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XP Inc. Reports First Quarter 2023 Financial Results

XP Inc. (NASDAQ: XP) (“XP” or the “Company”), a leading tech-enabled platform and a trusted pioneer in providing low-fee financial products and services in Brazil, reported today its financial results for the first quarter of 2023.

Summary

Operating Metrics (unaudited)

 

1Q23

1Q22

YoY

4Q22

QoQ

Total Client Assets (in R$ bn)

954

873

9%

946

1%

Total Net Inflow (in R$ bn)

16

46

-65%

31

-48%

Annualized Retail Take Rate

1.21%

1.23%

-2 bps

1.22%

-1 bps

Active clients (in '000s)

3,966

3,504

13%

3,877

2%

Headcount (EoP)

6,146

6,323

-3%

6,928

-11%

IFAs (in '000s)

13.0

10.7

21%

12.3

6%

Retail DATs (in mn)

2.4

2.3

2%

2.7

-12%

Retirement Plans Client Assets (in R$ bn)

62

50

23%

61

2%

Card's TPV (in R$ bn)

8.6

4.5

90%

8.2

4%

Credit Portfolio (in R$ bn)

 

17.5

11.5

52%

17.1

2%

 

 

 

 

 

Financial Metrics (in R$ mn)

 

1Q23

1Q22

YoY

4Q22

QoQ

Gross revenue

3,326

3,270

2%

3,337

0%

Retail

2,569

2,307

11%

2,549

1%

Institutional

332

548

-39%

357

-7%

Corporate and Issuer Services

266

249

7%

275

-3%

Other

 

158

166

-5%

156

2%

Net Revenue

 

3,134

3,121

0%

3,177

-1%

Gross Profit

2,050

2,231

-8%

2,067

-1%

Gross Margin

 

65.4%

71.5%

-606 bps

65.1%

33 bps

EBT

816

856

-5%

738

11%

EBT Margin

 

26.0%

27.4%

-140 bps

23.2%

281 bps

Net Income

796

854

-7%

783

2%

Net Margin

 

25.4%

27.4%

-197 bps

24.6%

76 bps

Basic EPS (in R$)

 

1.48

1.53

-3%

1.43

4%

Diluted EPS (in R$)

 

1.48

1.48

0%

1.39

7%

ROAE1

 

18.7%

22.8%

-413 bps

18.1%

54 bps

ROAA2

 

2.4%

3.3%

-97 bps

2.4%

2 bps

_____________________________________________

1 – Annualized Return on Average Equity.

2 – Annualized Return on Average Adjusted Assets. Adjusted Assets excludes Retirement Plans Liabilities and Float Balance.

Discussion of Results

Detailed impact of one-time non-recurring loss

(in R$ mn)

 

1Q23

One-time

loss

1Q234

1Q22

YoY4

Total Gross Revenue

 

3,326

(164)

3,489

3,270

7%

Retail

2,569

(95)

2,664

2,307

15%

Institutional

332

-

332

548

-39%

Issuer Services & Corporate

266

-

266

249

7%

Other

158

(69)

227

166

37%

Net Revenue

 

3,134

(160)

3,294

3,121

6%

EBT

816

(160)

977

856

14%

EBT Margin

 

26.0%

n.a.

29.6%

27.4%

221 bps

Tax Expense (Accounting)

(20)

30

(50)

(2)

n.a.

Tax expense (Tax Withholding in Funds)3

(147)

(17)

(131)

(161)

-19%

Effective tax rate (Normalized)

 

(17.4%)

n.a.

(16.3%)

(16.0%)

-27 bps

Net Income

796

(131)

927

854

8%

Net Margin

 

25.4%

n.a.

28.1%

27.4%

76 bps

Total Gross Revenue

Gross revenue was R$3.3 billion in 1Q23, flat QoQ and up 2% YoY. Excluding a one-time non-recurring loss of R$164 million related to the bonds of a large corporate issuer that filed for bankruptcy, gross revenue was R$3.5 billion, up 5% QoQ and 7% YoY.

Retail Revenue

(in R$ mn)

 

1Q23

One-time

loss

1Q234

1Q22

YoY4

Retail Revenue

 

2,569

(95)

2,664

2,307

15%

Equities

1,069

-

1,069

1,098

-3%

Fixed Income

332

(95)

427

425

0%

Funds Platform

313

-

313

268

17%

Retirement Plans

87

-

87

74

17%

Cards

204

-

204

97

112%

Credit

41

-

41

35

19%

Insurance

32

-

32

23

42%

Other Retail

 

490

-

490

287

70%

Annualized Retail Take Rate

 

1.21%

4 bps

1.26%

1.23%

2 bps

_____________________________________________

3 - Tax adjustments are related to tax withholding expenses that are recognized net in gross revenue. 4 - Excludes one-time non-recurring loss related to the bonds of a large corporate issuer that filed for bankruptcy.

1Q23 Retail revenue was R$2.6 billion, growing 1% vs 4Q22 and 11% vs 1Q22. Excluding the one-time loss of R$95 million from the bonds of a large corporate issuer, Retail revenue was R$2.7 billion, growing 5% and 15% QoQ and YoY, respectively.

Stronger client activity and performance of the advisory network relative to 4Q22 were the main factors driving sequential improvement, despite the still very challenging macro scenario.

Among revenue lines, Fixed Income, as expected, saw the largest spike in demand from clients while Structured Products within Equity recovered from an unusually weak 4Q22. Revenue from stocks and futures intermediation, on the other hand, followed lower market volumes and were the main negative drivers.

Retail-related revenues in 1Q23 represented 78% of consolidated Net Income from Financial Instruments, as per the Accounting Income Statement.

Take Rate

Annualized Retail Take Rate was 1.21% in 1Q23 as reported and 1.26% accounting for the one-time non-recurring loss.

Institutional Revenue

Institutional revenue was R$332 million, down 7% QoQ and 39% YoY, mostly impacted by weaker trading activity on our main product lines in the quarter. The decrease is more noticeable versus 1Q22, when market volatility boosted overall volumes in trading desks, leading to a peak in demand for hedging.

Institutional revenue in 1Q23 accounted for 7% of consolidated Net Income from Financial Instruments, as per the Accounting Income Statement.

Corporate & Issuer Services Revenue

Revenue totaled R$266 million in 1Q23, down 3% QoQ and up 7% YoY. Sequential contraction in revenue happened mainly due to weaker capital market activity in the quarter, which followed the bankruptcy of a relevant Brazilian retailer and the consequent worsening of overall corporate credit dynamics.

Corporate and Issuer Services related revenues in 1Q23 represented 7% of consolidated Net Income from Financial Instruments, as per the Accounting Income Statement.

Other Revenue

Excluding the one-time non-recurring loss of R$69 million on the quarter, Other revenue was R$227 million in 1Q23, up 46% QoQ and 37% YoY.

Other revenue in 1Q23 accounted for 8% of consolidated Net Income from Financial Instruments, as per the Accounting Income Statement.

Costs of Goods Sold and Gross Margin

Gross Margin was 65.4% in 1Q23 versus 65.1% in 4Q22 and 71.5% in 1Q22. Accounting for the non-recurring loss of R$164 million related to a single issuer, 1Q23 gross margin was 67.1%. QoQ improvement was mainly due to a more favorable product and channel mix and the absence of the one-time impacts on cards and prepaid expenses of 4Q22.

SG&A Expenses

(in R$ mn)

 

1Q23

1Q22

YoY

4Q22

QoQ

Total SG&A5

 

(1,045)

(1,255)

-17%

(1,377)

-24%

People

 

(760)

(899)

-16%

(892)

-15%

Salary and Taxes

(378)

(346)

9%

(337)

12%

Bonuses

(329)

(354)

-7%

(379)

-13%

Share Based Compensation

 

(53)

(200)

-73%

(176)

-70%

Non-people5

 

(285)

(355)

-20%

(485)

-41%

LTM Compensation Ratio6

28.5%

28.9%

-43 bps

29.5%

-107 bps

LTM Efficiency Ratio7

 

40.4%

40.1%

24 bps

42.0%

-161 bps

Headcount (EoP)

 

6,146

6,323

-3%

6,928

-11%

SG&A5 expenses totaled R$1.0 billion in 1Q23, down 24% QoQ and 17% YoY, and reflecting primarily the impact of company-wide efficiency initiatives implemented in the quarter. Because of the reduction in headcount and related Share Based Compensation forfeits, share based compensation expenses decreased relative to 4Q22 and the run rate of 2022FY.

Last twelve months compensation ratio6 in 1Q23 was 28.5%, an improvement from 28.9% and 29.5% in 1Q22 and 4Q22, respectively. Also, our last twelve months efficiency ratio7 reached 40.4% in 1Q23, compared to 40.1% and 42.0% in the same periods.

EBT

EBT was R$816 million in 1Q23, and excluding the R$160 million one-time non-recurring loss recognized in the quarter (after sales tax), EBT was R$977 million, up 32% QoQ and 14% YoY. EBT Margin, excluding the one-time nonrecurring loss, was 29.6% in the quarter, up 641 bps QoQ and 221 bps YoY, in line with our medium-term annual guidance of 26% to 32% between 2023 and 2025.

Net Income and EPS

In 1Q23, Net Income was R$796 million, up 22% QoQ and down 8% YoY. Basic and diluted EPS were R$1.48.

Excluding the R$131 million one-time non-recurring loss recognized in the quarter (after taxes), Net income was R$927 million, up 18% QoQ and 8% YoY.

_____________________________________________

5 - Total SG&A and non-people SG&A exclude revenue from incentives from Tesouro Direto, B3.

6 - Compensation ratio is calculated as People SG&A (Salary and Taxes, Bonuses and Share Based Compensation) divided by Net Revenue.

7 - Efficiency ratio is calculated as SG&A ex-revenue from incentives from Tesouro Direto, B3, and others divided by Net Revenue.

Other Information

Webcast and Conference Call Information

The Company will host a webcast to discuss its second quarter financial results on Monday, May 15th, 2023, at 5:00 pm ET (6:00 pm BRT). To participate in the earnings webcast please subscribe at 1Q23 Earnings Web Meeting. The replay will be available on XP’s investor relations website at https://investors.xpinc.com/

Important Disclosure

In reviewing the information contained in this release, you are agreeing to abide by the terms of this disclaimer. This information is being made available to each recipient solely for its information and is subject to amendment. This release is prepared by XP Inc. (the “Company,” “we” or “our”), is solely for informational purposes. This release does not constitute a prospectus and does not constitute an offer to sell or the solicitation of an offer to buy any securities. In addition, this document and any materials distributed in connection with this release are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction.

This release was prepared by the Company. Neither the Company nor any of its affiliates, officers, employees or agents, make any representation or warranty, express or implied, in relation to the fairness, reasonableness, adequacy, accuracy or completeness of the information, statements or opinions, whichever their source, contained in this release or any oral information provided in connection herewith, or any data it generates and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) in relation to any of such information. The information and opinions contained in this release are provided as at the date of this release, are subject to change without notice and do not purport to contain all information that may be required to evaluate the Company. The information in this release is in draft form and has not been independently verified. The Company and its affiliates, officers, employees and agents expressly disclaim any and all liability which may be based on this release and any errors therein or omissions therefrom. Neither the Company nor any of its affiliates, officers, employees or agents makes any representation or warranty, express or implied, as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any.

The information contained in this release does not purport to be comprehensive and has not been subject to any independent audit or review. Certain of the financial information as of and for the periods ended of December 31, 2021 and December 31, 2020, 2019, 2018 and 2017 has been derived from audited financial statements and all other financial information has been derived from unaudited interim financial statements. A significant portion of the information contained in this release is based on estimates or expectations of the Company, and there can be no assurance that these estimates or expectations are or will prove to be accurate. The Company’s internal estimates have not been verified by an external expert, and the Company cannot guarantee that a third party using different methods to assemble, analyze or compute market information and data would obtain or generate the same results.

Statements in the release, including those regarding the possible or assumed future or other performance of the Company or its industry or other trend projections, constitute forward-looking statements. These statements are generally identified by the use of words such as “anticipate,” “believe,” “could,” “expect,” “should,” “plan,” “intend,” “estimate” and “potential,” among others. By their nature, forward-looking statements are necessarily subject to a high degree of uncertainty and involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Company. Such factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements and there can be no assurance that such forward-looking statements will prove to be correct. These risks and uncertainties include factors relating to: (1) general economic, financial, political, demographic and business conditions in Brazil, as well as any other countries we may serve in the future and their impact on our business; (2) fluctuations in interest, inflation and exchange rates in Brazil and any other countries we may serve in the future; (3) competition in the financial services industry; (4) our ability to implement our business strategy; (5) our ability to adapt to the rapid pace of technological changes in the financial services industry; (6) the reliability, performance, functionality and quality of our products and services and the investment performance of investment funds managed by third parties or by our asset managers; (7) the availability of government authorizations on terms and conditions and within periods acceptable to us; (8) our ability to continue attracting and retaining new appropriately-skilled employees; (9) our capitalization and level of indebtedness; (10) the interests of our controlling shareholders; (11) changes in government regulations applicable to the financial services industry in Brazil and elsewhere; (12) our ability to compete and conduct our business in the future; (13) the success of operating initiatives, including advertising and promotional efforts and new product, service and concept development by us and our competitors; (14) changes in consumer demands regarding financial products, customer experience related to investments and technological advances, and our ability to innovate to respond to such changes; (15) changes in labor, distribution and other operating costs; (16) our compliance with, and changes to, government laws, regulations and tax matters that currently apply to us; (17) other factors that may affect our financial condition, liquidity and results of operations. Accordingly, you should not place undue reliance on forward-looking statements. The forward-looking statements included herein speak only as at the date of this release and the Company does not undertake any obligation to update these forward-looking statements. Past performance does not guarantee or predict future performance. Moreover, the Company and its affiliates, officers, employees and agents do not undertake any obligation to review, update or confirm expectations or estimates or to release any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of the release. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented and we do not intend to update any of these forward-looking statements.

Market data and industry information used throughout this release are based on management’s knowledge of the industry and the good faith estimates of management. The Company also relied, to the extent available, upon management’s review of industry surveys and publications and other publicly available information prepared by a number of third-party sources. All of the market data and industry information used in this release involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Although the Company believes that these sources are reliable, there can be no assurance as to the accuracy or completeness of this information, and the Company has not independently verified this information.

The contents hereof should not be construed as investment, legal, tax or other advice and you should consult your own advisers as to legal, business, tax and other related matters concerning an investment in the Company. The Company is not acting on your behalf and does not regard you as a customer or a client. It will not be responsible to you for providing protections afforded to clients or for advising you on the relevant transaction.

This release includes our Float, Adjusted Gross Financial Assets, Net Asset Value, and Adjustments to Reported Net Income, which are non-GAAP financial information. We believe that such information is meaningful and useful in understanding the activities and business metrics of the Company’s operations. We also believe that these non-GAAP financial measures reflect an additional way of viewing aspects of the Company’s business that, when viewed with our International Financial Reporting Standards (“IFRS”) results, as issued by the International Accounting Standards Board, provide a more complete understanding of factors and trends affecting the Company’s business. Further, investors regularly rely on non-GAAP financial measures to assess operating performance and such measures may highlight trends in the Company’s business that may not otherwise be apparent when relying on financial measures calculated in accordance with IFRS. We also believe that certain non-GAAP financial measures are frequently used by securities analysts, investors and other interested parties in the evaluation of public companies in the Company’s industry, many of which present these measures when reporting their results. The non-GAAP financial information is presented for informational purposes and to enhance understanding of the IFRS financial statements. The non-GAAP measures should be considered in addition to results prepared in accordance with IFRS, but not as a substitute for, or superior to, IFRS results. As other companies may determine or calculate this non-GAAP financial information differently, the usefulness of these measures for comparative purposes is limited. A reconciliation of such non-GAAP financial measures to the nearest GAAP measure is included in this release.

For purposes of this release:

“Active Clients” means the total number of retail clients served through our XP Investimentos, Rico, Clear, XP Investments and XP Private (Europe) brands, with Client Assets above R$100.00 or that have transacted at least once in the last thirty days. For purposes of calculating this metric, if a client holds an account in more than one of the aforementioned entities, such client will be counted as one “active client” for each such account. For example, if a client holds an account in each of XP Investimentos and Rico, such client will count as two “active clients” for purposes of this metric.

“Client Assets” means the market value of all client assets invested through XP’s platform and that is related to reported Retail Revenue, including equities, fixed income securities, mutual funds (including those managed by XP Gestão de Recursos Ltda., XP Advisory Gestão de Recursos Ltda. and XP Vista Asset Management Ltda., as well as by third-party asset managers), pension funds (including those from XP Vida e Previdência S.A., as well as by third-party insurance companies), exchange traded funds, COEs (Structured Notes), REITs, and uninvested cash balances (Float Balances), among others. Although Client Assets includes custody from Corporate Clients that generate Retail Revenue, it does not include custody from institutional clients (asset managers, pension funds and insurance companies).

Rounding

We have made rounding adjustments to some of the figures included in this release. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that preceded them.

Unaudited Managerial Income Statement (in R$ mn)

Managerial Income Statement

 

1Q23

1Q22

YoY

4Q22

QoQ

Total Gross Revenue

 

3,326

3,270

2%

3,337

0%

Retail

2,569

2,307

11%

2,549

1%

Equities

1,069

1,098

-3%

995

7%

Fixed Income

332

425

-22%

393

-15%

Funds Platform

313

268

17%

311

1%

Retirement Plans

87

74

17%

93

-7%

Cards

204

97

112%

234

-13%

Credit

41

35

19%

47

-13%

Insurance

32

23

42%

31

2%

Other

 

490

287

70%

443

10%

Institutional

332

548

-39%

357

-7%

Issuer Services & Corporate

266

249

7%

275

-3%

Other

158

166

-5%

156

2%

Net Revenue

3,134

3,121

0%

3,177

-1%

COGS

(1,084)

(891)

22%

(1,110)

-2%

Gross Profit

2,050

2,231

-8%

2,067

-1%

Gross Margin

 

65.4%

71.5%

-606 bps

65.1%

33 bps

SG&A

(1,042)

(1,251)

-17%

(1,135)

-8%

People

(760)

(899)

-16%

(892)

-15%

Non-People

(282)

(351)

-20%

(243)

16%

D&A

 

(48)

(61)

-21%

(46)

5%

EBIT

960

919

4%

886

8%

Interest expense on debt

(163)

(48)

238%

(150)

9%

Share of profit or (loss) in joint ventures and associates

 

19

(14)

-234%

1

-258%

EBT

816

856

-5%

738

11%

EBT Margin

 

26.0%

27.4%

-140 bps

23.2%

281 bps

Tax Expense (Accounting)

(20)

(2)

822%

44

-145%

Tax expense (Tax Withholding in Funds)8

(147)

(161)

-8%

(192)

-23%

Effective tax rate (Normalized)

 

(17.4%)

(16.0%)

-136 bps

(15.8%)

-157 bps

Net Income

796

854

-7%

783

2%

Net Margin

 

25.4%

27.4%

-197 bps

24.6%

76 bps

Adjustments

 

23

133

-83%

110

-79%

Adjusted Net Income9

819

987

-17%

893

-8%

Adjusted Net Margin

 

26.1%

31.6%

-549 bps

28.1%

-199 bps

_____________________________________________

8 - Tax adjustments are related to tax withholding expenses that are recognized net in gross revenue. 9 - See appendix for a reconciliation of Adjusted Net Income.

Accounting Income Statement (in R$ mn)

Accounting Income Statement

 

1Q23

1Q22

YoY

4Q22

QoQ

Net revenue from services rendered

1,346

1,265

6%

1,565

-14%

Brokerage commission

494

560

-12%

544

-9%

Securities placement

249

291

-15%

361

-31%

Management fees

382

329

16%

412

-7%

Insurance brokerage fee

41

36

14%

47

-13%

Educational services

13

8

69%

6

108%

Commission Fees

189

93

103%

237

-20%

Other services

101

89

14%

102

-1%

Sales Tax and contributions on Services

 

(123)

(141)

-13%

(145)

-15%

Net income from financial instruments at amortized cost and at fair value through other comprehensive income

502

(145)

n.a.

14

n.a.

Net income from financial instruments at fair value through profit or loss

 

1,286

2,001

-36%

1,598

-20%

Total revenue and income

3,134

3,121

0%

3,177

-1%

Operating costs

(1,017)

(864)

18%

(1,071)

-5%

Selling expenses

(15)

(19)

-22%

(48)

-69%

Administrative expenses

(1,094)

(1,293)

-15%

(1,368)

-20%

Other operating revenues (expenses), net

19

0

n.a.

235

-92%

Expected credit losses

(68)

(26)

156%

(38)

77%

Interest expense on debt

(163)

(48)

238%

(150)

9%

Share of profit or (loss) in joint ventures and associates

 

19

(14)

n.a.

1

n.a.

Income before income tax

816

856

-5%

738

11%

Income tax expense

 

(20)

(2)

n.a.

44

n.a.

Net income for the period

796

854

-7%

783

2%

Balance Sheet (in R$ mn)

Assets

 

 

 

 

1Q23

4Q22

Cash

 

 

 

 

3,089

3,553

Financial assets

 

 

 

 

180,185

177,682

Fair value through profit or loss

99,527

96,730

Securities

84,511

87,513

Derivative financial instruments

15,015

9,217

Fair value through other comprehensive income

29,145

34,479

Securities

29,145

34,479

Evaluated at amortized cost

51,514

46,473

Securities

10,905

9,272

Securities purchased under agreements to resell

11,830

7,604

Securities trading and intermediation

2,607

3,271

Accounts receivable

595

598

Loan Operations

23,107

22,211

Other financial assets

 

 

 

 

2,470

3,517

Other assets

 

 

 

 

6,194

5,761

Recoverable taxes

283

163

Rights-of-use assets

233

258

Prepaid expenses

4,250

4,240

Other

 

 

 

 

1,427

1,099

Deferred tax assets

1,582

1,612

Investments in associates and joint ventures

2,256

2,272

Property and equipment

304

311

Goodwill & Intangible assets

 

 

 

 

830

844

Total Assets

 

 

 

 

194,441

192,035

 

 

Liabilities

 

 

 

 

1Q23

4Q22

Financial liabilities

 

 

 

 

128,402

127,709

Fair value through profit or loss

26,545

22,135

Securities

11,472

13,529

Derivative financial instruments

15,073

8,605

Evaluated at amortized cost

101,857

105,574

Securities sold under repurchase agreements

25,921

31,790

Securities trading and intermediation

15,269

16,063

Financing instruments payable

46,482

43,684

Accounts payables

586

617

Borrowings

1,825

1,866

Other financial liabilities

 

 

 

 

11,774

11,554

Other liabilities

 

 

 

 

48,916

47,173

Social and statutory obligations

503

968

Taxes and social security obligations

400

365

Private pension liabilities

47,806

45,734

Provisions and contingent liabilities

79

44

Other

 

 

 

 

127

62

Deferred tax liabilities

76

111

Total Liabilities

 

 

 

 

177,395

174,992

Equity attributable to owners of the Parent company

 

 

 

 

17,039

17,036

Issued capital

0

0

Capital reserve

19,195

19,156

Other comprehensive income

(48)

(134)

Treasury

(2,903)

(1,987)

Retained earnings

795

-

Non-controlling interest

 

 

 

 

7

6

Total equity

 

 

 

 

17,046

17,042

Total liabilities and equity

 

 

 

 

194,441

192,035

Float, Adjusted Gross Financial Assets and Net Asset Value

(in R$ mn)

We present Adjusted Gross Financial Assets because we believe this metric captures the liquidity that is, in fact, available to us, net of the portion of liquidity that is related to our Float Balance (and therefore attributable to clients). We calculate Adjusted Gross Financial Assets as the sum of (1) Cash and Financial Assets (comprised of Cash plus Securities – Fair value through profit or loss, plus Securities – Fair value through other comprehensive income, plus Securities – Evaluated at amortized cost, plus Derivative financial instruments, plus Securities (purchased under agreements to resell), plus Loans and Foreign exchange portfolio (assets) less (2) Financial Liabilities (comprised of the sum of Securities loaned, Derivative financial instruments, Securities sold under repurchase agreements and Private pension liabilities), Deposits, Structured Operation Certificates (COE), Financial Bills, Foreign exchange portfolio (liabilities), Credit cards operations and (3) less Float Balance.

It is a measure that we track internally daily, and it more intuitively reflects the effect of the operational profits we generate and the variations between working capital assets and liabilities (cash flows from operating activities), investments in fixed and intangible assets and investments in the IFA Network (cash flows from investing activities) and inflows and outflows related to equity and debt securities in our capital structure (cash flows from financing activities). Our management treats all securities and financial instrument assets, net of financial instrument liabilities, as balances that compose our total liquidity, with subline items (such as, for example, “securities at fair value through profit and loss” and “securities at fair value through other comprehensive income”) expected to fluctuate substantially from quarter to quarter as our treasury manages and allocates our total liquidity to the most suitable financial instruments.

In order to explain how we measure our cash position or generation internally, we are introducing the Net Asset Value concept. Since we are a financial institution, we hold several types of financial instruments with different characteristics, hence the definition of net cash that makes more sense from a business perspective is the Net Asset Value. It is basically the adjusted gross financial assets net of debt instruments.

Adjusted Gross Financial Assets

 

 

 

 

1Q23

4Q22

Assets

 

 

 

 

180,747

177,761

(+) Cash

 

 

 

 

3,089

3,553

(+) Securities - Fair value through profit or loss

 

 

 

 

84,511

87,513

(+) Securities - Fair value through other comprehensive income

 

 

 

 

29,145

34,479

(+) Securities - Evaluated at amortized cost

 

 

 

 

10,905

9,272

(+) Derivative financial instruments

 

 

 

 

15,015

9,217

(+) Securities purchased under agreements to resell

 

 

 

 

11,830

7,604

(+) Loans and credit card operations

 

 

 

 

23,107

22,211

(+) Foreign exchange portfolio

 

 

 

 

1,732

2,145

(+) Energy

 

 

 

 

874

647

(+) Central Bank Deposits

 

 

 

 

538

1,119

Liabilities

 

 

 

 

(149,313)

(146,194)

(-) Securities

 

 

 

 

(11,472)

(13,529)

(-) Derivative financial instruments

 

 

 

 

(15,073)

(8,605)

(-) Securities sold under repurchase agreements

 

 

 

 

(25,921)

(31,790)

(-) Retirement Plans Liabilities

 

 

 

 

(47,806)

(45,734)

(-) Deposits

 

 

 

 

(21,025)

(20,262)

(-) Structured Operations

 

 

 

 

(13,204)

(12,110)

(-) Financial Bills

 

 

 

 

(6,347)

(5,676)

(-) Foreign exchange portfolio

 

 

 

 

(2,036)

(2,405)

(-) Credit card operations

 

 

 

 

(5,245)

(4,987)

(-) Commitments subject to possible redemption

 

 

 

 

(1,008)

(1,049)

(-) Other Funding

 

 

 

 

(175)

(47)

(-) Float

 

 

 

 

(12,662)

(12,792)

(=) Adjusted Gross Financial Assets

 

 

 

 

18,772

18,775

Net Asset Value

 

 

 

 

1Q23

4Q22

(=) Adjusted Gross Financial Assets

 

 

 

 

18,772

18,775

Gross Debt

 

 

 

 

(9,950)

(9,389)

(-) Borrowings

 

 

 

 

(1,825)

(1,866)

(-) Debentures

 

 

 

 

(2,235)

(2,029)

(-) Structured financing

 

 

 

 

(2,393)

(1,934)

(-) Bonds

 

 

 

 

(3,497)

(3,561)

(=) Net Asset Value

 

 

 

 

8,822

9,385

Float (=net uninvested clients' deposits)

 

 

 

1Q23

4Q22

Assets

 

 

 

(2,607)

(3,271)

(-) Securities trading and intermediation

 

 

 

(2,607)

(3,271)

Liabilities

 

 

 

15,269

16,063

(+) Securities trading and intermediation

 

 

 

15,269

16,063

(=) Float

 

 

 

12,662

12,792

Reconciliation of Adjusted Net Income (in R$ mn)

Adjusted Net Income

 

1Q23

1Q22

YoY

4Q22

QoQ

Net Income

 

796

854

-7%

783

2%

(+) Share Based Compensation

 

68

212

-68%

181

-62%

(+/-) Taxes

 

(46)

(79)

-43%

(71)

-36%

Adj. Net Income

 

819

987

-17%

893

-8%

 

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