Good evening, everyone. Welcome to XP Inc.'s earnings call for Q2 2021. I am André Martins, Head of Investor Relations, and on behalf of the company, I would like to thank you for your interest in our webinar. We hope everyone's safe, everyone's healthy. It's always good connecting with you. Not necessarily on a quarterly basis. Today we have with us Thiago Maffra, our CEO. We also have Bruno Constantino, CFO, and the IR team, myself, Antonio Guimarães, and Marina Montemor. We will be available for the Q&A session right after the presentation, and you can raise your hand on the Zoom tool to ask questions. Before beginning the presentation, please refer to our legal disclaimer on the earnings presentation. That's the session where we clarify forward-looking statements and their definition.
All of the documents that explain why the forward-looking statements might differ from the actual results, they can be found on the SEC filing session of our website. Again, thank you very much for the interest. We will show a brief video of the first half of the year, and then I'll pass the word to Maffra to deliver the opening remarks. As you saw, a very special first half of the year for us with this very upbeat message, and song, and this Olympic mood. I'll pass the word to our CEO, Thiago Maffra, for the first time here as a CEO participating on the call. Maffra, the floor is yours, as we project our presentation.
Okay. Thank you, André. Thank you all for participating in our earnings call. This is my first time here, as André mentioned, as the company CEO. I'm very happy to be here, and I expect to be in touch with you for many years to come. Can you move to the first slide? One more. That's it. Well, the idea on this slide is to show how our business model has evolved during the last years. As you all know, XP has completed 20 years last May, and for the first 18 years, we have been very focused on the investment business. However, in the last two years, we have expanded our products and services far beyond investments. On the left box, we show how we started from the most difficult segment to penetrate, with high switching costs and great need for a trusted brand.
The current satisfaction level of our clients, translated by the 76 NPS that we achieved this quarter, tells us that we are in the right direction. Currently, on the center box, we are preparing the company to successfully deliver our ambitious goals. Which involves entering new verticals and expanding our TAM from BRL 110 billion today to BRL 350 billion on the next three years. It's worth mentioning that the market will generate almost BRL 800 billion in 2021, of which we have about only 1%. Additionally, in order to intensify disruption that we have been leading in Brazil, one of the main enablers that will allow us to enter new markets is the digital transformation that we have been doing in the last few years. Our goal is to have a scalable tech platform that will allow us to have lower cost to serve and faster time to market.
On that context, new verticals such as banking, insurance, and solutions for companies, from SMBs to corporate, are quickly advancing. We are doing substantial investments on these new verticals, and we expect to see huge increase in our financials down the road. Finally, on the right box, the end game, by embracing a broader universe of Brazilian individuals and companies, we will take XP to a new level of reach, always focused on clients and their needs. We will keep transforming the financial market in Brazil beyond investments to become the one-stop shop for all the financial services, being the number one service provider to millions and millions of clients. Now I will pass to Bruno. He will show off our financial KPIs.
Thank you, Maffra. Good evening, everyone. Great pleasure to be here with all of you one more time. I will start with the main highlights of the quarter. I will try to be brief so we can go to the Q&A session, which is much more interesting. The highlights, as you probably could see, a very strong quarter, again, the strongest ever. I'm going to go through the numbers in the following slides. Also, as the video showed, the M&As that we announced recently and that we expect to keep doing, the partnership model with our main IFA offices as a broker-dealer. We closed four deals. Also, the independent asset manager business, it's something connected into our ecosystem. It makes sense to leverage those independent asset managers.
It helps the liquidity of the secondary market, the development of the Brazilian capital market itself, and that's key to democratize the access to investments and the growth of the capital markets by itself. We announced the partnership with Capitânia, with Giant Steps, and with Jive in the second quarter this year, and we are always looking for opportunities like that. We also entered the bond market first time. We did the roadshow and closed the deal in the second quarter, the liquidation only happened in July 1st, you're not going to see that in our second quarter numbers, only in the third quarter. I think it's important to highlight that to have access to the global bond community as a long-term strategy is something important considering the size of this market and how liquid it is. Last, the brand awareness.
We are honored with the award that we received by Euromoney as the best bank for wealth management this year, 2021, in Latin America. When we think that this business, this segment in XP five years ago was almost nonexistent. We went from zero, from the ground, and received this award this year is something that make us really proud. As André Martins mentioned about the Brazilian Olympic Committee, we established this long-term relationship as an investor in the Brazilian Olympic Committee. We also are really happy with this partnership, especially when we think how sports can transform the whole society, and we are eager to keep this relationship close. Now, moving to the numbers itself. The KPIs you have seen already. The investment KPIs and the banking KPIs, and new here is only the financial KPIs.
Going to the left, the investment KPIs, we reached BRL 817 billion AUC as of June, an 88% increase year-over-year. Active clients, a growth of 33% year-over-year, surpassing the mark of 3.1 million clients. Net inflows, a very strong quarter, BRL 75 billion. We did have some concentrated net inflows. We estimate around BRL 30 billion of these BRL 75 billion in few clients, especially the private banking segment. As someone asked here in the chat, in the Q&A, in the last four quarters, we had these, what we call the extraordinary inflows or outflows in the last three. If it's coming every quarter, it's not extraordinary anymore. It's more volatile, but not extraordinary. A very strong quarter in terms of net inflow. When we go to the middle, the main banking KPIs, BRL 6.8 billion, our credit portfolio.
There is not credit card in this number. Loans and receivables of the credit card is not included in this BRL 6.8 billion. A strong growth year-over-year. We're very small last year, but growing, even when we compare quarter-over-quarter. We ended the first quarter with BRL 4.7 billion and reaching almost BRL 7 billion at the end of the second quarter. When we look at the credit card, we are really happy with the results and it's above our expectations. Our expectations usually is very high. BRL 2.1 billion of total TPV in our first quarter with the credit card officially launched. We launched in March this year. 0% NPL ratio, basically because the credit is almost everything collateralized, and the credit card is the same thing. It's based on your investments in our platform. Finally, on the right side, the financials.
We reached record numbers in all lines, gross revenue, adjusted EBITDA, and adjusted net income, surpassing the mark of BRL 1 billion of adjusted net income in one single quarter. Just to give an example of how important this mark is for ourselves, when we think about the year of the IPO 2019, the whole year, we did approximately BRL 1 billion of adjusted net income. Now you fast-forward one year and a half, and in one single quarter, we were able to hit the same mark in the second quarter. All of that keeping a high number of NPS, as André mentioned, 76. Going into the total revenue growth, we went from BRL 2 billion- BRL 3.2 billion year-over-year, a 57% increase.
When we look at the components of the growth, it's very diversified, and in my view, it's what translates in a very resilient model that we have. The growth in the revenue is represented by equities and futures, fixed income, financial products, and much more. When we look at the net income from financial income, let me talk about the net income from financial instruments in the retail part. Before we go there, let me go back here and just mention the fixed income in the institutional part of our business. We always talk a lot about retail. Retail, as you know, is the main component of our results. In the second quarter represented 77% of total revenues, but the institutional business did really well in the second quarter as well, and I'm going to talk about it in a couple of slides.
Moving to the retail revenue, we went from approximately BRL 1.5 billion to almost BRL 2.5 billion of total revenue in retail, a 66% increase year-over-year. As I was mentioning, the net income from financial instrument, a part of our revenues that you're going to see growing a lot, and it's correlated with the flow business that we have and with the development of the Brazilian capital market, secondary trading. 82% in the second quarter of the total net income from financial instrument came from this segment, the retail segment, which is very recurrent the way we see it. The take rate, when we look at the last 12 months take rate, it's pretty much stable. We always get this question about what's going to happen with the take rate. The answer is pretty much the same. It's hard to predict, to forecast.
What I can tell is despite losing parts of the take rate because for failing some parts of the revenue as we did last year with the online brokerage in Rico in at XP, we are able to add new products and services that increases the take rate. Of course, there is a math component of the growth of the assets under custody, which by itself reduce the take rate, everything else constant. The take rate has been pretty much stable at 1.3%, and we expect to stay like that in the near future, especially with the banking business getting traction in our ecosystem. Going to the institutional revenue. In this slide, we decided to basically talk about two topics here. Number one, despite the breakdown, 12% of total revenue institutional hit the record market in this quarter, the BRL 375 million of total revenue.
The fixed income part played an important role here, especially because we are in an environment of increasing interest rates in Brazil. I think it's worth sharing those numbers with all of you. When we look at the total revenue growth of XP in the second quarter-over-quarter compared to the first quarter this year. Our revenue grew 15%. Institutional grew more than the average of the company, 27%. Inside institutional, the fixed income component grew 39% quarter-over-quarter. It's directly correlated with the increase in interest rates. In the bottom of this chart, we have the CDI rate at the end of each quarter. It went from 2% to 4.25% at the end of second quarter this year. We also have the expectation of the market about the end of period for 2021 in each quarter.
The steepening of the curve helps the fixed income business, not only for institutional segment, but also for retail segment. I think it's worth sharing those numbers with all of you. Going to the EBITDA, adjusted EBITDA and the margin. On the left, we share the SG&A. The SG&A is going to keep growing as it has, and basically because we are investing a lot in our people, in technology, in new verticals, and so on. When we look at the second quarter last year, we had BRL 765 million of total SG&A, ex-share-based compensation. This year, BRL 900 million. A growth of 18%. What is important to highlight is the operating leverage that we have in our business. Despite investing a lot, we are very cost-conscious.
We pay a lot of attention, and we understand that we need to control the costs as a competitive advantage going forward, so we can return that in prices and offers to our clients. As you can see, second quarter last year, our total SG&A as a percentage of net revenues represented 33.2%. Second quarter this year, it went from 33% to less than 30% of total net revenue. When we look at the headcount evolution in our company, at the IPO, we had approximately 2,000 people in our company. Since the IPO until today, we have onboard more people than we have built throughout our lifetime until the IPO moment. That's a very strong number.
We are going to keep hiring at least for the following quarters, as we see a lot of opportunity, as André mentioned, about the BRL 800 billion revenue boom in the financial industry, and we are just increasing from BRL 70 billion-BRL 100 billion to BRL 350 billion. There is a lot more to do in XP. When we look at the margins, despite all the investments we have done in our people and headcount growth, we are able to deliver operating leverage. You can see that through our EBITDA margin going from 36.3% last year to more than 40% in the second quarter of this year, a growth of 77% year-over-year. Lastly is the net income and net income margin. As I said already, we went from BRL 565 million to more than BRL 1 billion of adjusted net income.
A very important growth year-over-year based on retail business explaining most of it. On the right part, it just shows everything that I said. Revenue growing exponentially, 57% year-over-year. You go to the EBITDA, it grows even more because of the operating leverage, despite all the investment, 77% year-over-year. You go to the adjusted net income, it grows even more than the EBITDA because of the corporate structure in place with the lower effective tax rate. With that, I conclude my number presentation here, and we are happy to answer any questions you might have. Thank you very much.
Great, Bruno. Thank you. Thank you, Maffra.
André Martins, next quarter, Otavio is going to be responsible to make the whole presentation. That's the target, right?
Yes. That's the goal. We go directly to the Q&A.
We go straight to the Q&A.
Yeah. That was concise. That's as concise as it gets. We will call you, be allowed to talk here on a first come first served basis. We have the Morgan Stanley team here on the first place, I believe it's either Jorge Kuri or Eugenia, I think it's Kuri.
Yeah. He says here.
Hi.
On the Q&A.
Hope everyone is doing great. Congrats on the extraordinary quarter. Bruno, sorry, that was actually my question, the one you were reading in the Q&A.
I didn't know.
You have been delivering inflows that are much better than expected, and I've called them one-timer, but they keep recurring. Is it possible that you have now inflected to a much higher level of AUC growth, given your larger scale, brand awareness, the IFA network, which is a multiple of what it was even a year ago. That growth over the next 12-18 months may continue at this very rapid pace. What would hold you back from saying, "You know what? They were really one-timers, and you shouldn't think of us growing at this pace over the next 12 months"?
Yeah. When we think about quarterly basis, the investment business, as Maffra mentioned, is the hardest to penetrate market. There is an inertia there that depends on tailwinds sometimes to get people out of inertia. I am always conservative answering that type of question. That's why we say between BRL 10 billion-BRL 15 billion per month, and there is volatility there. You're right, considering the past quarters, as I mentioned, we had strong net inflows in three out of the four past quarters that we showed to the market. I'd rather be more conservative here and not taking into account those more concentrated inflows in the private segment or corporate segment. Even without that, we hit the market of more than BRL 15 billion per month in the second quarter.
Yeah, I think there is a component of more brand awareness, momentum that you keep getting. Despite the interest rates going up, as you could see in the graph that I showed in the presentation, the expectation now is what? 7.5%-8% is still below double digits. When we look at a longer period of history in Brazil, it's not going to stop the financial deepening. The way I see Brazil, it's really under-penetrated in terms of different asset classes. We can see that in our ecosystem in terms of cross-selling for international funds, for alternative investments. We mentioned in the video the private equity and venture capital access, democratizing access to clients that never invested in that type of product. They do have the profile to invest in those type of products. I think there is this momentum that will probably keep going.
It's hard to say I don't know what inflection point. What do you mean by inflection point, Jorge?
All right. Thanks, Bruno, and congrats again on the great quarter. Thiago, congrats on the appointment and best of luck in the new role.
Thank you, Jorge.
Thank you, Jorge.
Thank you. We hope to speak to you soon. Next in line, we have Otavio Tanganelli from Bradesco BBI.
Hi, André. Can you hear me?
Yes, we can.
Yes, we can.
Thanks for taking my question. Congratulations on the very strong quarter. I wanted to understand a little better the revenue trends. One thing that was particularly impressive to me was the margin expansion, especially in such a competitive scenario that we see pressure on the cost page, IFAs and so on. In terms of the mix of revenues, I understand that there was a higher share of non-commissionable revenues. Wanted to get your views on that. How should that evolve going forward, and whether is this sustainable or not? Because the gross margin levels that we're seeing here are really positive in such a competitive scenario. Thank you.
Look, the gross revenue was strong, you're correct. We had this gross margin expansion year-over-year from almost 70% last year to a little bit more than 70% of gross margin in this quarter. The compression in terms of the investments we have been making in our IFA network is there. The investments that we have made and the expenses related to those investments, it's in our commission line in the costs that you can see there. It's more a mix of products and the operating leverage that we have in our business. I don't know. I wouldn't say that it's non-commission based as you said, Otavio. The commission line grew a lot, but the revenue grew even more and given us an operating leverage there. It's marginal operating leverage. I would say gross margin is pretty much flat year-over-year, right?
Where we have the operating leverage is more in the SG&A and the EBITDA margin, because there you have all the structure of the company, the platform to serve all the clients. Of course, when revenues keep growing, there is an operating leverage much stronger than in the gross margin.
Thank you, Bruno. One additional question, just if I may here. Yeah, I saw that you recently announced the acquisition of Levante. Wanted to get a little bit of your views in terms of the B2C market. How do you see the opportunities going there? We comment a lot about the B2B side of the IFA network. Wanted to get your views on how you see this market and whether is this a good opportunity going forward or not.
Do you want me to take the first part, Bruno, here?
Go ahead, Thiago Maffra.
Okay. Yeah. How do we see that? We see the financial deepening in Brazil happening and accelerating in the next few years. When we look today, I would say we have about 1,100 IFAs in the market. We believe this number can go up to 36,000 IFAs in the next three years. We see this financial journey accelerating. When you look at the B2C and the B2B market, we believe there is room to grow both of them, because as I mentioned, we see the IFA network growing three times in the next few years. There is a lot of room to grow. About the Levante acquisition, for us, it's very important. XP was born as an education company. That was the first product that we sold. Guilherme was the first teacher teaching people how to invest in equities in Brazil.
Education, it's our DNA, and we'll keep investing in education. When you think about acquisition, it's very important to have content and to have solid investment information and content to give to your clients. Basically, the strategy is to have very strong digital content to help in the acquisition part of the business. Again, we see both of them growing, our B2C and B2B.
Yeah. Just to say one more thing about our strategy in M&A, Otavio. Think of XP as an ecosystem for entrepreneurs, right? We are like a magnet that our ecosystem attracts a lot of entrepreneurs. We can leverage all those entrepreneurs in their own business using our distribution capability and using ourselves as entrepreneurs as well. It's a win-win situation. When we make those acquisitions, minority stakes, so Levante is going to still be independent as the asset managers that we acquired the minority stakes, they are going to be independent. We can help them through our ecosystem and also profit from the equity stake that we have. As I said, it's a win-win situation because on their side, they can become more successful entrepreneurs. It makes sense. We have done that in the past as a strategy.
It needs to complement our ecosystem, and we're going to keep doing in the future, considering we have the right price. Just to give, I was looking at the commission numbers. The commission part, only the commission inside cards, went up more than 50% year-over-year. As I said, it's related to the growth of the total revenue that grew 57%, commissions grew 52%. It's really related. The difference is basically a mix of product.
Super clear, Bruno, Maffra. Thank you, guys.
Thank you. Obrigado, Otavio.
Our next question is from Mr. Tito Labarta from Goldman Sachs.
Hi. Thanks, André. Good evening, everyone, Bruno, Maffra. Congratulations also on the strong results and on your appointment, Maffra. My question on the take rates, I know, Bruno, you get this question often and it's hard to predict, but more specifically on the credit portfolio and the impact that that could have on the take rate. You mentioned a positive impact, but any color you can give? What type of interest rates are you earning on this? I know NPLs are zero, but I assume there's some provisions involved. What type of NPLs would you expect over time, and how big do you expect the credit portfolio to get? Just trying to estimate how much will that credit portfolio benefit your take rate. Similarly, on the credit card TPV, any color you can give on a potential take rate there?
Yeah, sure, Tito. First, we do not disclose, segregate the numbers of the Banking, what I can tell you, it's a low base, quarter-over-quarter, the Banking relevance, the Banking related revenues, by Banking related, I mean the credit card and the FX. They grew more than 100% quarter-over-quarter. It's a strong growth. In terms of the whole thing is growing, the Banking is supposed to grow even more than the rest of the products in our ecosystem for obvious reasons. It's a brand new business that we have started here. The relevance as the breakdown of the total revenue, it should keep growing as we move further down the road. That's one thing, that thing by itself increases the take rate, everything else constant. Basically because there is not necessarily a custody associated with that revenue.
We increase some basis points there with these banking services and products. We do not have yet the full digital Bank accounts that we are going to have. We already have for employees and a few clients, but we're going to roll out, as we did with the credit card business, until the end of this year. That's about the banking admin services and products. Of course, the custody is expected to keep growing. As I mentioned, the math of the custody, we have not reached yet the BRL 1 trillion of assets under custody. In our custody, that's another important thing to mention. In our custody, we do not consider institutional custody from pension funds, RPPS, some institutional clients that we do have custody inside XP. It's not in that number because they do not talk to the retail revenue.
We do not consider AUA, assets under administration, in that custody, despite having a business of administration in our broker-dealer as well. We expect to keep growing the custody and that it's going to reduce. The take rate, I always answer the same way. It's hard to forecast. I would expect it flat. Why is that? Because there is some compression in terms of prices. They do not affect us directly. As I said before, I believe this price compression is much more skewed into the fixed income funds from the asset managers of the incumbent banks that still charge too high management fees. We do not charge those high management fees in our platform. The mix is skewed into more alternatives and multi-market or equity funds in our platform. It is still under-penetrated in Brazil.
Generally speaking, we believe, as you said, the financial deepening is going to be there. This movement of asset allocation is positive for the take rate still. Interest rates going up, fixed income should present a more relevant role in our growth, in our revenues. Equity, if it's stable, it's not going to have the tailwind that it had in the past. As I've said, it's very resilient business model, no matter what the macro environment is, because of the under-penetration in the market, because of our low relevance in terms of total revenue. When we think about the total revenue pool, we expect to keep growing independently of the macro environment.
Yeah. Just to add, Tito asked about the credit card TPV. We are not opening the target, just to give you a caller today, the only clients that are allowed to order a credit card with us are XP clients above BRL 50,000. Imagine that’s less than, I would say, 20%, 30% of our clients when you look at Rico, when you look at the clients with less than BRL 50,000 at XP. There is a lot of room to see a growth in the TPV in the next quarters. You can expect the TPV to go up really fast. As always, at XP, we dream big, and we want to be one of the main players of credit cards in Brazil in the next few years.
Yeah. The way we did things here, everything is scalable in terms of the technology, the architecture behind it, so we can use it for all the three brands if we want to. That's the way we build things. Of course, we need to test, execute, and folks deliver, get better, listen to the clients, and that's exactly what we have been doing. When we think about the long-term strategy, everything needs to be scalable for many millions of clients in the future.
Great. Thanks, Bruno Constantino and Maffra. That was very helpful. If I could just ask one follow-up then. You mentioned the addressable market of BRL 800 billion, which you're not fully servicing yet, and you have 3.1 million clients today. How do you think about the addressable market for clients? I think your clients are more on the higher end, but just thinking about the addressable market for clients.
Yeah. That's a good point. When you look XP two years back, as I mentioned in my first talk, we have been very focused on investment products. When you have only investment products, you need people that are money savers. Once you start to moving forward to credit, you start to move forward to payments, digital account, then you can go down the pyramid and increase your target of clients. For sure, you can expect XP to increase the target of clients when compared to a few years ago.
Okay. Thank you. Congratulations again.
Thank you, Tito.
Thank you, Tito. Great to hear from you again. Now Steffen Gruschka. Just one second. Just let me disable. Steffen Gruschka, I really hope I'm not mispronouncing your name. Welcome.
Thank you. Can you hear me?
Yes, Steffen. Go ahead.
First of all, you did a great job with my name. It's perfect. It's a Polish name and a German spelling, so you did extremely well. Thank you very much, and also congratulations to this great set of numbers. I've got a few smaller questions for you. The first one being, your assets under custody, how would they split? I mean, which part of it is equities? Which part of it is fixed income funds? Can you give us a little color about that?
Steffen, we do not give the exact breakdown. What I can tell you is equities is the most relevant part of the total. Fixed income and the funds platform in general, those three together would be the bulk part of the total custody. It depends on, because equity, as you know, depends on the market prices as well. It will vary from quarter to quarter, but I would say, in order of relevance, equities, funds, and fixed income.
Okay, perfect. Thank you very much.
Inside funds, you have multi-market equity funds, fixed income funds. The breakdown is diverse there.
Perfect, understood. Thank you very much. The second question is the number of IFAs. I think you misspoke. I think you meant to say you have 11,000 now, right? You're expecting this to grow to 30,000 in three years. Is that correct?
Yeah. When I said it's 11,000 in the market and 36,000 in the next few years.
Okay. With 11,000, would you still have a market share of 80% of IFAs?
Yeah. Roughly. The point of the IFAs, the most important, at least in my opinion, is what Maffra said. That this profession is growing a lot. It has grown a lot in the past years, and we expect to keep like that for everything that we have discussed here. Especially when we think about the incumbent banks needing to cut costs and close branches. And the financial deepening going on, and our IFA network hiring and seeking for new IFAs and also other players in the market looking for IFAs. I think that's a trend that will keep growing in the next years, as Maffra mentioned.
No, we completely agree with you. That's why I'm asking. In a way, I liked a slide that you had around the IPO where you had the chart of how many IFAs you had. You discontinued that. That's why I was asking about the number. I have one more question about the profitability of segments. I think if I understood you correctly, 82% of profits come from the retail segment, with 77% of revenues. Can you say a little bit about the profitability of first institutional and then of issuers services, which are the two other kind of relevant parts?
No, unfortunately, we do not disclose profitability by the segment. Especially because when we think about the SG&A, the infrastructure of our ecosystem is there to serve all of the segments. Either the retail, the institutional segments, they are served by the same infrastructure in most of the cases. We look at the profitability as a whole, and is reported in our numbers.
Okay, understood. Thank you very much. Thank you very much for answering these questions. We are in Germany. I've waited here until midnight, so it was really worth it, I have to say. Thank you very much.
Thank you for participating in our call, Steffen.
Thank you.
Thank you so much, Steffen. Always good to hear from different countries. Please let us know through our IR contacts if you need a follow-up call. We will be thrilled to walk you through some of the dynamics of the company in more detail. Thank you.
Oh, I would love it. Thank you very much.
Have a good one. Last but not least, we have Neha from HSBC. Good evening, Neha.
Good evening. Can you hear me fine?
Yes, we can.
Hi, Neha.
Hi, Bruno. Congratulations to Thiago for the new role, and we wish to talk to you often. Thank you for joining the call today. Congratulations on the blockbuster quarter. I think it was very solid earnings performance. Most of my questions are answered, but I wanted to dig a bit upon the financial income, which you said 82% of the financial income is related to the retail segment. If you look at the breakdown of the revenues, the big part of the revenue growth for this quarter has been driven by the financial income, that is becoming more and more relevant for your total revenues. If we think about projecting that, what are the factors that we should continue, how should we think about projecting that line?
I know a good part of that is related to revenue, but for us analysts, it will be very helpful to understand how do we project it. My second question is on Banco XP. I know there's very limited color that you can provide, but the loan portfolio has been growing very well. If you can give us some sense of what are the kind of rates that you charge for some of the pledged and unpledged loans. What are the rates that you charge for the credit card loans? It's still small, but what are the rates and what is the cost of risk that you see for the credit card loans? That will also be very helpful for us. Thank you.
Okay. Yeah, the net income from financial instruments, if I understood correct what your question was, it is growing. The way I believe you should think about looking forward is related to the growth of the secondary market, because that's related to the secondary market, and the growth of new products and business that comes to the market. For example, I will give you some examples. Like REITs. The REITs funds and industry that was in the past non-existent in Brazil as well, that XP helped to develop not only the primary market, but especially the liquidity of the funds being traded in the secondary market.
By doing that, we reinforce also the primary market, and that's the beauty of the ecosystem, because one thing pushes another, you have more offers, you have more products to trade, and then you help the development of the capital markets itself, as I said. REITs is one example. You have the BDRs, you have the fixed income, corporate bonds being traded. All of that, it's a business of flow. This business of flow, we do our active in this business in order to have products to offer for new clients and existing clients that keep bringing more money into our ecosystem as our assets under custody demonstrate. Also, it's important to enhance the experience of the clients in terms of liquidity in the secondary trade. One thing brings the other one.
The way I like to think about it's related to the custody, it's related to the growth of the volume trading, and it's related to this business of flow. Having said that, there is one additional component that goes into the net income from financial instrument that is directly related to interest rates, which is basically the floating revenues that goes in there. If interest rates go up, if the floating balance goes up, because it's also related to the custody, that by itself should increase the net income from financial instruments. Regarding the credit card and the rates. Right now, our profile of clients, they do not use the revolving part of the credit card.
It's not something that we have considered in our business plan aiming for the clients that now, as Maffra mentioned above, only at XP brand above BRL 50,000 invested, the revolving part is not relevant. Of course, in the future, when and if we decide to accept a broader public in other brands, then this equation, depending on the profile of the client, can change going forward.
Could you give us share your pipeline or your vision for Banco XP? What other products do we have in the pipeline for the next year or two? I know you mentioned that you will launch the digital bank account by the end of this year. Any other products that you have in mind that we should expect for the next year or two?
There is a huge pipeline. When we think about products, there are different segments and specifics. When we think about individuals is one thing. When we think about companies, SMBs, another thing. The pipeline is huge. We're planning to have this strategy day with investors, sell side analysts, so we can give a little bit more color. I will keep high level, then Maffra can complement.
Yeah
if he wants. The thing is, we're going to have full digital account by the end of this year. That's important to complement the experience with the credit card and the digital accounts. As I mentioned before, the architecture, the foundation of what we have been doing, it's scalable. We can adopt in different brands if we want to. It's more about a business decision than anything else. Maffra, feel free to-
Yeah. I would answer in a different way. We have three main pillars that we are going to explore in the next quarters. The first one is banking service in general, and you can include payments, include digital account, credit card, et cetera, and credit, as Bruno mentioned, we are going to have different credit lines in the next quarters. We are already working on that. We have been working on that for a few quarters, and we are going to launch some of them soon. We have insurance, which is to increase the range of product insurance that we have today. The third one is thinking on companies, from SMBs to corporate companies. We are going to develop a lot of products focused on these companies. It's a lot of things for the next quarters, as Bruno mentioned.
We are going to give a better color of each product that we are going to launch on the investor day. For sure, it's a big roadmap for the next quarters and years. We have a lot of work to do. Yeah.
Great. Thank you so much.
We are excited about it.
Thank you so much. Look forward to your strategy day then, and hear more about that.
Thank you, Neha.
Thank you, Bruno. Thank you, Thiago.
Thank you.
Thank you, Neha. We don't have any other raised hands here. With that, we conclude our second quarter of 2021 earnings call. Thank you everyone for the participation. Again, the IR team is always available and alert to schedule calls with you whenever it is convenient. Bruno, would you like to deliver any closing messages? Maffra.
Yeah, no, just before Maffra close the call, I would like to mention that before our next meeting in the following earnings call, probably we're going to have already our BDRs being traded in Brazil. It's something important for us because retail investors in Brazil will be able to buy directly through B3 our shares if they want to. That's a consequence of the deal that Itaú already announced to the market of XPart S.A. As you know, Central Bank has approved, now it's a matter of time to have the general meetings. Still pending approval by both general meetings, XP Inc., and XPart, assuming that everything is going to be smooth and approved, in the third quarter, at the end of the third quarter this year, we expect to have this transaction completed and BDRs being traded in Brazil. Thiago Maffra, you can go for the closing remarks.
Yeah. I just would like to thank you all again for being here with us and say that despite the great result that we are delivering this quarter, we only have 1%, about 1% of the addressable market that we believe we should pursue in the next years. As we always say, we are only at the beginning here, and I'm very excited to be with all you guys for the next years. Thank you very much.
Thank you. Take care.