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XP Inc. (NASDAQ:XP)
Q1 2020 Earnings Call
May 12, 2020, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Carlos Lazar

Good evening, everyone and welcome to the XP's earnings conference call for the quarter ended in March 31, 2020. I'm Carlos Lazar, head of investor relations and I really hope that you're well and safe. Joining me today for the call are Mr. Guilherme Benchimol, founder and CEO; and Bruno Constantino, CFO.

We'll be available for today's Q&A session and you can send your questions in the Q&A too that you can find in our screen. Let me highlight that our first-quarter earnings release and presentation are available on the investor relations website. I would like to remind that certain statements in this presentation and during the Q&A may relate to future events and expectations and as such constitutes in forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from these forward-looking statements.

Information concerning factors that could cause actual results to differ from forward-looking statements is contained in our reports filed with SEC. Now, I will turn the conference call over Mr. Guilherme Benchimol who will deliver some opening remarks starting on Slide 5 of the presentation.

Guilherme Benchimol -- Founder and Chief Executive Officer

Good evening everyone and thank you for your interest in our event. In the first quarter of 2020, the world was hit by the rapid spread of COVID-19 and every effort was made to save lives and keep business operating. At XP, the initial priority was the health and wellbeing of our employees. Really fast we had more than 95% of our workforce in the home office model and the company fully operational.

As a matter of fact, in a few days we were better than before more organized, disciplined and achieving a new standard of performance and efficiency across all levels. I still believe that every difficult moment we faced over our history did also create opportunities for us to improve as people and as team, mainly because of our partnership model. Also the surprise remote, a chance to bring forth and create new competitive advantage by adapting and leveraging even more all our operations. And between this competitive advantage I'd like to highlight the following: First, our education DNA since the beginning of the pandemic we observed in Brazil a significant increase in interest investments.

In this context, we relied on our high quality content to deliver an even better experience for our customers. And the result was some records being broken in different channels that were maintained of the market, proving once more XP's vital role as a catalyst for this movement. Second, we focus on being as close as possible with our clients. The good thing is that our business is privileged among all others.

We do not depend on physical contact, our services were already delivered justly and more than ever people are at home available to connect first and learn about the new economic environment that is developing. Our solid operation performance in the first quarter of 2020 combined with the important milestone of two million active clients achieved at end of March gives us confidence that we are moving in the right direction. Another competitive advantage that helps us is our differentiated network of independent and internal financial advisors which allows us to keep in touch with customers and provide content and information in efficiency, specialized and recurring manner. Additionally, we believe that our platform is unique, offering the best products, services and tools in the interest for all investors profiles.

The market opportunity remains massive especially when considering the concentration in Brazil with five large banks controlling 90% of investment in assets. Also we cannot forget that since 1994, interest rates remained above 13% and therefore, the incentive for diversification and long-term orientation have always been low. The current Selic rate 3% per year seems to be a catalyst for secular change in the behavior of Brazilian investors. Therefore despite the fact that we cannot predict when the pandemic will be contained, we are confident that we'll come out of this chapter stronger than we entered.

Also we truly believe in XP's business growth prospects especially in the long-term. Finally, I'd like to ratify our purpose of transforming the financial market to improve people's lives and quote our idol and great source of inspiration [Foreign language]. In adversity some give up, while other break records. Now, I'd like to hand the call over to Bruno to commenting detail on our operating and financial results.

Thank you all.

Bruno Constantino -- Chief Financial Officer

Thank you Guilherme. I don't know if you guys are hearing me well there. Lazar, am I good? Can I move on?

Carlos Lazar

Yes please.

Bruno Constantino -- Chief Financial Officer

OK. We're going to get better on this conference calls as time goes by. We learn from experience. So I'm going to try to be brief here and so we can have more time for Q&A.

This slide it's about the KPIs, you have seen it already when we talked about the COVID-19 update last month. So basically, we ended the quarter with our total assets under custody at BRL 366 billion. We had health pace of net inflow during the quarter approximately BRL 12 billion per month a little bit above the pace we have experienced in the fourth-quarter 2019 and the main impact was due to the market sell off because of the crisis. Another important KPI to highlight is the number of active clients.

We have seen a very healthy pace as well in terms of net new clients in our platform on a monthly basis. I'm going to talk a little bit more about that when I give the update regarding the impact of the crisis in the month of April as well. But we reached very important mark in our company passing the number of two million active clients in March. In our NPS of course, it's 72 as you already know I'm also going to talk about that later on the presentation.

One important thing to highlight here is that, the interest of Brazilian in equities probably due to this historical low interest has bought more retail clients to this equity world and the touch points we have-a company like ourselves has increased a lot and that reflects also in the number of active clients in our platform. So moving forward to the next slide. I'm going to talk about the numbers. OK, this it's new, what we have shown it was just a highlight above 60% we actually grew year-over-year 84%.

Our total gross revenue reaching BRL 1.9 billion in the first quarter of 2020. This number was even in stronger than the total revenue that we got in the fourth quarter of 2019. Remember that we have in the first quarter we have the performance fees of the funds platform which we do not have in the first quarter so it's not the same comparison. But even though without this performance fee revenue which by the way was a strong source of revenue in the first quarter of last year we were able to reach our record revenue ever in the history of the company in a quarter.

The distribution of this revenue is pretty much the same 68% for retail which is our main segment and institutional had an increase in relevance compared to the other revenue segment lines reaching 18% in the first quarter. Issuer services with 7% and digital content although it was-it experienced a very good growth in the first quarter because the other segments grew even more in relative terms decreased to 1% and the rest it was in other revenues. So moving to the retail revenue part, we experienced so it's the next slide. Thank you, Andre.

Retail revenue and take rate, we grew 79% in the retail revenue. Equities was very strong but we experienced growth all over the products, not the only equities but also the funds platform year over year, fixed income as well. It stretched products and so on. REITS and so on.

So that's the benefit and I've been saying that for a while. I'm going to repeat myself in the future as well. It's the benefit of having all the investments possible for our clients in our platform and the clients will have to invest in something and what will vary overtime is going to be the mix. But at the end of the day we expect to grow in-kind of product.

In the first quarter, we experienced as I said strong growth in our products being equities the most relevant one. When we look at our take rate, we notice an increase. This take rate is considering the last 12 months, so you can move the impact basically we added the first quarter of 2020 and took out the first quarter of 2019 and the take rate went up, not only because of the high growth that we had more than 80% in our total revenue, 79% in retail revenue. But also because of the decrease in the assets under custody.

As I mentioned last month, we had these one-off outflows close to BRL 20 billion that does not translate in loss of retail revenue. So just by this fact we should have an increase in the take rate at 1.4% in the first quarter last 12 months. Going to the next slide, I'm going to talk about institutional and issuer services. Institutional a very impressive growth more than 100% year over year, 126% to be more precise that's a function of volume growth as well and also new business lines that we didn't have in 2019.

As for example with the bank the structure notes, the COE. We were able to issue through our bank, our own structured notes and there's a structuring fee that it's institutional fee that stays within the bank. Also the corporate clients trading like swaps and NBF's with us, within the bank that's again a new revenue line that we didn't have in the last year. But the most relevant explanation for this high growth is the volume of the market as a whole and XP being the market leader for our institutional clients.

When we go to the issuer service revenue, we also experienced a very strong growth year-over-year 137%. This was mainly a function of January and February considering March; we already saw the impact of the crisis in the offers in the market. So it was reduced month in terms of revenues. But it was enough to reach this strong number in the first quarter of 2020 when we compared to first quarter of last year.

Moving to the digital content and other. Again same thing 70% growth year over year in digital content from BRL 16 million to BRL 27 million and other revenues 28%. The digital content is a function of the courses and MBA that we launched last year and this year and the other revenue is mainly a function of increasing our adjusted gross cash because of the IPO and our cash generation and that's mainly it. Now we're going to talk about the COGS and SG&A, our expenses structure.

So in the next slide we can see that COGS is basically in line with total revenue growth 88% and I mean the gross margin it's also basically inline 40 bps lower than the first quarter of 2019. That's a function of mix, it's really hard to tell what this gross margin is going to be. There's a volatility there depending on the mix, but there is nothing else to highlight in the COGS in stretch. When we look at operating expenses then you can see some efficiency gains there already.

Our total revenue grew 84%, the operating expenses grew 62% despite XP has invested a lot in people through our spreads, we're still hiring despite the crisis and we have a roadmap to as you know launch new product for our clients still this year. So all those initiatives they represent increase in our SG&A. But we are able to get some efficiency gains there and that was this number shows and you can see that as well when you look at our operating expense as a percentage of net rev. So we have close to 39% in the first quarter last year and this year close to 34%, so 500 basis points efficiency gain there.

Moving forward to the adjusted net income. We can see a very strong number as well. We had BRL 450 million in the first quarter of this year that's close to what we did in 2018, the whole year. So in 2018, we had if I'm not mistaken BRL 491 million of adjusted net income in one quarter, this year.

Not having any performance fees we had BRL 415 million in one quarter and that represents 147% increase compared to the first quarter of 2019. We also can see increase in our adjusted net margin close to 24%, that's a function of everything I said, it's a function of the growth in revenues across all segments lines. The operating efficiency gains that we got in our cost structures and also a lower effective tax rate that we had in the first quarter of this year. I believe that's a question that might come later, so I'm going to just jump in and already explain.

Going forward, we still expect this lower tax rate to remain. It's mainly a function of the cash from the IPO being part in our IPO Company which has a lower tax rate and when we consolidated as a whole, we can expect a lower tax rate going forward. As we use that cash for anything that we think it's an opportunity. We might see that number going up, but as we generate a lot of cash and we have these asset-light business model.

I wouldn't expect these effective tax rates to move up from the first-quarter numbers going in the future of the next quarters. So now, I would like to share with you some updates regarding the crisis and what's going on in April. As we did last month, we're going to share here the main KPIs that we have in our company and how they behaved during April. First one being the assets under custody, we can see a pick up.

So when we, we have year-to-date here is basically from January to April included, so four months of the year. So we can notice a recover from the number we just showed of the first quarter off BRL 366 billion going up to BRL 385 billion as of April. The net inflow remains in healthy pace on average per month considering the four months of 2020. We're talking about BRL 10.7 billion per month close to BRL 11 billion so basically inline, with what we have in the first quarter net last year.

We did notice reduction in that net inflow in April. It's still in the healthy pace close to BRL 7 billion net new money and this reduction it's mainly a function of the lockdown added by the banks demand for the clients to go physically in bank branch for wire transferring higher amounts, even if it to his or her own accounts in another bank or platform. So this restriction considering the banks are working with approximately 20% of their branch open and there is a lockdown all over Brazil. This restriction it's something that it's impacting over net new money, but it's worth noting that we basically saw already in the beginning of May, recover there.

If we look at one number that we like to follow is 10-day business day, the moving average of the 10 business day. And basically, we had our all-time high in March this year. We got an average in specific days of more than BRL 600 million per day so that goes beyond the BRL 12 billion pace that we saw in the first quarter then because of this lockdown effect and this restriction imposed by the banks. We saw the bottom in April it was appeared a little bit above BRL 200 million close to BRL 5 billion in a month and then we had BRL 7 billion in April and then when we go to May, we can see a recover and this number is north of BRL 400 million.

So it's hard to tell about what's going in the future. But the key message here is yes in the short-term we might see in the second quarter a lower pace though a very healthy one in terms of net new money because of these restrictions. But going forward we understand it's a blip that will come, the money will come. We have clients because of the restrictions doing daily wire transfers.

Others are waiting for the restriction just to leave the table. So I think the important message here is that, we are confident every help that has not come to our platform because of those restrictions will come as soon as those restrictions go away. Moving to the next slide. So active clients.

Active clients another good surprise that we have in our platform, the number it's being strong month-after-month. We have added up to more than 2,100 active clients as of April with the monthly pace of more than 100,000 active clients in our platform. This number is already net of the churn. We do not open our churn, but I can tell you that the churn it's being stable.

So we haven't seen anything unusual regarding the churn in our platform because of the crisis. And we expect this number to keep strong throughout the year and the main reason for that is what we have been saying regarding the interest from Brazilians to understand better about investments especially considering the low interest rate environment that we have, interest rates in Brazil are at 3% expectation is that, it's going down further, maybe even reach lower than 2%, that's totally new scenario for Brazilians in terms of investments, how to invest. We already have good signs of that in our platform as despite the market sell-off and the equity sell-off. The behavior of the retail clients it's been really good one, we've seen in our funds platform for example positive net inflow in the equity funds.

It's still a lower portion. Remember that Brazilians more than 80% of the investments of the Brazilians are in fixed income and most of those investments in fixed incomes embed fixed income products with high management fees, very lower returns at the end of the day. When we look at the Selic rates at 3% going to 2% maybe that's even worse, so that's why we think that going forward this process that has started already it's going to accelerate. The equitization of the Brazilian market it's something new and we have a very low starting point.

We talked about that in our road show during the IPO. We said look Brazil has less than 1.5 million people in the stock market, if you take out REIT's this number nowadays is above two million as you can check with big three numbers. So it's growing a lot despite the equity sell-off in the market despite the volatility, despite the crisis. But it's still two million, it's nothing for a country with more than 200 million people.

So we think there is a low hanging fruit there. We think low interest rates it's going to keep pushing this movement and we believe that we're going to see this trend in our numbers going forward. And of course our NPS just to finish this COVID-19 update remains the same as of April, 72. So with this, I move back to Guilherme.

I'm sorry I forgot the last slide regarding the records. Here it's just to share some records. We have had some records in March and April. But if you look only at April, retail equity custody, all time high, close to market share, close to 25%.

Retail equity volume market share, all time high in April, close to 56%. Our retail research platform audience reached 1.6 million unique visitors in one single month and our organic social media leads also reached one million. So all strong numbers, records. Very good month in our way of speaking.

And the ranking is number one in retail equity custody volume and derivatives, that's nothing new here. And just that to say that we were very honored to get for the second consecutive time these awards of the Best Investment Advisory Company by company by São Paulo residents. We're really honored about that and we hope to keep deserving that recognition going forward. We're going to keep working hard for that.

So with that I turn back to Guilherme. I believe for the closing remarks and then we'll go for the Q&A session.

Guilherme Benchimol -- Founder and Chief Executive Officer

On the last Slide No. 19. We reinforced the attractive long-term prospects of our business which we consider and changed despite severe crisis that we're facing right now. XP Inc is well positioned and we continue its mission to transform the financial markets in Brazil.

Number one, firstly as I mentioned in the beginning the investment markets in Brazil remains very large and concentrated with over BRL 8 trillion investable assets of which 90% are still of the five incumbent banks. The lower interest rates in Brazil are positive tailwind for disruptive and client self business such as XP which benefits from increasing demand for financial location and more sophisticated assets. Moving to XP's tech-enabled platform and broad range of products and services. With the IFA in direct channels as well as our digital content initiatives forming a complete and self-reinforcing ecosystem.

In this sense, we're simply launched XP wealth services and we will not stop. Between the new initiatives we're particularly into the assets about the evolution of our payment project. It will enable us in 2020 to offer a complete banking solution which will allow customers to cut ties with banks and concentrated 100% of their investment with XP. Number three, we highlight our mission-driven culture and shrunk purpose as key competitive advantage especially in challenging times.

We're long-term oriented in managing the business and never lose sight of our three values. Big dream, entrepreneurial spirit and open mind. When making decision and the evaluating talents in the context of our meritocracy, cycle and partnership model. Four, finally we highlight our strong balance sheet position with more BRL 8 billion in cash providing a vital war chest to navigate through the crisis and exploit growth opportunities.

Considering all that, it's crystal clear that we are only in the beginning of our journey. On behalf of XP, I would like to thank you all for your interest. Now, we'll open the call up for the Q&A session.

Carlos Lazar

Thank you. Guilherme so let's open for the Q&A. Just reminding all, please state your questions with name, institutions in the Q&A tool in your screen. Feel free to also to ask questions during the after the beginning of this session.

We have some questions already here. Bruno, I'm going to start with one from Juan Octavio Pendinelli from Credit Suisse. I think you did respond during the presentation, but I maybe to clarify or reinforce the message the question is, I wanted to get a little more clarity on the very low effective tax rate. What is the driver behind it and see if it's sustainable or not? Many thanks in advance.

Bruno Constantino -- Chief Financial Officer

Yeah. It's as I said the main reason for that we're looking at the tax rate that is consolidated tax rate. We have several companies with different tax rates each one of them. And as we have to proceed with the IPO at XP Inc which is the IPO Company incorporated in Cayman and most of the proceeds is invested through that entity.

When we consolidated the tax rate, we have this lower effect, the lower tax rate as a whole. If it is sustainable or not, it will depend on where the cash is. So we bring most of this cash down for a company that has higher tax rate of course the consolidated tax rate it will be high, if not it will get the same pattern that we saw in the first quarter. And another important thing to understand is depending on where most of the revenue is, it may vary as well.

It's my belief that, when we look at the following quarters, we should expect the same effective tax rate we saw in the first quarter. And the main reason for that, is that we're not foreseeing a huge capital injection from XP Inc into other entities in Brazil because we do have a very good cash position in all of them and as I said during my presentation we are an asset like business model generates a lot of cash, so we do not expect the need to bring this cash to other entities.

Carlos Lazar

OK. Going to second question from Eduardo Rosman with BTG. The first one has to do with the numbers of clients. After a massive increase in the number of new individuals in the stock exchange in March, we saw already a big slowdown in April.

Do you see this trend accelerating in your numbers? We also see through BIM record high redemptions from funds mainly fixed income. Did you see the same thing happening in our quarter or do you believe that this was to do more with big banks asset management arms?

Bruno Constantino -- Chief Financial Officer

OK. Yeah. Regarding the number of clients. As I said, the pace per month it's really strong.

We don't expect that to suffer in the near future because we believe that because of the low interest rates and the interest of Brazilians to learn about investments, this will keep going on and on and as we understand XP offers through all three brands that we have, the best value proposition for any client that wants to invest in Brazilian securities or funds. We understand that we're going to keep attracting new clients to our platform. Regarding the funds, fixed income as an asset class within the funds is the one has suffered the most especially because when you have a crisis, the easiest one to get liquidate off right. I also mentioned in equities, we saw an increase in relative terms in our fund industry compare to fixed income for example.

But when we look at the fund platform as a whole it's pretty much stable. So we do not see any huge money withdrawing from the funds platform. There is money withdrawing, money coming in and again the fact that you mentioned about big three regarding the clients I forgot to comment on that. Remember that, our business is all kind of investments.

So I highlighted big three just to mention the potential of the equitization in Brazil considering the low starting point that we have in number of Brazilians trading equities in the market. But that's one thing, we also have fixed income, we also have these structured notes, we also have the funds platform and so on. So I believe it's the whole investment senior it's with the crisis and with the low interest rates, a company like ourselves can really help all our clients in prospects new clients that are on board to understand what's going any invest better or force according to the client profile and financial goals and needs.

Carlos Lazar

Second question is about the evolution of expenses, the net margin reached at almost 24% which is above the upper bound of our guidance. Naturally the net margin depends of the level of revenues. But we wanted to understand what to expect from expenses, is it fair to expect expenses to accelerate more than revenues in the coming quarters or not or can you please explain, how we should think about opex moving forward?

Bruno Constantino -- Chief Financial Officer

OK. We -- When we gave that guidance for the IPO. It's a long -- mid to long-term guidance it's not a quarterly guidance that we gave to investors. And the reason we gave the 18% to 22% adjusted net margin which was according to our historical numbers it's because we understand there is a great opportunity ahead of us.

As Guilherme mentioned in the beginning of his presentation despite these strong first quarter in 2020, we understand we're just getting started in our long-term journey we truly believe in that. So, we might see expenses going up in the future as we address other segments, other businesses in the financial industry in Brazil. Having said that, we don't like expenses growing faster than rent that's for sure. That's not our culture here, it might happen in one quarter.

Yes, it might. Do we expect that? No, we don't. We always expect revenues to grow faster than expenses. But as I said there is volatility in the business.

We have a long-term view here that's why we don't want to guide for quarterly results or quarterly margins. It's hard to forecast those but at the long-term the direction it's very clear in our minds. The 18% to 22% adjusted net margin might be a very conservative one, maybe. If we believe so, we adjust the guidance as we move forward.

But as it is a mid to long-term guidance, we are going to leave the way it is.

Carlos Lazar

Next question comes from Domingos. Can you please explain -- from J.P. Morgan. Can you please explain the difference between the BRL 1.6 billion revenues expected in April versus the BRL 1.8 billion reported to-date, why such difference?

Bruno Constantino -- Chief Financial Officer

OK. Hi Domingos. Maybe that was a miscommunication from my part. When I presented the update of the COVID, what we said there was that the total revenue would grow above 60%, we didn't have the financials yet.

We were on the conservative side that we knew would be north 60%. We didn't say, I don't remember me saying that it would be 60% revenue growth. But we should have put a range there to guide better that number. And yes, the 84%, so there's again there's nothing to explain there comparing the 84% to the 60% because they're not comparables.

84% it is above 60% and that's what we saw, we said in our last month. I'm sorry. But yes, was this strong growth in total revenues and as I said, across all segments but equities being a relevant one but also fixed income a very relevant one as well and all segment lines. So very good quarter.

Carlos Lazar

Thank you. In the same line, Mariana Taddeo from UBS. Good evening. Congrats on the results and retail take rate positively surprised in the quarter due to high trading volumes.

What can we expect it going forward as equity volumes normalize and we probably should not have contributions from performance fees in 2020 and lowering contribution from security distribution as well? Thanks.

Bruno Constantino -- Chief Financial Officer

Yeah. Yeah. I mean I don't know again it's hard to answer that Mariana because take rates is a function of so many variables, that it's hard to say if it's gone even upper. It's going to say stable or go down.

These take rates that we saw, there's a component of performance fee there because it is last 12 months. So, it gets the performance fees of the second-quarter 2019 and fourth-quarter 2019. And also, it gets the offers of three quarters in 2019 and two months basically in 2020. If we take that out of the equation.

You can say that yes for that specific fact take rate should go down. But on the other hand, you have higher assets under custody on average. This year than we had last year. We have many more clients in our platform this year than we had last year.

And even if you consider that the trading parts going to reduce or normalize at what level we'll normalize and people will have to invest in some. So, we have some forces in a positive trend for the take rates and we have others on the negative trend for the take rates. It's going to be a combination of those two forces added together and the result I wouldn't say it's going to be higher, stable or lower. It can all of the three.

But I wouldn't say would vary too much, that's-I don't know if that was helpful. But that's what I can say.

Carlos Lazar

Thank you. From Felipe Salomao from Citibank. I understand that you're-a lot of moving parts. But it's the same question again of the revenue use during the 2004 and full year and also could you please let us know the issuer services business has already resumed the origination of primary offerings.

Thank you.

Bruno Constantino -- Chief Financial Officer

OK, Salomao. Yeah, for the year again, we had these 1.4, as I answered Mariana, it will depend a lot if the number of clients, all the products and the growth of other business that we have compensate for the loss of performance fees and no offers. If we don't have any offers. It's going to be a function of those things.

Regarding the offers in the market, we've been very active. Our issuer services business is talking is business as usual considering the lockdown and everything. But they're doing a lot of meetings with corporate clients, trying to help, understand the needs, how we can approach, what market we can approach and we might see some offers coming to the market. It's a function of volatility, it freezes a little bit, then it's going to be a matter of price and it's a new price because it's a new market, it's a new scenario then before the crisis.

But I believe we're going to have some offers resuming sooner than later. But we will see, we will see.

Carlos Lazar

From Mario Pierry, Merrill Lynch. Can you discuss how the mix of inflows has changed since the beginning of the crisis? Are your ability to sustain the retail take rate of the remainder of the year? Again, the same question but the first one please.

Bruno Constantino -- Chief Financial Officer

How the inflow has changed the assets under custody, basically, is that it? Did I get it right?

Carlos Lazar

Yeah. If the inflow has changed since the beginning of crisis, the mix of the inflows?

Bruno Constantino -- Chief Financial Officer

No. As I said, more for equities at the beginning. Retail clients trying to benefit from the sell-off that we had in the market when the crisis started then we had the fixed income providing also opportunities and other clients trying to benefit. If I can give you like the break down as a whole when we look at March and compare it to April for example.

Remember that we have this three big buckets right. Fixed income in our AUC, fixed income, equities and the funds platform. Fixed income, it's pretty much stable from March to April when we look at fourth quarter, we saw an increase in fixed income from lower than one-fourth to above one-fourth of our custody. In equities, we noticed a drop and of course because of the drop down in the market so the market-to-market might sell this drop we had close to 30% in December, in March we were down to 22% approximately and in April it went up by 200 basis points approximately.

And the fund platform is pretty much stable, around one-third between 30% and one-third of the AUC. So my answer is no, no big movement there regarding asset class as a whole.

Carlos Lazar

OK. Tito Labarta from Goldman Sachs. Do you think the entire decline in net flows of around BRL 4 billion in April is related to the lockdown or what would the inflow be if they weren't for the lockdown?

Bruno Constantino -- Chief Financial Officer

It was not BRL 4 billion, OK? We had BRL 7 billion in April by itself and its lower than the BRL 12 billion than on average we had in the first quarter. And yes, it's basically a function of the lockdown. We can tell that when we look at the number of wire transfers that we had before the lockdown and the one we have now after the lockdown. The number of wire transfers for higher amount has decreased by 45%, 50% in some cases and that's a function of these demand that some banks still do for the clients to wire transfer to his or her own account to have to go physically to a branch.

So, you can confirm the branch manager to convince you not to wire transfer whatever and then the client does not go because there is the lockdown and because of healthy reasons, security reasons. Most of the clients don't want to go to a branch and there is only 20% of the branch open. So it's mainly a function of that as soon as either we have two ways here either the lockdown is over or the wire transfers are allowance because at the end of the day for security reasons it shouldn't be a problem for anyone because you're transferring your own money to your own account, it's the same account. And as soon the digital system of the banks allow the clients to do it electronically which should be the case then we expect to resume the same pace that we had in the first quarter.

But the BRL 4 billion that you might have confused there is when I saw that the bottom on a daily average if we put on a monthly, we take the worse daily average, we have everyday positive net inflow in our platform. The lowest daily average happened in April. The highest daily average happened in March, so we were the highest one in March then the lowest one in April and that was exactly the lockdown and we can see that because of the reduction in the wire transfer for higher amounts.

Carlos Lazar

Questions here from Neha Agarwal and Mico Tronco is very similar. Can you please provide some color on your initiatives in payment and banking segment? What products are looking and what is the timeline that you can expect for those?

Bruno Constantino -- Chief Financial Officer

Yeah. We are looking at as Guilherme said as well. We want to cut completely the link of our clients with the bank. To do that, we need to offer other products and the payment products are a need for everybody.

So, we're talking about a digital bank account, we're talking about being able to pay our bills. So, payment in our apps and systems, platform and also, we're talking about credit card, that comes the partnership with Visa and they are all going in parallel because we need to launch everything together. We have been saying that we are going to launch everything this year. We do not want to give you a precise month of the year.

We want to have the flexibility as soon as we launch for the public, everyone will know for sure. What I can tell you is that, we've been working very, very hard to speed up the process in terms of the credit card with Visa for example, we already have more than 30 people working on it, in our spreads. We're hiring more people and things are evolving, really well. It's moving faster than our initial plan.

OK, that's what I can tell you. We already have some beta test, so hopefully it's going to be sooner than later. Hopefully, but in this year.

Carlos Lazar

Go ahead. Go ahead. Go ahead.

Guilherme Benchimol -- Founder and Chief Executive Officer

It's important information that we had already launched the move to anticipate the fund, the quote of the funds and we're charging the best interest rate ever in Brazil. We're charging just the CDI, just the interest rates in Brazil. If you will anticipate your quote so it's something.

Bruno Constantino -- Chief Financial Officer

The -- it's Dutch Express and LeMichi Express if you redeem your funds. We can provide you credit at the lower spreads in the market already, it's up and running and it's working. And despite the market volatility we didn't have any NPL there, of course our credit portfolio is still small because we have just started this business. But is ramping up really well and the same thing with the Limity Express that it's just margin lower in Brazil.

It's also up and running working, if you're client of XP and you want to get a margin allowance, we're going to be more than happy to quote and give you a price and get your investment with us as a collateral and give you the money to do whatever you want, to reinvest, to buy a house, whatever you want, we are ready to offer you that. And that's another interesting point because this product basically it's very common for US or European investors. But in Brazil it doesn't exists for real, only for very high net worth individuals. And one explanation probably the main explanation for that is because the high interest rates that we always have.

When interest rates go down to 3% to 2% per year, it changed completely, the environment and the way of thinking. It takes a while for people to realize that. But it's going to happen and we're positive about those two products that Guilherme just highlighted.

Carlos Lazar

OK, let's get another question here from Victor Vitar. Can you please talk about the wealth management launch and how it fits with the overall business strategy? How do you believe that you're going to be competing with the banks?

Bruno Constantino -- Chief Financial Officer

The wealth management. The wealth service business the one that we launched and we announced last month. That's again, think about XP as compete ecosystem and platform when you think about investments. So, when you think about investments either you want to have IFA to help you with your investments.

You want to have internal advisor from XP. You want to do everything yourself, totally digital and that's it. Anyway, you want to invest or you want to have another advisor like a private banker that has his or her own business that wants to plug in our ecosystem and then you instead of paying rebates from the investments you do, you want to pay a specific amount based on your assets, total investments that you have. We have all kinds of business models because we understand people are different.

People have different needs and different way of thinking in terms of investment. So, either way what you think it's better for you, we're going to be able to serve you the best way we can and we're going to work hard to be the best alternative in the market, in all segments. The wealth services business it's one more business that we understand we can disrupt these private banking business as we did, with the IFAs. We also considering I'm talking about that, we also there's was news on the newspapers in Brazil.

We're innovating with global funds. We just closed this partnership with Wellington we have their funds in our platform for Brazilians to invest abroad Brazil and being able to reach an investor an assessment management company with more than BRL 1 trillion of total assets of total assets, so that's something that we're providing even more products, good products for our clients. We already have more only in that specific segment we have more than BRL 3 billion just new I'm talking about international products in our platform and we believe it's the size of this industry it's huge, its massive and it's something that Brazilians are tasting right now. The very high net worth individuals maybe those already were able to invest.

But the broader investors in Brazil they're not using too and they're getting these too, the lower interest rates. So, all of that added together it's what we believe to be a powerful ecosystem when we think and talk about investments either in Brazil or globally speaking.

Carlos Lazar

One final question here, especially from a client, Ikatori Chendri. What are the main risks that you see that can change or impact the results forecast for 2020?

Bruno Constantino -- Chief Financial Officer

The main risks. Our risks, we think about risks all the time. It's part of our job. One risk that we are always thinking about is how to improve our platform because as you look at the number of clients that we have and the pace we've been growing and also with the volatility in the market and all the activity in the market growing exponentially as well, when you add all of those things we need to accelerate the pace of improvements in our platform.

That's a must. We already have and had these mindsets and we had a roadmap for 2020 and what the crisis did, it made us anticipate. We established this group in -- technology that worked 24 for 7. They're still working to make all the improvements.

The good thing about is that, now our platform is the capacity that our platform can hold with all the clients growth and trading together and accessing market data together is a number that we expect it to reach by the end of this year with all the improvements. So, we anticipated a lot. We were able to do that because we have these fantastic employees that are committed with our purpose of the company, that the way people donate their sales to make things better for our clients it's really something else and we had the proof during the crisis with that and but that's still a worry. So, I'm talking about risks.

We keep looking at that on a daily basis. I'm thinking another risks. Again, in terms of results we can have volatility because the product mix can shift from one quarter to another depending on the macro scenario, the macro environment. That is something that can harm or benefit in the short-term the results.

but when we look at the long-term we shouldn't be worried about that because at the end of the day as we have only a fraction of the market when we think about investments and most of the investments are concentrated in five banks in Brazil, 90% are concentrated in five banks and 80% of the total money invested in Brazil as I said is in fixed income and most of that money in bad fixed income products. We believe that we're going to keep attracting clients and net new money to our platform just because our value proposition is much, much better for the client and so win-win situation here. So, the mix might shift. But in the long run we don't see that as a problem because will have to invest in something either a fixed income product, funds or equities, as structured NOLs, diversified, gold, abroad, international portfolio managers, whatever.

We have everything in our platform to offer our clients. I don't know if there is something that you...

Carlos Lazar

OK, that is perfect. Thank you, Bruno. Well with that I'm going to go back for the presentation. I'm going to conclude this part, this Q&A session.

So, Andre, if you can please go for the presentation once again for us to conclude the conference call. Thank you.

Bruno Constantino -- Chief Financial Officer

Thank you very much, Lazar and thank you all for all the questions.

Guilherme Benchimol -- Founder and Chief Executive Officer

Whenever we have a big challenge, I think about where we came from. Starting a company from scratch with no money or support from anyone, it strengthened as human being and as entrepreneur. We know that nothing resists us determination, humbleness, resilience and long-term view. Crisis are always a challenge but they were meant to be overcome.

Our team is more committed and motivated than ever and I'm convinced that we will leave this moment, even strong. Thanks again.

Duration: 69 minutes

Call participants:

Carlos Lazar

Guilherme Benchimol -- Founder and Chief Executive Officer

Bruno Constantino -- Chief Financial Officer

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