Excluding Modal, our return on average equity would have been 23.4%, an increase of 143 bps quarter-over-quarter. At XP, We have a conservative approach towards our balance sheet. But when we look at our capital ratio plus our capacity to continue generating healthy profits over time plus the lack of need to retain too much capital to grow, it is our desire to gradually reduce the level of our capital ratio at XP in platform. In second quarter ’23, our capital ratio was 24.2%. We ended third quarter ’23 with a capital ratio of 22.1%. The reduction quarter-over-quarter was mainly driven by the dividend payment of US$320 million in September. Looking forward, we expect to end next year with a capital ratio below 20% to a very conservative level.
To get there, we need to continue expanding our net income and returning capital to shareholders. In that context, we have decided to pay an additional dividend on December this year of $0.73 per share, around US$400 million. Now both Maffra and I will be happy to take your questions.
A – Antonio Guimaraes: Great. Thanks, Bruno. So now we’re moving onto the Q&A session. [Operator Instructions] The first one today is Mr. Jorge Kuri from Morgan Stanley.
Jorge Kuri: Can you hear me? Hello? Can you hear me? Hello?
Antonio Guimaraes: Hello, now we hear you, Jorge.
Jorge Kuri: Great, thank you. Thanks and sorry for that and congrats on the results. I wanted to ask now that we’ve seen more of the rate cuts this quarter vis-a-vis the previous quarter, how do you see your retail revenues trending in particularly how are you seeing equities and the funds platform behave so far this quarter. And you mentioned something Bruno that is evidently super important for the narrative on XP, which is the debate on the terminal rate for Brazil. So the focus service shows consensus moving rates up by year-end 2024, I think now it’s at 9.25%. I know some economies are already at 10%. So I wanted to get your reaction on how does the business look again on the retail revenues particularly equities. How does that look? It would kind of like cannot go below 10% rates, at least during 2024. Thank you.
Thiago Maffra: Hello, Jorge. This is Maffra. Thank you very much for your question. Going straight to your point, we haven’t seen yet any big change on the retail clients flow. So we have been repeating that in the last calls and meetings with investors. When we are talking about retail clients, they are lagging. They will not move just because we see 100, 150 bps cut on SELIC rate. If you look the level of interest rates still very high. But more important than that, if you look at the performance of riskier assets in the past 12 or 24 months, almost every asset class is losing to SELIC rate. The only asset class that’s not losing to SELIC rate is basically the LCIs, LCAs, the [indiscernible] SMT, CGs from banks, when you grow [indiscernible] to back, okay? So it’s very hard to see retail clients moving if we don’t see the price action from other assets going up. So that’s my view. So we don’t see yet any coming back from retail clients.
Bruno Santos: If I may add just one data point, Jorge, to what Maffra just mentioned, a moderate portfolio, moderate, not aggressive in the past two years is probably below 60% of the SELIC rate. So that pretty much the picture that we have right now. And in this environment, it’s hard to see the flow coming, although usually in moments like this is especially the good moment to invest in those asset classes. So that’s the job that the advisers need to do. But it’s hard for the individual to move in that direction. Individuals are being well remunerated to keep their money in cash, 12% per year. So that’s the picture.
Jorge Kuri: Thank you for that. And regarding the second part of my question on next year and the current expectations for rates maybe to settle probably not much below 10%, how do you envision the retail investor base as such.
Bruno Santos: I mean, we are positive for the future considering interest rates have already started coming down. And we believe that one path to see riskier assets performing better. So whenever the assets are performing better, they tend to attract more individuals and more flow to the assets to the funds and so on. If you ask the portfolio managers, we know because we are the largest funds platform in Brazil. If you look at the performance of multi-market funds, for example, everybody is below the hurdle. So whenever you have those funds performing better and interest rates going down, again, it’s a precondition for that to happen. We believe we’re going to see a better market environment. It’s more about the performance of riskier assets than the level — terminal level of interest rates by itself.
Jorge Kuri: Great. Thanks for that. Congrats again.
Bruno Santos: Thanks, Jorge.
Antonio Guimaraes: Next one in line is Mario Pierry from Bank of America.
Mario Pierry: Hey, guys. Good afternoon. Let me ask then two questions. One is a follow-up to Jorge’s question. But if you could discuss a little bit more about the productivity of the IFAs, right? Because we see your inflows on a standalone basis of BRL14 billion only in the quarter. This is a drop of 60% year-on-year or your IFA base expanded by 25%. So can you — I guess with the high rates negative impact, but like the productivity of your IFA network has declined quite a bit. If you can just discuss what you think is impacting, how can that improve. Also, if you can give us any perspective on the inflows throughout the months of the quarter? Were they fairly even or did you see like a drop off in September? And then the second question.
It’s a quick one related to Modal. We see that your headcount increased by about 700 people, roughly 600 — I think it was about 700 people. Even though Modal only brought in about 200,000 clients. So how do you think — are there like any cost synergies to be realized with Modal? Have you already achieved that? If you can give us some color on that also, that will be helpful. Thank you.
Thiago Maffra: Thank you, Mario. This is Thiago. So to your first question. For me, it’s the same reasons that we already mentioned on Jorge’s question about the performance of riskier assets, macro environment and so on. And of course, the productivity of the IFAs, they are much lower this year than it was in the past for the same reasons we already mentioned. But we are keeping investing on expanding the IFA numbers, the internal advisers because we believe investments is made by humans, by advisers, so and when the market comes back, we are ready to capture market share and growth. But again, for the same reasons, the level of productivity is much lower. On your second question about Modal. We received the approval in July 1st.
