, still very strong growth, BRL 8.6 billion of credit portfolio. The credit card business is not included in that number.
Our credit business, if not all, most of it is collateralized, so any concern regarding delinquency rates, we don't have it. As you can see, the NPL ratio so far is 0%, and we intend to keep like that going forward. Going to the credit card business, the BRL 3.3 billion I already talked about, it's a 55% growth quarter-over-quarter. Our financials, as I said, record number in the gross revenue and in the adjusted net income and our adjusted EBITDA, BRL 1.2 billion, a 61% growth year-over-year. With the NPS hitting the mark of 77, a very strong number and a very important KPI for XP, as you know. Talking about the revenue, the total revenue, the growth 50% year-over-year, hitting the mark of BRL 3.37 billion.
The main driver for that growth, as usual, has been the retail business contributing with 80% of that growth, and then the issuer service business contributing with 10% of that growth. Retail representing more than 3/4 of our total revenue, and I'm gonna talk in detail about the retail revenue in the next slide. Retail growing more than the average of the company, as usual, 53% year-over-year. That's the interesting part in my view. We hear sometimes concerns about the macro environment and interest rates going up in Brazil. Our business is a business that has a portfolio effect and a very unique ecosystem. Depending on the macro environment, what happens with our business is that the mix of product and this portfolio effect changes.
At the end of the day, if you look throughout our history, we have gone through different macro cycles in Brazil throughout our history. We are a company with more than 20 years of existence. No matter what the macro environment has been, XP's results have been strong. The main reason for that is, as I said, this unique model of a portfolio effect and ecosystem together with a still highly concentrated financial market in few banks. The growth potential, in my view, is intact. What you're gonna see is gonna be a change in mix. Let me give you a few examples so you can put that in numbers. Going from only talking about the retail revenue, that is, as I said, 3/4 of our total revenue.
When you look at the first quarter of this year, okay, 2021, fixed income plus financial products represented around 37% of our total retail revenue. Two quarters later, fixed income plus financial products jumped from 37% to more than 44% of the total revenue. Equities and futures, approximately 1/3 in the first quarter decreased to 1/4 in the third quarter. Again, some products losing relevance to other products that are gaining relevance, and that's the portfolio effect base. Additional to that, when we have higher interest rates, we also benefit from two other revenue sources. One, floating that goes into retail, and two, the return in our own gross financial assets that we have, our proprietary cash.
Doing the same math, comparing first quarter this year to third quarter this year, when we look at our interest on our gross cash in the first quarter represented less than 2% of the total revenue of the company, okay? Now, two quarters later, this number jumped to 3.5%. Of course, interest rates are higher. When we go into the floating revenue inside the retail revenue, in the first quarter it was around 4% of total retail revenue. In the third quarter, this number doubled to almost 8% of the retail revenue in the third quarter. I'm just sharing some numbers with all of you so you can understand what this portfolio effect means in terms of revenue growth going forward.
Also, on the right side of the chart, when we look at the take rate for retail revenue, it's interesting to note by coincidence that it's been stable since the IPO. I remember at the IPO time, a lot of analysts and buy-side investors questioning the take rate and thinking about price compression going forward, and this take rate should go down. In the middle of this period, we have reduced our prices. We have, as you know, zero brokerage online commissions at Rico. We have reduced by 75% our prices at XP brand. Despite all of that, take rate is stable. Why is that?
We have a lot of moving parts affecting the take rate, as you know, but we are also adding new products and business and increasing the LTV of our client and also the engagement and the loyalty of our client with our brand. To give you one example here, let's take the banking revenue. By banking, we're talking about credit card, we are talking about credit and FX basically. The banking business, which is totally new for XP, represented in the first quarter this year, roughly 1.5%, 1.7% of our total revenue. In the third quarter, more than 3% already on a relative basis, on absolute terms, growing much faster. This business in the future can represent much more of our revenue mix in the company.
That's one example of this innovation and building the future effort that we are going through, and that is done by a lot of investments in our foundations, protect and expand the core, as I mentioned earlier. Now moving to the next slide, we go to our adjusted EBITDA and margin, and here you can see the investment. Where can you see the investment? Headcounts. Headcount, that's the main investment we have. We have grown our headcounts by 64% year-over-year. It's a lot, but it's necessary. It's as if at XP we have a mature business in investments, what we call our business as usual, that we keep innovating, and this business has a huge operating leverage. On the other side, we have like startups inside XP that we are building from scratch. A bank.
We started from scratch a credit card business that we, in six months, were able to make a purchase using our physical credit card as a start, and then six months later, we launched the product to our customers. These businesses, they are like startups. They are being built from scratch. Of course, we're gonna keep growing the headcounts, so we can keep delivering more features and evolving those products and those businesses as we learn from the clients and keep moving forward. That's what explains this increase of SG&A compared to the net revenue, growing from 31.9% to 35.2% year-over-year. There is one other effect that is a tough call, because in the third quarter of last year, we had operating revenues in our SG&A that reduced the amount of the SG&A.
That operating revenues, they are not present anymore. They are like a one-off. If you take that out of the equation, basically, even with all those investments and this increase in headcounts, this number, 31.9%, should be higher than 36%. That's why in our earnings release, we mentioned that our EBITDA margin, going to the right side of the chart, 36.9%, adjusted EBITDA margin, which is below 40% level, is not a normal margin for a company like ours. This is temporary in our view. It's gonna stay probably below 40% in the next quarters. Why is that? Because we're still investing a lot in those new businesses.
We believe these investments are gonna peak at the fourth quarter next year, and then we're gonna start seeing these margins going up again, getting all the benefits of the revenue that those new businesses are gonna bring to the company. I don't know if you remember last quarter, Maffra commented about the expansion of the addressable market. I haven't also talked a lot about it. Today, we are addressing between BRL 100 billion-BRL 120 billion of addressable market in the financial industry. A financial industry revenue pool of more than BRL 800 billion. By the end of 2024, we are gonna be addressing four times what we address today.
We're gonna be addressing BRL 350 billion-BRL 400 billion of annual revenue pool, not considering that this revenue pool can grow from today until the end of 2024. That's what justifies all the investments we have been doing in the company. Now, the next slide before we go to the adjusted net income, we put here the math to reach what we call our normalized effective tax rates. I know this is also a point of discussion and confusion sometimes with investors, so we thought it would be helpful to share with all of you. What we have here? We have the earnings before tax, as you can see in our financials, then the income tax reported in the financials.
We add the withholding tax that we have in our structure, but that does not go into our revenue, which in the first quarter was BRL 105 million of withholding tax. Those are taxes that are gonna be paid, okay? But they do not go through our financials. In the second quarter, we had BRL 126 million, and this quarter, BRL 179 million of withholding tax. You add back that withholding tax to the earnings before tax, and then you add the tax, because that's a tax, together with the income tax, and you reach the normalized effective tax rate. That you can see it's around 14%-18%. This is the number that we have been talking about between 15%-20%. This number can be volatile depending on the product mix that we have.
That's what explains the lower effective tax rate that you see in our financials reported officially. Also we have added in our earnings release all those numbers in our managerial income statement, so it can be easier for you to see the numbers as we see it and then forecast the way you would like. Now we hit our adjusted net income and margin. 82% growth of adjusted net income, more than BRL 1 billion again, with 32.8% adjusted net margin, explained again by retail revenue, the operating leverage impacted by the growth of the SG&A and the lower effective tax rate. With that, I think I end here, right? We go straight to the Q&A. As I said, I tried to be brief so we can have the Q&A session. Thank you very much. André, you're gonna be the one-
Yeah.
Doing the Q&A. Perfect. With you. Thank you.
Thank you. Thank you, Bruno. We have a lot of hands raised here. I just ask you to limit yourself please to one question since we have, I think 10 people on the line here. The first question comes from Jorge Kuri from Morgan Stanley. Kuri, can you hear us?
Yeah. Hi, everyone. Thanks for the presentation and congrats on the great numbers. My question is if possible, could you maybe elaborate more on the expectation for EBITDA margins? You know, maybe help us a little bit more with, you know, when do you think they will peak and, sorry, trough. And then where do you think they can be once you finish the investments for growth in the banking business that it seems that you're planning until the end of next year. Where should they be, say, in 2023? And, you know, what is the risk that, you know, then you'll find another growth avenue and then invest more and maybe the margins just stay low for a while?
You know, I guess the bigger question is, do you really have to have higher margins? I mean, you're generating very good returns as is. I mean, wouldn't it just make sense to continue investing in growing the business and keep, you know, the margins or net margins, whatever you wanna look at. I think that your guidance for net margins of 25%, just keep it there for the next three to five years and grow more. Or, you know, that's just not enough available avenues for you to do that. You know, I know I'm rambling, but anyway, thanks. Thanks. Hopefully it was clear.
Oh, yeah. Thank you, Jorge. That's a mantra. Feel free to jump in, okay?
I got it.
That, that's something we discuss a lot and we are investing, as I tried to show here, we are investing heavily. The 64% growth in headcounts, I mean, we're gonna have almost 3,000 new people in our company in one year. That's a lot. That's basically because all the new businesses that we are entering in. Also, we are a company result driven as well. We are cost conscious. We don't like to see our margins going down, you know. We understand that because it's temporary. We understand the opportunity, huge. We understand we have to do it. It's the right decision for the long term, and we are doing.
We don't wanna do it in a way that the profitability, you know, is not there really strong because that's our life. XP has been profitable since the beginning. It's. As I have said that many times, Guilherme Benchimol has said that many times about the necessity of this company to be profitable to disrupt the banks. Because imagine, we were nobody, no money, competing against the huge banks with a lot of capital, with a lot of money, a lot of profitability, and without any financial sponsor for 10 years. 10 years, and we became the largest independent broker-dealer like that, without any sponsor and with our own money. How? Being profitable. Being profitable and reinvesting 100% of the profitability in the future of the business, and that's exactly what we have been doing.
We haven't distributed any dividends since the IPO. Why is that? We see a lot of opportunity, and we are profitable, and we are gonna keep reinvesting. We have constraints. One of them, talent, people. You need to find them. Cultural fit, you need to have that. To execute, we know that it's easy to create a narrative, it's hard to execute and deliver. Do a lot of things at the same time, it's not that easy.
Yeah.
Go ahead.
Yeah. Another way to answer your question is, of course we may decide to be, to go faster or slower, but, in our view, we are going a very fast pace because we are building for a huge business line, insurance, credit, banking and businesses. For huge business lines that will bring us from a BRL 100 billion market to over BRL 400 billion in the next 24-36 months. We believe we are going very fast, but it takes some time to build such business line.
We will not build everything from in a quarter or two quarters. We believe to have very good execution, we need people, we need some time and a s the numbers starts to show, from credit card, credit card will be the top 10 issuers in Brazil in the next months or quarters, for sure. The same thing for FX, we'll be top 10, top five players in the next quarters. Everything we build, we want to be the top players, but we'll take a few quarters. We believe we are going fast. If we find a way to go even faster, for sure we will be.
Great. Thank you.
I didn't answer. Sorry, Jorge.
Yeah.
You talked about the margin in the future. Yeah. About revenue. Yeah. It's gonna be beyond north of 40% for sure, because the business is really scalable. We are in a transitory period, and we are building the future actually. That's only in investments.
Forget about building the future, only in investments, we are still. I mean, in early stage there because the cross-sell capability of our ecosystem has proven really interesting, not only for the new businesses, as you can see in the numbers of collateralized credit and credit card, but also when we have any new product in our ecosystem, in our platform. International funds, we went from nothing to more than 25 billion of AUC really fast, creating the market. Anything that we cross-sell here, because Brazil is so under-penetrated in many products, it's, I mean, it's a really positive for the company and the financials as well.
Great. Thanks. Congrats again.
Thank you, Jorge.
Thank you, Kuri. Always great to hear from you. Our next question is from Otávio Tanganelli from Bradesco BBI.
Hi, guys. Thanks for taking my question. Congrats on the results as well. I wanted to understand a little bit better the revenue mix that you're thinking going forward, especially if you have seen at the margin any trends of clients switching back to fixed income products. Obviously, the higher interest rates should have a positive impact in some portion of your revenues. I wanted to get your sense on clients' behavior throughout the products. Also if I can add potential revenue trends that we may see going forward. Thank you.
Sure. Hi, Otávio. First, let me clarify that when you have a mix, for example, away from equities into fixed income, that's not necessarily something negative for a company like XP, okay? Think that fixed income nowadays, different than in the previous upward interest rate cycle that Brazil had, has much more fixed income related credit in the market, right? With even longer duration than before. You have a lot of benefits as well in the investment business from interest rates going up. It's not that this is like only an equity business. It's not. We are not in the equity business. We are in the investment business.
In the investment business, the disruption is gonna be always there because it's the same business that you know we have been disrupting in equities, fixed income as well. We sell CDs from banks in our platform. We have distributed, for example, a CD from one of the incumbent banks in our platform. We do that. We are an open platform. I mean, there is a lot of demand, but we also have a lot of other fixed income products as well. Just to make sure we don't get it wrong and say, "Okay, because it's not equity anymore, we are in a risk-off mode. It's fixed income, so that's gonna hurt revenue." No, not necessarily. I showed the numbers of fixed income. It's growing a lot.
In terms of the mix, it's gonna change. You are correct, and that's natural. Let me share some data with you when we think about the AUC. When we think about the AUC, we have like in the first quarter, equities is the largest part of AUC, not revenue, okay? Revenue is less than 25%, less than 1/4 when you take everything into consideration, equities, futures, et cetera. But the AUC is higher because we have large custodies that does not necessarily deliver too much revenue. It used to be in the first quarter more than 40%. Now is less. It would be like 44%, now it's less than 30%, 39%, 38%.
It has reduced a lot because of the mark-to-market and et cetera. Fixed income used to be less than 20%, now it's more than 20%, going to one-fourth. This mix is natural. We are a company that we are always looking for the opportunities, always looking for what is the best thing for the client. Of course, the product mix, the offer of the product, respecting the client profile, risk profile, and everything else, it depends on the macro environment, and we do not dictate the macro environment. We take it for granted, and then we act, and we always innovate. We have a very strong sales team and treasury department that keep thinking about what could make sense for our different profiles of clients. That's how we got here in the investment business. Again, portfolio. Think about a portfolio effect. This mix changes depending on the macro environment.
Just to add here, another important point, as Bruno mentioned earlier on, the part of the revenues that are not correlated to AUC, they have been increasing a lot, and they will increase a lot in the near future because we have been investing in products that they have no correlation with AUC. They are not investments as credit card, this kind of stuff. Our revenue mix is becoming less and less correlated to AUC, as used to be in the past. That's a very important part of our business model for the future.
Sure. If I can, obviously, I understand a little bit the segments of the distribution of this revenue being generated, but really up to you regarding the disclosure. Thanks, guys.
Thank you, Otávio. Let's move on to Mr. Tito Labarta from Goldman. Hi, Tito.
Hi, everyone. Good evening. Thanks for the call. Thank you. My question on the net inflows, you know, Bruno, you mentioned you closed at BRL 15 billion per month. How should we think about that, you know, given the rising interest. Not just rising interest rates, but, you know, going into election year, high inflation, you know, concerns about GDP growth getting worse. How resilient is that? Can you get back to the BRL 10 billion? Is there upside from here? Any color or how you think about that net inflow number going forward? Thank you.
I mean, can we get back to the BRL 10 billion? Yeah, anything can happen. Do I expect that and be happy with that number? Not at all. Because of the growth of the distribution channels, I mentioned at the beginning the protect the core and all the investments we've been doing in our distribution channels, we expect to keep the pace that we have delivered in the last two quarters. You know, we don't see that reducing because of interest rates going up. Again, what changed is the product mix, not the net new money. Because the net new money, considering how concentrated it still is, the investment business inside the banks, it doesn't need to grow. We just need to do more and more of the same.
Yeah.
Keep growing.
For me, that's a good way to answer, Tito. If you think of XP in Brazil, it's less about the macro environment and more about the micro environment because the money is still inside the five big banks. It doesn't matter how the macro environment is going in Brazil. Our goal is to keep growing because the money is still inside the five big banks. We believe we can continue to grow. Doesn't matter what's happening in the macro environment.
Yeah. If I may, I mean, a crisis, as Maffra said, we don't know if we are in a crisis or not yet. We're gonna see. Time will tell. Of course, a crisis is not wanted and not welcome. A tailwind of a risk on mode is more than welcome. But not having that and having a crisis and a headwind in a business like ours is not really a problem. Sometimes on the contrary, because for other players it might be a problem. But we do have a very consistent and resilient business model, and our ecosystem and business has become more diversified and more resilient over time. We have much more money than we had in any other crisis that we have faced in the past. So that's how we see the tailwind in the investment business.
It does help to get people out of the inertia of moving from one place to the other, the investments. That's a positive thing about a risk-on and a tailwind mode. We don't have that right now, but that doesn't mean we are not gonna grow the client, the number of clients. We're gonna grow the net new money because the money is still outside XP, inside the banks, and we believe that we have a better product offer. We believe that our company has a better brand awareness because we have been side by side with the client since the beginning. It's our history here. We believe we can provide a better experience and knowledge about investments as well as an advisor. All of that together, I mean, we just adjust to the macro environment.
Great. Thanks, Bruno. Thanks, Maffra. If I could just do one follow-up on that, I guess. On the IFAs, you know, you continue to grow, you know, over 1,000 per quarter. Yeah, how much will that help? And also, I was surprised by the gross margin, you know, increasing, right? Particularly given the investments you've had to do with the IFAs. If you can give some color on that, like the IFAs and the impact on gross margin and how that contributes to growth.
Yeah. The IFAs, Tito, is what I believe Maffra mentioned that in the last earnings call. We believe that in the next three years we're gonna have, like, more than 30,000-
35,000.
Yeah. IFAs. Why is that? It is a trend of the profession. It's people need to understand better about investments. You have the incumbent banks reducing costs, closing branches, being attacked by all the places from different players in the market. This trend, I believe it will continue, and that's the number you see of more than 1,000 new IFAs coming to our ecosystem per quarter. It's organically. It's not even ourselves doing it. It's the ecosystem of the IFAs doing it themselves with the money we have injected in the network. Regarding the gross margin product mix, for example, sometimes people do not realize that, but okay, fixed income compared to equities, different commissions. Fixed income has a greater gross margin than equities, for example.
There are many factors there that explains the growth of the gross margin, and you are correct. We still have the impact of the investments we have been doing, and we're gonna continue to have this impact going forward in our COGS. The product mix, plus different channels, plus different products, it's related to the product mix, but I mean products that from the new businesses like banking products, all of that together explains the record gross margin since the IPO.
Great. Thanks, Bruno. Thanks, Maffra.
Thank you, Tito.
Tito, have a good one. Our next caller is Olavo Arthuzo from UBS. Hey, Olavo, can you hear us?
Hi, guys. Hello, Bruno, Thiago, André, and hello everybody, and thank you for taking my question. I just have one, just to make this very quick. It's about the credit operations of the company. Because I understand that your 90-day NPL ratio is very close to zero, but your credit portfolio is growing at a solid pace. I was wondering how big you expect the credit portfolio of the company to reach, thinking about the next five years, for instance. If this expansion contemplates a different segment or credit product that is offered today. Also, what is the NPL ratio level the company is assuming as stable for this credit portfolio? This is it. Thank you.
Yeah, sure. Thank you, Olavo. The credit business, credit, as you know, is a risky business. We like to look for low-hanging fruits. The low-hanging fruit in our ecosystem is collateralized credit. That's less riskier for sure. We know the client. The client invests with us, so it's a different type of credit and we cross-sell a lot in our ecosystem. The loan portfolio has grown very fast and that's one of the things that I explained about the potential of cross-selling our platform. We were impressed ourselves about the growth of the credit portfolio. The NPL is zero. It's BRL 12 million that we have in our NPL so far as a provision. We expect to stay like that for now.
If we decide to move further and start giving credit, like clean credit without collateral. Of course, the NPL will grow. It's credit, it's a function of risk appetite that you have at the end of the day. We have the benefit of having started recently with a very, I would say secure, credit risk, a different profile and collateralized. We're gonna go step by step. I don't have a number to give you, like what should be the NPL five years from today, the type of the credit. We know that most of the revenue pool of the BRL 800 billion in the financial industry is driven by different types of credit. When we think about credit, there are different segments of credit.
We like the low-hanging fruit, the collateralized, then we keep moving, get the experience and so forth. Credit is something that you need to be cautious about. It's easy to grow. To answer you in a different way, if we wanted to grow our credit portfolio, it's easy. You're giving money. Give money, anybody wants money, depending on the interest rates, of course. Then you have to collect and you have to get back. We are cautious about that. We will see. We're gonna go step by step. We know we are in a different macro environment, so we need to be cautious here, but we're in very good shape. We do not expect our NPL to rise further as we are today because of any crisis or whatever, again, because of the type of the credit we have.
Yeah, just to add.
Thank you, Bruno. Just to follow up on this, how much penetrated, or compared to the potential of penetration of this credit portfolio the company has within all the client base, considering the asset under custody?
Yeah. We, yeah, nowadays, I mean, we used to have like 0.6%. We did like a metric of total custody, because if it's collateralized with investments, it's a function of the investments you have in-house, right? In the platform, in the ecosystem. So we have like 0.6% of AUC. This number, because of the reduction of AUC driven by the mark-to-market effect, it's now around 1%, something like that. We do not know if it's like 2%, 2.5%. It depends on the interest rates. Of course, interest rates is higher, but also depends on the opportunity of the investments our clients might face. Sometimes it's easy to get the credit and invest. We are learning the potential of this business because it's a brand new business in Brazil for that type of client in our ecosystem.
Yeah. Olavo, I can give you two examples that we will illustrate very well. If you take our credit card, as Bruno mentioned, we have about 200,000 issued cards in the market. If we look the number of clients we have, that number is very low. Why it's very low? Because today we only allow clients from the brand XP with 50K plus to apply for a card. In the next quarter, we'll go down at XP to zero requirement for investments. And you'll see the number of eligible clients going up a lot. So probably in the next quarters we'll issue a lot of cards. The same thing for margin loan. It's a brand new product we just released last quarter.
It's going up like really fast because the penetration is still very low. Most of these new product lines, they are just starting to ramp up, and we expect a very high growth in the next quarter. We are just beginning these business lines.
Okay. This is very clear. Thank you, Bruno, and thank you, Thiago, for this.
Thank you, Olavo.
Thank you, Arthuzo. Olavo, sorry.
Our next caller is Neha from HSBC. Hi, Neha. Good evening.
Hi. Good evening. Thank you so much for taking my question. Congratulations on the very solid quarter. Just one quick question. The headcount increase that you've had, I believe a part of that is coming from some of the executives that you're hiring, which act as financial advisors as well for some of your clients, right? Could you explain your strategy there? Are you trying to have some in-house financial advisors as well, or what is the outlook there?
No, we do have our internal financial advisors. I don't know if I. First of all, good evening, Neha. I don't know if I understood your question, but we do have XP Direct and the IFA network. They coexist.
Yeah.
At the XP brand, we do have the self-attended client that, you know, it's do it yourself. But we also have an important channel of advisor there with internal advisors. At Rico and Clear brand, we do not have that. Okay. Yes, part of the growth of our headcounts is from internal advisors as well. Brazil is big and t he concentration is huge. Despite all the growth XP has had, 90% of the money is invested inside the banks. That's, I mean, that's what keep bothering ourselves. We look at it and say, "Why we are not growing faster, and what can we do?" We have been investing.
So the-
Yes.
Has the growth in the financial advisors that you have internally for the XP plan, has that been faster now? Are you trying to hire more people, maybe that helps you in facilitating growth, for your business?
Yeah. It's accelerating together with the IFA network. The channels are going to coexist. It's like the XP Direct for the self-attendance type of client. We are agnostic about channels. We think as an ecosystem and platform, we need to have all channels. Like the wealth service channel, same thing. We have been investing a lot in the wealth service channels for different managers and private bankers to connect through our ecosystem. So, both of them, Neha, are growing at very healthy pace.
Great. One last question on credit. I completely understand that you want to grow on the credit side very cautiously, and I think that completely makes sense. What other new products can we expect to be launched in the coming two to three years? Just wanna get a sense of the new products that we can see from XP.
Look, when we think about, for example, the insurance business, there are a lot of products that we can go after, right? Different type of insurance, and we can do partnerships using our platform and so forth. Insurance, as Mafra mentioned, is one of the four main blocks of businesses that we are looking and investing a lot. When we think about the banking part, the digital bank is something that we started our digital bank one year ago. One year ago. When you think about, you know, all the competition and et cetera, they've had a bank for many decades.
We have started our bank from scratch basically one year ago because we decided before having the digital bank account to start with the credit card, because we believed it would be the most important product. It did a lot of service. The banking is gonna be up and running for our clients at the end of this year, beginning of next year. We keep adding new features as we move forward. It's like any other business scaling from scratch, right? When you think about SMB, it is a different market. We do have many corporate clients, middle and large corporate clients in our platform, but we do not have all the products to serve them. We're gonna invest, and we're gonna have that in the next years.
The roadmap for the next two to three years, I would say they are concentrated in those four blocks that Mafra talked about. Banking, and here there is a lot of investments. You do have the credit card here that you make money and it impacts the revenue growth. But the other part of the digital banking is to get the transactional part of the clients and then understand better with the data and engage the clients, so you can cross-sell later and increase the loyalty of the clients. In our case, for our existing clients, as we have said, the strategy is to cut completely the link with the banks. We have nowadays approximately 50% of share of wallet.
If our clients already trusted us with their investments, to trust us with the transactional part, it's a matter of XP proving to the clients that we can deliver a very good experience. We are gonna do that throughout time. Okay. That's a huge potential in our view that we have without adding one single additional client in our ecosystem. Banking part. You have the credit that, as I said, you have to be cautious step by step, look at the environment, learn from the data that you get, and then you can move with the low-hanging fruit because there are a lot of different segments that are not really risky for our clients that we can get into. With partnerships, for example, mortgage, just to give you one other example, or home equity.
You have the insurance that I've talked about, different types of insurance and the SMB. As I said, this is at a later stage compared to the other three.
Oh, you got it very clear, Bruno. Thank you so much.
Thank you, Neha.
Thank you, Neha. Bye-bye. Now we have our last question from Mario Pierry from Bank of America. Hi, Mario.
Hi, guys. Good evening. Thanks for taking my question here. Since it's the last one, let me ask two of them, if you don't mind. The first one is on the revenue yields, right? You show that your revenue yield has been stable for a long time, and you're talking about now more contribution from the banking, from credit cards and also from floating. I don't know, Bruno, if you mentioned during your comments what percentage of your retail revenues are coming from floating. If you can give us a breakdown again. What I understood was that the banking revenues were 3% of your retail revenues, I think. That would imply revenues of only BRL 80 million, roughly, out of a loan book of almost BRL 9 billion.
I was just trying to understand here, if you can give us some color on the interest rates on these loans that you're charging. I think that'll be helpful. That's the first question. The second question is, I think, right, with the share price down following the divestiture from Itaú, you still remain very confident with the outlook for the company. Are you considering doing a share buyback? How do you see the attractiveness of your shares now, and why not, like, you know, start buying some of the shares?
To answer your first and second question, Mario, it's the floating in the third quarter represented approximately a little bit less than 8% of the retail revenue, okay? In the first quarter was roughly 4%. Basically, it doubled in two quarters. The banking services, it's more than 3% in the third quarter, okay? It's closer to 3.5%, growing from less than 2% in the first quarter, close to 1.5%. It's more than the BRL 80 million that you have mentioned. Remember that our credit, it's a very cheap credit for the client.
We use a lot of credit as a service where we have a different revenue profile because sometimes we are distributing a product that makes sense, and then we provide a credit also because the credit risk is really low, and you can see that in our NPL. Then we can have a profitability by the cross-sell in our platform. We get the benefit of a very good experience in the perspective of our client, and the engagement is higher for the long term because the client has a credit with us. It makes a lot of sense, okay? The net interest margin in that credit is not huge. We are not in the business of, you know, lending credit, taking risk, high NPL. Not today, right?
We are adding some new products. For example, I just mentioned the margin loan, and it's available for clients. We charge 4% a month for you to leverage your investments in equities. You can imagine that's a very profitable product because the NPL is so very close to zero because you leverage on top of your own investment. We are creating new products. I would say that the credits we have so far, as Bruno mentioned, they are bigger tickets with very low risk or zero risk, so they're very cheap. We are adding new products with higher interest rates and higher profitability, as I just mentioned.
Yeah. That's a good point because on Neha's question before Mario's about the products, I forgot to mention the margin loan. Margin loan is something new that it should increase in the next years. Going to your third question, Mario, about the share buyback, here is how we think, okay? We are here for the long term. We need to think about what is the best use of our cash inside the company. The company is growing a lot. We do need cash, especially for our business of flow that helps to develop the Brazilian capital markets, bring new products to secondary markets, and we are able to make money using that warehousing business of flow as well.
You can see that in our revenue in the third quarter was almost half and half, you know, the fee business and the flow business. That business, despite not, you know, hedging the risks and et cetera, trading a lot, it's a business that demands capital, and we believe it's the best use of our capital because that's the core of the business. To buy back shares, it would be an option if we had, you know, cash that has no use for the business itself. We are here, as I said, for the long term. It's our net worth here of the main partners of XP is more than 90%, 90% XP shares. That's it.
Very clear. Thank you.
Okay. Mario was indeed the last caller, I believe. Thank you all very much for your participation in our call. We hope to see you again. We are all available, Bruno, Mafra, ourselves, Marina Montemor, for follow-up calls, any questions, any subjects that you might want to discuss down the road. Bruno, Mafra, if you'd like to say some closing remarks on our behalf here, thank you all very much.
Yeah. I just want to finish saying that, as Bruno mentioned, as I wrote in the letter, XP is our life. We are here for the long term, and we really believe we have big opportunities in Brazil to continue to grow despite the macro environment and despite any kind of interest rates or crisis. We will deliver very strong results in the next quarters for sure. Thank you.
Thank you all. Good to see you.
Thank you.
Stay safe.
Bye.
Bye-bye.