XP Inc.'s U.S.-listed shares (XP) experienced a decline of 3.78% in after-hours trading on Monday, following the release of its first-quarter earnings report. While the Brazilian financial platform posted a 7% rise in adjusted net income to 1.32 billion reais, investors focused on weaker net inflows and a declining retail take rate, overshadowing the announcement of a new share buyback program.
The stock closed the regular Nasdaq session at $17.34, down 0.74%, before sliding further to $16.69 in extended trading. The after-hours market, known for lower liquidity and sharper price swings, amplified the reaction. The broader market also exerted pressure, with the Nasdaq Composite closing down 0.51% as technology stocks dragged indices lower amid rising oil prices and Treasury yields.
Key Financial Metrics
Gross revenue for the quarter reached 4.92 billion reais, an 8% increase year-over-year, while net revenue climbed to 4.73 billion reais, also up 8%. Adjusted diluted earnings per share improved 9% to 2.49 reais. Total client assets grew 15% to 1.53 trillion reais, reflecting continued asset accumulation.
However, the quality of inflows raised concerns. Total net inflows dropped sharply to 14 billion reais from 24 billion reais a year earlier and 32 billion reais in the previous quarter. The annualized retail take rate, a measure of fee yield on client assets, slipped to 1.18% from 1.25%, a decline of 7 basis points.
Segment Performance
Retail revenue rose 10% year-over-year, supported by equities trading activity, but fixed income revenue fell 25%. In contrast, wholesale banking revenue grew 26%, with corporate activity surging 78%, indicating XP's strategic pivot toward a more diversified business model as traditional brokerage margins remain uneven.
Capital Returns and Management Changes
The board attempted to shift focus to capital returns, declaring a cash dividend of $0.20 per Class A share, payable June 18 to shareholders of record on June 10. Additionally, XP authorized a new share buyback program of up to 1.0 billion reais, effective May 19. CEO Thiago Maffra reiterated confidence in double-digit business growth this year, while CFO Victor Mansur emphasized that buybacks represent the best mix for current capital distribution, accounting for over 75% of returns.
In a leadership transition, XP announced that Gustavo Alejo Viviani, a former Santander Brasil executive with experience in wholesale and retail banking, will assume the role of CFO on August 3. Mansur will step down on May 31, with Maffra serving as interim CFO until Viviani takes office.
Market Context and Outlook
The results stand in contrast to U.S.-listed Brazilian peers like Nu Holdings (NU) and Inter & Co. (INTR), which focus more on digital banking. XP's heavier exposure to brokerage, advisory, and corporate markets leaves it vulnerable to uneven market conditions. Management noted that wider credit spreads pressured parts of the quarter, and April remained challenging before signs of stabilization emerged in May. If interest rate cuts proceed slowly and fixed-income issuance fails to recover, the buyback may not suffice to offset weaker inflows when regular trading resumes.
