Good evening, everyone. I'm Andre Parize, Investor Relations Officer at XP Inc. It's a pleasure to be here with you today. On behalf of the company, I would like to thank you all for the interest and welcome you to our 2024 third quarter earnings call. This quarter, the results will be presented by our CEO, Thiago Maffra, and our CFO, Victor Mansur, who will both be available for the Q&A session right after the presentation. If you want to ask a question, you can raise your hand on the Zoom too, and we will attend you on a first-come, first-served basis. We also have the option of simultaneous translation to Portuguese. There is a button below if you want to turn on the translation. And before we begin our presentation, please refer to our legal disclaimers on page two, on which we clarify forward-looking statements.
For additional information on forward-looking statements, you can also be found on the SEC filing section on our IR website. Now I'll turn it over to Thiago Maffra. Good evening, Maffra.
Thank you, Andre. Good evening to all. I appreciate everyone joining us for our third quarter 2024 earnings call. It's a pleasure to be here tonight. Let's explore and discuss our quarterly results, as well as our strategy in place to accomplish your goals. This is another positive quarter for XP. Our strategy has been executed as planned, and it's translating into solid results. Let me share with you the highlights, starting with client assets, which have achieved BRL 1.21 trillion, posting a 12% increase year-over-year. As we will see during the presentation, it's important to mention that it was another consistent quarter regarding net inflows, aligning with our levers and our capacity to adapt, becoming more relevant in fixed income in the current scenario.
We also increased our total number of advisors, reaching 18,400, growing 9% year-over-year, and continued to expand our active client base, marking BRL 4.7 million, increasing 6% year-over-year. During the nine months of 2024, gross revenues grew 17% year-over-year, reaching BRL 13.3 billion. Our EBT posted 25% growth year-over-year, delivering BRL 3.7 billion. Our net income reached BRL 3.3 billion, expanding 17% year-over-year, and it was the highest in our history in the quarter at almost BRL 1.2 billion reais, with a 27.5% margin.
The set of results indicates that we are at the right pace to meet the 2026 guidance released in the last year's Investor Day. We'll go into more details on the financials later on. Going to balance sheet and profitability, we ended the quarter with an ROTE of 28.4%, an increase of 258 basis points year-over-year.
Our BIS ratio was 21.5%, and the EPS was BRL 2.18 per share, the all-time high in our history. On the right, you can see that EPS since the IPO grew almost four times, reaching BRL 7.93 in the last 12 months. Today, we also announced an extra payout of BRL 3 billion, contemplating dividends and a new share buyback program. Recently, we commented that we are targeting to deliver more than 50% payout until 2026. This year, it's well above it. All in all, we keep our targets to 2026 to reach a BIS ratio between 16% and 19%, with more than 50% payout in the next couple of years. Our capital discipline in how we operate our business considers efficient capital allocation and capital return to shareholders.
As I commented recently, we were already expecting to deliver better results in the second half of 2024, based on our growth levers, cost discipline, and capital allocation. Third quarter 2024 results reaffirm that our execution plan is on track and enhances our confidence in delivering the guidance. Moving on to the next slide, we see our strategy tracker, which presents how our business evolves in time. We will analyze each pillar during the presentation. Our gross revenue in third quarter 2024, last 12 months, reached BRL 17.6 billion, posting a 20% growth. Hypothetically, if we target to reach the top of the guidance, it will be necessary a 20% CAGR until fourth quarter 2026.
Regarding our LTM EBT margin, we have reached 28.1%, a 183 bps expansion compared to third quarter 2023 LTM figures, demonstrating that we are in the right pace to reach the 30%-34% target range in 2026. In retail investments, we reinforce that our aim is to become leaders in investments, which is our core business. As highlighted in the beginning of this presentation, our strategic achievement was to keep consistency on net new money. We recorded BRL 31 billion in net new money for the quarter, which represents a 124% growth year-over-year, excluding Modal acquisition. It's important to highlight that out of the BRL 31 billion, BRL 25 billion is from retail. Important to remind you that around BRL 20 billion in retail net new money is a good level for the current scenario.
This achievement was possible due to improvement to several factors, and I would like to remind you of our main levers. Number one, product platform, the most complete investment platform in the country, positioning us ahead of peers. As an example, during the quarter, our fixed income platform posted solid results once again, with innovative and competitive products and sophisticated instruments. Second, our multi-channel distribution keeps evolving, and as we mentioned in the recent past, IFAs, internal advisors, and RIAs work synchronized to increase our client base and grow AUC. In this quarter, we reached 18,400 total advisors, which 2,700 are our internal sales force. When compared to net inflows, internal advisors already represent, in many months, a higher net inflow than the IFA network.
Third, for the past few years, we have implemented more intelligence in our offering with the right value proposition for each segment, from private to retail. For example, pricing adjustments for each product and services with a better understanding on economics, providing private clients a more active portfolio management while providing retail clients an objective-based approach to run their portfolios. Additionally, during the year in private banking, we hired many seasoned professionals, including the CEO for the segment, that will pay off in the next years. This change in the way of doing business translates into a potential faster growth in private banking and retail, since we are already very competitive in the affluent segment. Lastly, transitioning from a product distribution firm to a service provider is key to differentiate ourselves from other players for the next decade.
While competitors render financial planning to ultra-high private bank clients, we are offering to clients with BRL 300,000 and above, which is only possible because of our tech-enabled platform. No other player in Brazil can do it in the same scale we are doing. We continuously keep improving our services and product offering, and the combination of these levers is translating to a consistent retail net inflow, higher productivity, higher quality from client perspective, and more profitability for the company. Noteworthy that we receive many questions regarding retail take rate direction. As we said recently, for the midterm, we do not expect big change, and this quarter it increased 4 bps , marking 1.33%. Now, let's move to our cross-selling initiatives. We are continuously implementing new initiatives and products to attend and excel our clients' financial needs.
When a client decides to enhance the relationship with XP, acquiring other services or products, we see the cross-sell results materially lifting revenues. On the left side of the slide, we can see how retail cross-sell is evolving. Credit card grew 12% year-over-year, achieving BRL 12 billion in TPV in third quarter 2024, and gained market share during the year. It still has roughly 29% penetration, while we estimate incumbent banks present around 50% penetration. Life insurance keeps a fast pace, posting 46% growth year-over-year in written premiums, reaching BRL 362 million in the quarter. Penetration is around 2%, and when we compare to other players, we believe there's a lot of room to increase our penetration on our client base, since market presents an average of 17% penetration.
From a revenue perspective, it still has a lagging effect, since sales from our marketplace impact revenues positively during the first three years, and sales from our own insurance company take three years to present revenues positive impact. This effect relies on the high commissions and provisions in the beginning of the terms. On retirement plans, our client assets grew by 15% year-over-year, reaching BRL 78 billion. XP has 5% market share, and the market leader has 28%.
We are addressing new efforts to keep growing our share. Initiatives as cashback and sales force expansion are resulting in a faster growth pace. We are confident that we will gain much more relevance during the next years. Retail credit presented 51% growth year-over-year, marking BRL 75 million in revenues in the quarter. Our objective is not to grant money through clean credit lines, but with client investments as collateral.
We have the best client base from a credit risk perspective, and as a consequence, our ECL to loans is one of the lowest in the local market. In this new vertical concept, we have other products as FX, global investments, digital account, and consortium, which grew 92% year-over-year, with revenues reaching BRL 201 million this quarter. This is a clear example of our capacity to launch new features and reap the benefit rapidly. If you remember a few years ago, we had zero revenues on these products.
On the right side of the slide, to illustrate the relevance of cross-sell, we can see revenues per client among different segments. On this example, we are using a 100-base chart. On average, clients with more than two products present 38% more revenues, and clients with more than three products present two times more revenues than a client with one product.
Important to highlight that our retail offers include more than one product. Therefore, this is how we monetize clients with tickets lower than BRL 100,000. With that in mind, we understand that there's a big opportunity in front of us. We have a complete product range with room to increase penetration and profitability, while we keep launching new ones. And finally, the corporate and SMB. As we mentioned before, wholesale clients are crucial to our ecosystem. Each quarter, we have been able to innovate and to meet our corporate clients' needs, while distributing these instruments to retail and institutional network. Now, let's explore our wholesale business from origination, distribution, lending to derivatives, and FX treasury services. During the last years, we have been improving our position in rankings and league tables in investment banking.
We are number one in REIT issuance and CRA, Certificates of Agribusiness Receivables, and number two in CRI, Certificates of Real Estate Receivables. As a matter of fact, during third quarter 2024, we reached BRL 8.6 billion in DCM volume, positioning XP as the top two ranking year to date. Since we have the largest investor platform in the country, when we think about secondary trading, we are number one by far, with more than 50% market share. Institutional is another piece that benefits from our ecosystem. As a market leader in independent fund managers distribution, we are the fourth largest player in equity traded volume. With our quality in execution and strong relationships, we keep gaining market share, and we understand this trend remains looking ahead.
Expanding beyond investment banking and brokerage, a few years ago, we have started to develop new businesses, such as corporate securities trading, which can be monitored by our capacity to originate and distribute our expanded loan book. Corporate securities achieved BRL 23 billion, a 79% growth year-over-year. We are the largest broker for corporate credit in Brazil, and a portion of these corporate securities is related to our flow book, which turns over around three times per quarter. Our unique recycling mode provides better NIMs risk adjusted, aligning with our credit risk discipline. Another example, derivatives. We keep evolving our offering while increasing penetration in OTC derivatives. And this quarter, we were ranked fourth position compared to tenth two years ago. More than that, we became number one in interest rate swaps. This is another clear view of our powerful ecosystem.
On FX, a similar improvement, reaching first from fourth first years ago when we started. Lastly, we have been developing and deploying more products and services. For instance, last quarter, we launched the corporate digital account, and we will launch trade finance in the next months. We are also acting as the insurance broker for our corporate clients. As this business grows, we will bring additional disclosure regarding them. The new launch corroborates to increase cross-sell as it's part of our plan to gain profitable market share with lower risk. As a consequence, wholesale business printed a solid 36% revenue growth last 12 months. Victor will give more details about the revenue growth. Now we will hand it over to Victor so he can discuss this quarter's financials. Thank you.
Thanks, Maffra. Good evening, everyone. It's a pleasure to be here with you. Before we go to the results of the quarter, I would like to recall some ideas anticipating the second quarter of 2024. First, in the second quarter, we explained that warehousing assets by underwriting more fixed income offerings would drive an increase in our wholesale revenues, particularly in the ECM services. At the same time, we anticipated a lagging impact on retail until the distribution phase of those offerings. As expected, when the distribution phase of those offerings took place this quarter, we observed a positive impact on retail fixed income revenues. Second, for the reason just mentioned, in the second quarter, we have increased our balance sheet, growing BRL 10 billion in corporate securities in a single quarter as part of our warehousing business.
Finally, we had also anticipated that revenue mix, along with a few other minor effects, resulted in a higher EBT margin and tax rate in the second quarter. We emphasized that using a trailing 12-month metric for both would serve as a more reliable guide for expectation in the coming quarters. With that in mind, remember that the last quarter we focused on discussing our trailing 12-month figures. We are evolving the right way to deliver our commitments in 2026, and the third quarter of 2024 was a positive quarter with the retail business in the spotlight. Total gross revenue grew 17% over nine months of 2024 and 4% year-over-year. Retail was the highlight during the quarter. Corporate and issuer services posted solid results, and institutional revenue was flattish quarter-over-quarter.
On the right-hand side of the slide, we see our gross revenue breakdown, and retail increased participation to 77% on total revenues on the back of another positive quarter for fixed income. Let's move to the next slide with more details on retail. Retail revenue posted BRL 3.494 billion, a 15% growth in nine months 2024 and 10% growth year-over-year. Fixed income was once again the highlight, with 56% growth nine months 2024 against nine months 2023 and 31% growth year-over-year. That growth was supported by both our ability to keep launching new products, including corporate credit and structural notes, being very competitive against tax-exempt notes from incumbent banks. Second, our relevance in secondary trading is higher than 50% in terms of market share, which enables us to provide liquidity to our client base.
Moving on to the next slide, we will talk about corporate and issuance services revenue. Corporate and issuance services continue to be an important driver to total revenues, posting BRL 552 million in the quarter, which represents a 58% growth in the nine months 2024 and 6% growth year-over-year. Issuance services delivered positive results on the back of DCM activity, reaching BRL 323 million in the quarter and 71% growth in the nine months 2024 and flat year-over-year. Corporate results typically align with the issuance services performance if cross-selling opportunities are arising from new fixed income issues, particularly if derivatives.
Corporate posted BRL 229 million in the quarter, a 43% growth in nine months 2024 and 17% growth year-over-year. On the right-hand side of the slide, we like to present our ecosystem rationale, connecting our retail and corporate investment banking business in a profitable risk recycling mode.
In the second quarter of 2024, we expanded BRL 10 billion in new corporate securities warehoused in our balance sheet. In Q3, we already distributed around two-thirds of that book to our retail and institutional clients, as we said we would do. Moving on to the next slide, we will explore SG&A and efficiency ratios. SG&A ex incentives reached BRL 1.5 billion in the third quarter, a decrease of 2% year-over-year and a 7% higher quarter-over-quarter. Since every third quarter, we have investments in our XP Expert, quarter-over-quarter comparison has a seasonality effect. As we said before, cost discipline and efficiency are part of our plan and DNA, since both position XP in a better competitive level.
I'm happy to announce that this quarter, we mark another record with a 35% efficiency ratio, the lowest in our history since the IPO, printing 179 basis points lower year-over-year and 6 basis points lower quarter-over-quarter. Important to mention that we are confident to deliver our goals for 2026 with a powerful combination: our innovative solutions to our clients, our new business and internal advisor expansion becoming each year more mature, coupled with our cost discipline. Moving on to EBT now. EBT achieved BRL 1.2 billion in the quarter, a 5% growth year-over-year, and BRL 3.7 billion in nine months 2024, a 25% growth. As I commented before, we emphasized that using trailing 12-month metrics for both EBT margin and effective tax rate would serve as a more reliable guide for expectation in the coming quarters, which was already the case in this one.
In this quarter, our EBT margin in the last 12 months was 28.1%, flat year-over-year, and also flat against the second quarter 2024 last 12-month EBT margin. We believe our EBT margin will keep growing on an annual basis, reaching our goals for 2026. Let's see our net income on the next slide. Even considering the different revenue mix, I'm happy to share with you that during the quarter, we set a new net income record, printing BRL 1.187 billion. It represents a 7% growth in the nine months 2024 and a 9% growth year-over-year. Another important achievement was the increased net margin in 118 basis points, posting 27.5%. Let's move on to the next slide to talk about capital management. As you might have seen, this quarter, we start to disclose our BIS ratio data, including risk-weighted assets breakdown with two years of historical data.
We achieved 21.5% BIS ratio in the quarter, and one of our goals is to operate the business between 16%-19%. Efficient capital management is key. Therefore, besides the BRL 7.5 billion already distributed through dividends and share buybacks during the last years, we announced today an additional BRL 3 billion to be distributed in dividends and share buyback. Considering this distribution and full execution of the buyback program, we would have a BIS ratio at 18.3%, in line with our guidance. On the right side of the slide, we can observe that the RWA total assets ratio stands at 30% this quarter, with the credit RWA accounting for 45% of our total risk. The shift in the mix between credit and market RWA, compared to the previous quarter, is primarily due to the implementation of a new central bank resolution in this quarter, the 313 Resolution .
According to this new resolution, the risk associated with securities and derivatives held in the trading book must now be classified as market RWA. We believe this regulatory adjustment provides a more accurate representation of our risk profile. Given the majority of our credit exposure is tied to corporate bonds' credit spread, it aligns more closely with market risk. Taking that into consideration, our credit RWA is way lower than peers, which corroborates our discipline in allocating capital across the ecosystem. Also important to consider that our business not only consumes lower credit RWA, but also has a low average daily VaR, at BRL 22 million in the third quarter, or 10 basis points of our equity. Our strategy is based on increased profitability and capital returns to shareholders, while keeping a conservative BIS ratio when compared to the Brazilian financial industry.
This slide summarizes our capital distribution with more than BRL 10.5 billion in dividends and buybacks in the last three years. Last year, our total payout ratio was 114% with BRL 4.5 billion capital return. This year, with the new announcements, it indicates more than 90% payout ratio with more than BRL 4.2 billion of capital return. As Maffra mentioned earlier, our goal is to keep delivering higher than a 50% payout ratio for the next two years, aiming to operate between 16%-19% in BIS ratio. Now, let's see our EPS and ROTE numbers.
Our earnings per share evolution continues to post a solid growth and achieved BRL 2.18, an 11% increase year-over-year, and an 8% increase quarter-over-quarter. During the 3Q 2024, XP posted 28.4% in ROTE with an increase of 258 basis points year-over-year and 114 basis points quarter-over-quarter. Now, moving back to Maffra so he can do his final remarks, and then we go to the Q&A.
Thanks, Victor. So, before we go to the Q&A, I would like to emphasize four things. First, we had another solid quarter, confirming that we are on track to deliver our 2026 guidance. Second, as we presented, our levers are delivering positive results with BRL 25 billion net new money this quarter, indicating that our target to deliver around BRL 20 billion per quarter is feasible.
Third, we believe we are enhancing our moats by offering to our clients the most complete and sophisticated product platform in the country, expanding our best-trained sales force and evolving our value proposition properly to each segment through better offering objectives and a higher level of service excellence. Lastly, our commitment to manage our company with capital discipline, efficiency, and return to our shareholders. Once executed, we will have returned more than BRL 10.5 billion to shareholders throughout the last three years. Now, Andre Parize will start the Q&A session.
Okay, now we're going to start our Q&A, attending you on the first-come, first-served basis. First question is from Thiago Batista, UBS. Thiago, you may proceed.
Hello, guys. Can you hear me?
Yes.
Okay, thanks, Parize and Maffra. I have two questions. The first one, called the attention, the increase in the headcount of XP about 400 new individuals. Is it relevant the amount of those guys that went to the B2C advisor or not? And my second question, I know that you don't have a guidance for profitability or HOI or HOT, but can you give to us a ballpark idea of what level of profitability that you believe XP will have in the long term? And by the way, you are looking more to ROE or ROTE?
Hi, Thiago. Thank you for your question. Good evening to all. It's a pleasure to be here. I will take the first question, and Victor will answer the second one. Out of the about 400 employees, 300 went to B2C, their advisors. Why you don't see that increase on the total number of advisors? Because we had a change in regulation a few months back, and now the IFAs, they don't need the IFA partners. Imagine the managers, the people that work not as advisors on the IFAs, they don't need anymore to be IFAs. So now they are under employee contract agreements, and they are like leaving the IFA number. So if you look at the total number at ANBIMA, it's going down, okay?
It's not because people are leaving the profession of advisors. It's because of this new change in regulation, and they are becoming regular employees in Brazil, okay? So out of the 400 people that we hired internally, 300 went to the B2C as advisors, okay?
Perfect, thank you. I will take the second question about ROE. Looking at our ROTE number of 28%, you can say that our return on capital employed is around that. After we deliver our guidance of base index by the end of the guidance, you can expect our ROE will be mid to high 20s.
No, very clear, Maffra and Victor.
Okay, next question is from Eduardo Rosman, BTG. Rosman, you may proceed.
Hi, hi guys, good evening. I want to talk more about capital allocation, and Victor, I think he talked a lot about it. He came up with new information as well. I wanted to get more details about the RWA, what can we expect in terms of growth for next year, maybe in the midterm, if there is kind of a gains of scale there on operational risk or market risk, if you grow more eventually, if there's room to improve efficiency there.
Now you also have the ability to issue tier one and tier two. If you see room to do that and eventually bring your core tier one down. At the end of the day, I'm trying to understand what level of payout in the form of dividends and buybacks we can probably work in the next two years, right? You have a very high payout in the last couple of years, right? So I wanted to have an idea if we can work with something of at least 50% for the next couple of years. Thanks.
Okay, thank you for your question, Rosman. First, there is operational leverage in the RWA numbers. I can give you a color. If you look at our revenues in issues, services, and corporate, which is basically a more capital-intensive business, the revenues grew 38% in the last 12 months, and the RWA grew only 30%. So there is, again, between the relation in revenue and RWA. And when you go to market and operational RWA, also our gains that we can make over the years using more efficient structures as now we can use the bank in its full capacity. Talking about payout, you can expect 50% or more of our net income paid in 2025 and 2026. That should be the levels to reach our guidance in terms of BIS ratio. And after that, we should stabilize near 30.
Awesome, thanks a lot. Thanks a lot.
Okay, our next question is from Yuri Fernandes from JPMorgan. Yuri, you may proceed.
Hello, Parize. Thank you. Hi, Maffra, Victor. Quick one, just on Rosman's question, just making sure that 21.5% still does not reflect the BRL 2 billion, right? It should maybe drop to 19.5% without any capital generation for the next quarter. So very quickly this. And if I may, a second one, just on the order line, Parize, what happened with the orders? It was about 40% decrease quarter-over-quarter. So if you can provide a little bit of explanation what hurt that line this quarter. Thank you.
Oh, sorry. Thank you for your question, Yuri. The BIS ratio in the end of the quarter was actually 21.5%, and after the dividend, it goes to 19%. And considering the buyback done, it goes to 18.3%. And as we said, you can expect that we will pay more than 50% of our earnings in the next two years. And after that, our payout ratio should normalize between 30%-50% of our net income. Going to the second question about other revenue, in this quarter, we had a one-off event. In the beginning of the quarter, we tendered almost half of our outstanding 2026 notes and issued a new 2029 bond. Remember that those notes that we tendered, they were hedged to Brazilian CDI, and by tendering back, we had to undo the hedge accounting. And by undoing the hedge accounting, we discharged all the P&L in the net income.
If you consider all the transactions, the carry of the new debt is cheaper than the one that we bought in CDI plus levels. So over time, the P&L of the transaction is positive. But in this quarter, we had this one-off event that reduced the other revenue line, and you should expect that we'll be back to average levels in the next quarter.
Oh, super clear. Thank you for the explanation on this point.
Okay, our next question is from Mario Pierry, Bank of America. Mario, you may proceed.
Hey, guys, good evening. Let me ask you three quick questions. Two of them are follow-ups. First one, Maffra, you talked about you using more internal salespeople, right? However, when I look at the commissions paid to IFAs, they are growing faster than retail revenues. So in fact, we calculated a ratio of 25.8% this quarter.
Last year was 24.6%, previous quarter 25.7%. So when do we see the benefits of lower IFA commissions as you start to use your own internal salespeople? And as you mentioned, you had to add about 300 people this quarter. So I'm assuming we're going to see higher SG&A, and that should be compensated by lower IFA commissions. So I was wondering why that did not happen. The second question is very quick. If you can just talk about the impact of the Expert event on revenues and on expenses, I think that they net out.
But just to be clear, how much did you book in expenses and revenues this quarter? And then the third one really is when we were looking at the revenues from credit, we see your loan book is flat, relatively flat year-over-year. However, your credit revenues went from BRL 71 million to BRL 113 million. Was there anything unusual on the credit revenues? Thank you.
Thank you, Mario. So the first question about the commission costs, it's really hard to see a change in COGS quarter, like the B2C channel making a change in COGS from a quarter to the next one. You have to see this trend in a longer period of time, like in a year or two, because if we have a very small change in revenue mix, it can change everything, okay? So remember what we said in Q2, we did a lot of revenues on investment banking, on credit issuance, and on 3Q, we distribute a lot of this credit portfolio. And when we distribute, we make revenue on the retail and we pay commissions, okay?
It's a completely different COGS when you compare what you do when you book the primary market from the investment banking to when you distribute on the secondary market, okay? When you pay commission, the other one you don't pay. So it's basically revenue mix. That's why you're not seeing a big change. But you have to look at a longer trend to see these effects, okay? About the second one, we don't disclose how much we spend on Expert, but it's net zero, okay?
So for a few years, it was slightly negative. This year was zero, okay? So it's not even positive, but it's very important for us because it's one of the largest financial, if not the largest one in the world about investments. So it's really important for the brand, but it's net zero and some years is slightly negative. Victor will take the last one.
Okay, thank you for the question. About the credit, we had two explanations. The first is the beginning of margin loan operations in the broker-dealer, which are more profitable than conventional credit. And the second one, some loans from the Covid era with lower NII mature during this quarter, and they were renovated by new operations with this new normal of pricing with higher NII. Basically, that is the explanation. The book is almost flat, but we have two new products with higher NII than before.
Okay, that's clear. Maffra, let me just follow up here then on the gross profit and gross margin, right? Because you provide guidance for EBIT margin, I think 30%-34%, you're running at 28% right now. The improvement in margin, does it come from the gross margin or where should we see the improvement coming from?
Okay, thank you for your question. Talking about the guidance, we can give you some color about the improvement. First is operational leverage. You can see our efficiency ratio in the lowest level ever, and we expect that this ratio will keep improving over the next year. This is one factor. Another factor is the J curve of the cross-sell verticals that we have. We mentioned before that credit cards, for example, they had losses in 2022. They also lose money in 2023. This is the first year that they will make positive margins and that grow over our guidance period. Other verticals as our own internal sales force also lost money over 2022 and 2023. This is the first year of positive margin, and as they grow, they start being accretive in terms of EBT. Basically, those three things together can explain the expansion in margins.
Great. Thank you very much.
Okay, our next question is from Tito Labarta from Goldman Sachs. Tito, you may proceed.
Hi, good evening, guys. Thank you for the call and taking my question. Just a couple of questions on the revenues. Continued good performance on the fixed income retail revenues. How do you think that line sort of continues to evolve? I mean, do you think you're benefiting from a higher rate environment? Is there room for that line to continue to grow into next year? Just to understand a little bit the growth dynamic there. And then on the issuer services revenue line, right? I mean, it's been a good year overall, tough comps in two Qs, so down a bit this quarter. Do you think that comes back in 4Q and into next year? Just help us think about sort of DCM activity and how you feel about the issuer services revenues. Thank you.
Hi, Thiago. Thank you for our question. Second, please, Thiago. Answer both of them together. DCM industry in Brazil is at a new level. Our pipeline remains robust, and most likely, DCM activity remains strong in the next quarters. As well, the demand for fixed income coming from our distribution channels, both retail and institutional, is very strong. So we believe that we'll see both lines, DCM and fixed income lines, strong over the next quarter and next year. And also, you need to take into consideration the impact of our corporate restructuring. If the bank is at a more competitive level, we can originate more deals in DCM, we can warehouse more fixed income, and that increases our competitiveness in both of those lines. So we are optimistic for both in the next year and next quarter.
Okay, perfect. That's clear. One quick clarification. Just on the BIS ratio, is that a fully loaded Tier 1 ratio? Just to make sure, is there anything else in the BIS ratio?
Yes, yes. That is it. It's fully loaded.
Okay, perfect. Great. Thanks so much. Thank you.
Okay, next question is from Neha Agarwala from HSBC. Neha, you may proceed.
Thank you for taking my question. Just a quick one on the credit growth. Credit book was flat year- on- year. What should we expect going forward? Why don't we see a more strong growth on the credit side? Thank you so much.
Hi, Neha. So one important thing when we think about credit for XP, one main point for us, we don't want to pile up credit. So you cannot expect us coming back here one year ahead and saying that now we have like BRL 100billion-BRL 200 billion rise in corporate credit. So we don't have just a strategy. We don't have the business to pile up credit. Of course, as the wholesale bank grows, we have to warehouse higher amount of volumes from investment banking for corporate bond flows and for other business lines, for example, credit risk from derivatives.
So as the business grows, it will grow in nominal terms for sure, but not on the same growth rate as the business grows, okay? So the idea here is always to recycle capital, okay, and recycle fast. It's always to give credit with some collateral, and that's the strategy. So we don't have any strategy to pile up a big credit portfolio here, okay?
Very clear. Thank you so much.
Next question is from Daniel Vaz, Safra. Daniel, you may proceed.
Thank you, Parize. Hi, Maffra, Mansur. Good night. So to hear my side, looking at your expenses, I was trying to see beyond XP Expert. So we see the other revenue, other income, and other expenses net line. So we have another quarter of incentives coming from Tesouro Direto, B3, and also positive recoveries and reversal provisions. Can you comment on that, please, so we can get a sense on what are these other operating income way higher than a year ago?
And second, trying to see and get more color on your equity income or as shown in the release or share of profit on JVs and associates. So it went from BRL 41 million to negative three quarter-over-quarter. So any seasonality effects here, maybe associates pay higher cost to have a stand in XP Expert. So if you can get a color here, it will be very helpful. Thank you.
Thank you for the question, Daniel. I will split the answer in three parts here. You first asked about the incentives, okay? As we have built one of the largest distribution channels in Brazil, we have today more than 18,000 advisors. Every time that we launch a new product, we have some players in the industry that want to have access to our distribution. And what happened, usually they pay some fees. It can be upfront and it can be based on performance. It depends on the product and on the partner, okay? But it's recurring, okay? There is not an amount that's recurring every month, but it's recurring to have this kind of one-offs, okay, from different partners, from credit cards, from B3, from consortium, from other players, okay, from whole life insurance.
So you guys can expect this type of one-offs to be recurring, okay? So because it's part of giving access to these partners to our distribution. The second question that you asked, it was about the reversion in provisions. I imagine that it's on the expected credit loss that you mentioned. We had a BRL 42 million from the Acqua payment. There was a provision and it was reverted. So a good way of thinking about expected credit loss for regular quarters, it's BRL 80 million. Okay, that's a good number, okay, around this number. It can be a little bit less, a little bit more because we have some credit on the wholesale book that is less stable, but that's a good proxy, okay? And the third one about minority interest that you asked, it was BRL 41 million last quarter. It was almost zero this quarter.
We have done some deals with different players, with some asset management, with especially IFAs. And some of them, they are like going through some reorganizations. As I mentioned, some of them, they are like going to employee agreements. Some of them, they are like in different states. But I would say that for next year, you can expect this line to be a little bit higher than this year, okay, and a little bit more stable than this year, okay, because we have a lot of reorganizations this year. And these investments that we have done in the past years in IFAs, assets, and other businesses, they will start to pay off next year, okay? So it's going to be a little bit higher.
Okay, thank you for the detailed answer. Very helpful.
Okay, next question is from Henrique Navarro from Santander. Henrique, you may proceed.
Navarro, are you listening to us? We're going to move to the next one. If Navarro comes up, we're going to answer you. So the next one is Andrew Geraghty from Morgan Stanley. Andrew, you may proceed.
Hi, everyone. Congratulations on the results, and thank you for the opportunity to ask questions. I just want to briefly touch on the take rate, which was certainly a highlight of the quarter, expanding on a sequential basis. It looks like a lot of the improvement kind of came from the fixed income retail take rate. And so just kind of wanted to ask, I know you had mentioned some new products on the fixed income side. Is there anything in particular that makes you believe that this higher take rate on fixed income specifically is sustainable, or is this, again, just kind of a quarter-to-quarter fluctuation? Thanks.
Hi, Andrew. Thank you for your question. Basically, the highlight of the quarter in the retail line was fixed income, and that's what drove the take rate higher. As we expect the retail revenue to keep growing at the pace of our guidance, you can expect the take rate to be stable or slightly higher than what it is today.
Okay, thank you.
Just to complement Victor here, we have been mentioning that for a few quarters, I would say. When we think about take rate, when you look at our guidance, we didn't factor a better take rate into the guidance. But if you ask our view, at some point, the market will change, and we expect to see a change in the mix of products toward more higher ROA products, okay, because most of the money flowed to fixed income products with low ROA in the past quarters or years. At some point, that will revert, and we can expect a higher take rate. So that's our view. But a higher take rate is not factored into our guidance for 2026. So you can consider that an upside if it starts to go up.
Okay, got it. But you do think that at least over the coming quarters, take rate, as mentioned earlier, should be somewhat flat to slightly higher from here is a reasonable assumption.
Yeah.
Okay, thank you.
Parize, can you hear me now?
Brennan Pavon from Autonomous. Brennan, you may proceed.
Hi, hello. Can you guys hear me?
Yes.
Oh, hi. This is Renato Meloni from Autonomous. I think it was just a link issue here. So I just wanted to deep dive on the fixed income take rate. That's a large expansion this quarter, right? So can you explain the breakdown here of how much was client activity and how much was from the securities that you're having or mark-to-market of securities you're having in your balance sheet? And then further down, just thinking here of the dynamics that we're seeing market with spreads compressing and the cycle rates, how do you expect the fixed income take rate to behave in the next couple of quarters? Thank you.
Hi, thank you, Andrew. We don't disclose this level. Sorry, thank you, Renato. We don't disclose this level of detail in the fixed income line. What we can say is that almost everything that we are housing the last quarter, we sold this one, and that was one of the drivers of the revenue.
Okay, thanks.
And then just about the credit spreads, we are seeing some inflection, but as we said before, the DCM pipeline is still very hot, and the demand for the client demand is still in all-time high. So we don't expect any structural changes in the market.
Okay, so similar take rates in the next few quarters.
It's better and bigger than ever before.
Hi, guys. Sorry, I don't know if you could hear me. So similar take rates, fixed income take rates in the next quarter.
Yes, we believe so.
Okay, thank you.
Okay, next question is Henrique.
Hi, Parize. Can you hear me now? Hello? Hello?
Navarro, are you there?
Yeah, can you hear me now?
Yeah, we can. You may proceed, please.
Sorry for that. My question is on competition. All the large banks have been advancing with their own IFAs, IFR internal financial advisors, as well as improving the open investment platforms. The level of competition XP is facing was not there maybe two, three years ago, and it has been increasing. How do you see this advancement of competition from the large banks affecting your businesses?
Thank you for the question, Navarro. I would say, of course, the incumbent banks, they are not sitting down doing nothing, okay? But for us, the most structural change in the last, I would say, two years, it's not that the banks, the incumbent banks, they improved a lot in investments. And the main reason is the high interest rates, tax-exempt products, and so on, okay?
So if you look, some of these incumbent banks, without giving any names, they didn't improve at all, okay, in investments. But when you look at the NPS from affluent clients from the same bank, the NPS went up like 40 bps . The main reason is the level of profitability that they can have with these tax-exempt products. So it's a little bit harder to compete with the incumbent banks with this environment. But again, we are not blaming the macro environment. We are not waiting for the macro to get better. And our guidance doesn't depend on the macro environment. That's an upside. But for us, it's more the environment than the structural change in most of these incumbent banks.
Thank you very much. That was very clear.
Okay, that was the last question. So we thank you for your participation. Our team and the management are available for further questions. It will be a pleasure to answer anyone that you send to us. Thank you, and we talk soon.