Good evening, everyone. I'm Antonio Guimaraes, Investor Relations at XP. It is a pleasure to be here with you today. On behalf of the company, I'd like to thank you all for the interest and welcome you to the 2023 third quarter's earnings call. This quarter, we had a strong set of results, which will be presented by our CEO, Thiago Maffra, and our CFO, Bruno Constantino, who will also be both available for the Q&A session right after the presentation. And before we begin our presentation, please refer to our legal disclaimers on page two, on which we clarify forward-looking statements. Additional information on forward-looking statements can be found on the SEC Filings section of the IR website. So now I'll turn it over to Thiago Maffra. Good evening, Maffra.

Thanks, Antonio. Good evening, everyone. Thank you for joining us today on our 2023 third quarter earnings call. It's a pleasure to be here with you tonight. I will start with a brief introduction to this quarter's highlights and key updates. In the third quarter of 2023, we had a strong quarter with increased top line growth and profitability across different metrics. This quarter, despite the tough macroeconomic conditions that led to weaker organic net new money, we ended the quarter with BRL1.1 trillion in client assets, reaching all-time high records in most of our investment KPIs. For this quarter, as a result of our continuous focus in executing our strategy, we achieved the highest net income in our history at BRL1.1 billion, up 11% quarter-over-quarter and 5% year-over-year. Our discipline in cost control has reflected in the best efficiency ratio in the last three years at 37.3%, down more than 400 basis points year-over-year and 100 basis points quarter-over-quarter. As a result of our efforts, ROE rose 58 basis points quarter-over-quarter, reaching 22.6%, the highest during the year. And last but not least, our diluted earnings per share increased 7% quarter-over-quarter to BRL1.96, also the highest in our history. Moving to the next slide, I want to reinforce our three focus points. First, leadership investments by protecting and expanding our core business. In this quarter, we have incorporated Modal's financials and operations which should be fully integrated in 2024. At the same time, we have reached an all-time high in different investment KPIs, enhancing our capacity to reap the benefits of our leadership position, hand-in-hand with more positive market conditions. Second, superior product offering translated into the continuous improvement of our new verticals performance. New Verticals revenue grew three times in the last two years and now represents 11% of our total last 12 months revenue. We are certain that expanding the product offering into new verticals was the right decision, enabling us to diversify our revenues and deliver growth even in a tough environment for the investment market. This evolution confirms our initial thesis of the importance of having client investments first. For example, in credit cards, we estimate we have 50% of principal out of our total cardholder base. This is a clear example of many opportunities we will explore ahead in the proper time. Lastly, client focus, high quality and excellence in everything we deliver is a key pillar to achieve our long-term goals. We remain focused on that maintaining the NPS above 70 at the top of the industry once again this quarter. High NPS directly translates into high share of wallet, and we see this consistently in our client base. Our strategy is centered around providing advisers with the best tools, technology and products so they can better serve our clients. In this direction, we have evolved our incentive plans to advisers, providing them with more intelligent models and systems in order to improve clients' asset allocation, resulting in superior experience for retail investors.

Thanks, Maffra. Good evening, everyone. It's a pleasure to be here with you again. Starting with our gross revenue on the left part of the slide. This quarter, we reached record quarterly revenue in our history. BRL4.4 billion, a 17% growth quarter-over-quarter and 14% growth year-over-year. After discounting Modal's revenue contribution of BRL161 million, XP ex-Modal revenue would be BRL4.2 billion, 10% higher than our previous record of BRL3.8 billion reached in the third quarter '22. The sequential growth in gross revenue was mainly led by retail, which was responsible for 45% of the growth quarter-over-quarter. Corporate and Issuer Services represented 37% of the growth quarter-over-quarter. Both retail and corporate and issuer services benefited from capital markets activity, especially in DCM, which we will explore in detail on the next slides. On the right, in terms of revenue mix between segments, the highlight is corporate and issuer services with the strongest growth quarter-over-quarter, increasing its relevance by 57% from 7.6% in the second quarter to 11.9% in the third quarter. On the next couple of slides, we are going deeper into retail revenue, first, focus on retail core and then on new verticals. When we look at our core equities, fixed income and funds platform, the main highlight for the quarter is fixed income. We had a strong sequential improvement to BRL718 million, all-time high fixed income quarterly revenue, representing a growth of 24% quarter-over-quarter. Our previous record was in the second quarter '22 when fixed income revenue reached BRL580 million. As you know, fixed income revenue has two main components. Secondary trading and distribution of primary offerings. The latter had a growth of 100% quarter-over-quarter and was five times the revenue of the first quarter when we experienced a dysfunctional corporate bond market due to the impact of Americanas. We underwrote some offerings during this turbulent moment, aiming to distribute them whenever conditions return to normal. This had an important contribution to the record quarter. We continue to see a healthy DCM pipeline, but we expect the third quarter fixed income revenue to be the best quarter for the year. Funds platform had a slight decrease of 5% quarter-over-quarter, reaching BRL323 million, as expected, considering the second quarter had performance fees, which is seasonal and recognized at the end of every semester. Excluding revenue from performance fees from second quarter results, the third quarter was 8% higher quarter-over-quarter. And lastly, equities revenue increased 6% sequentially to BRL1.1 billion, positively impacted by Modal, approximately half of the growth and a continuous gradual improvement over time in equities. Our new verticals continue to grow well, reaching a total of BRL442 million in the third quarter, up 52% year-over-year and 11% quarter-over-quarter, enhancing our diversification and cross-sell opportunities. The main highlight of the quarter has continued to be cards revenue, reaching BRL259 million, a growth of 12% quarter-over-quarter and 77% year-over-year. When we compare our quarterly growth in TPV with the market based on recent data released by ABAX, XP grew 11% quarter-over-quarter compared to 7% from the market. We expect cards to remain outperforming the other new verticals in the following quarters. Coming back to total retail revenue. We have updated this slide to include third quarter results. The two key messages we delivered last quarter still stand. Number one, XP is a cyclical grower company. Core retail revenue is the best demonstration of this cyclicality. The peak of BRL8.3 billion in revenues in 2021 has not been reached yet again. In the third quarter '23, the last 12 months, core retail revenue improved from last quarter to BRL7.6 billion, reducing this gap that was BRL1 billion last quarter to BRL740 million this quarter. It is worth remembering that in 2021, our clients' assets were BRL815 billion. Our active clients were 3.4 million and our IFAs were 10,300. As of the third quarter this year, the same KPIs are BRL1.1 trillion of clients' assets, 4.4 million active clients and 14,300 IFAs. The development of the main KPIs in investments fostered the way for potential upside as the market recovers. And number two, new verticals continue to help offset macro headwinds, diversifying our business and increasing the resilience of our model. If we can compare the last 12 months revenue with 2021 revenue, new verticals have increased approximately 182%. In summary, there is potential for growth as the market recovers, although we expect a more gradual recovery, considering the pace of interest rate cuts, the terminal interest rate debate, and the impacts for riskier assets, and we keep increasing the resilience and diversification of our business model. Corporate and Issuer Services, together with retail fixed income were the highlights of third quarter '23 results. This shows the importance of our strategy to keep diversifying our revenue stream, opening new addressable markets as corporate, for example, and connecting everything with our core retail. This quarter, Corporate and Issuer Services revenue reached an all-time high record at BRL519 million, growing 83% quarter-over-quarter and 19% year-over-year. Corporate had its better quarter year-to-date, probably the best quarter for the year, reaching BRL197 million of revenue, benefiting from derivative demand from our corporate clients, also related to DCM activity in the period. Issuer Services reached the highest level in 11 quarters at BRL322 million, a growth of 105% quarter-over-quarter and 41% year-over-year. The positive result was led by DCM activity, as I already said, rewarding some underwriting we did with good corporate quality names in the first quarter this year when the DCM market became dysfunctional after Americanas events. We do not expect the same magnitude of revenue for Corporate and Issuer services in the fourth quarter. Total SG&A, excluding revenue from incentives, has increased to BRL1.5 billion, as already anticipated in our previous quarter. The main impact on the third quarter were inclusion of Modal expenses, which represented BRL111 million and the seasonal expenses related to the Expert Event around BRL60 million. The ratio between people and non-people expenses was 68% people and 32% non-people, in line with the long-term trend of 70% and 30%, respectively. When we gave our SG&A guidance between BRL5 billion and BRL5.5 billion for the year, Modal was not being considered. Even including Modal in our numbers, the SG&A guidance remains the same. As we said on the last earnings call, we remain focused on cost discipline, keeping both efficiency and compensation ratios near all-time lows since our IPO. The last 12 months efficiency ratio decreased from 38.3% to 37.3% quarter-over-quarter, close to our lowest level since the fourth quarter '19 when we reached 37.1% efficiency ratio. Compensation ratio decreased from 26.8% to 25.7% quarter-over-quarter, the best level in 12 quarters sequentially. It is natural to assume higher levels of comp ratio when compared to 2020 when our share-based compensation program was just kicking in. Our cost control discipline is a priority and has played an important role in our operating margins, which we are going to talk about on the next slide. EBT, a good proxy for earnings power, reached BRL1.157 billion this quarter, an 18% growth year-over-year and 20% growth quarter-over-quarter. It is our all-time high quarterly EBT, beating the fourth quarter '21 EBT at the peak of the last bull market. Our EBT margin has also improved in the quarter, increasing 86 basis points year-over-year and 74 basis points quarter-over-quarter, driven by operating leverage. Excluding Modal, our EBT margin would have been 28.8%. Our year-to-date EBT margin is in line with our annual guidance between 26% and 32% from 2023 to 2025. Our net income also benefited from operating leverage reaching BRL1.087 billion this quarter, up 11% quarter-over-quarter and 5% year-over-year. Despite the best quarterly net income in our history, the growth has been lower when compared to EBT growth. We expect this to be the trend given our accounting tax expenses should be higher going forward in the next years to come. In terms of net margin, the third quarter '23 presented a 26.3% margin, a 123 basis points decrease quarter-over-quarter and a 218 basis points decrease year-over-year. The export Modal and higher tax expenses in the quarter are the main reasons behind lower net margin sequentially. Excluding the impact from both Modal and Expert in the quarter, net margin would have been around 100 basis points higher and flat quarter-over-quarter. Our return on average equity has continued to grow sequentially. In the third quarter '23, our annualized ROAE reached 22.6%, increasing 58 basis points quarter-over-quarter despite Modal's effect, which added BRL2 billion to our equity. Excluding Modal, our return on average equity would have been 23.4%, an increase of 143 basis points 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 platform. In the second quarter '23, our capital ratio was 24.2%. We ended the third quarter '23 with a capital ratio of 22.1%. The reduction quarter-over-quarter was mainly driven by the dividend payment of 320 million dollars 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 in December this year of 73 cents per share, around 400 million dollars. Now both Maffra and I will be happy to take your questions.

Great. Thanks, Bruno. So now we're moving onto the Q&A session. The first one today is Mr. Jorge Kuri from Morgan Stanley.

Can you hear me? Hello? Can you hear me? Hello?

Hello, now we hear you, Jorge.

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, and 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.

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 a 100, 150 basis points cut on SELIC rate. If you look at 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, and fixed income. 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.

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.

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.

We are optimistic about the future, especially since interest rates have started to decline. We think that this could lead to better performance in riskier assets. When these assets perform well, they tend to attract more investors and increase flows into those funds. As the largest funds platform in Brazil, we have insight from portfolio managers. Currently, the performance of multi-market funds is underwhelming. For these funds to improve, it is essential for interest rates to go down. We believe that we will see an improved market environment, and the focus will be on the performance of riskier assets rather than just the level of interest rates.

Great. Thanks for that. Congrats again.

Thanks, Jorge.

Next one in line is Mario Pierry from Bank of America.

Good afternoon, everyone. I have two questions. The first is a follow-up to Jorge's question. Can you elaborate on the productivity of the IFAs? Your inflows for the quarter were BRL14 billion, which represents a 60% decline year-on-year, despite a 25% expansion in your IFA base. It seems that high interest rates have had a negative impact, but productivity among your IFA network has significantly dropped. Could you discuss what you believe is affecting this and how it might improve? Additionally, could you provide insight into the inflows during the quarter? Were they consistent throughout the months or did you notice a decline in September? My second question is brief and pertains to Modal. Notably, your headcount rose by approximately 700 people, while Modal only acquired about 200,000 clients. Do you anticipate any cost synergies with Modal? Have any already been achieved? Some additional insight on this would be appreciated. Thank you.

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 in expanding the IFA numbers, the internal advisers because we believe investments are made by humans, by advisers, so 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 on July 1st. So we are at the very beginning of the integration. And for sure, we have a lot of synergies. And probably the easiest way to answer your question, we believe already in 2024, the deal will be accretive on an earnings per share basis. So on earnings, we will already be accretive in 2024. Yes. For that to happen, we need Modal and Modal's clients because we have already migrated part of the clients to XP and Rico brand to deliver a bottom line above BRL150 million. So that's the threshold to make it accretive in EPS base and we believe we can achieve that next year.

Okay. Let me ask a couple of follow-up questions then. Like what was the net impact of Modal this quarter on your bottom line? You talked about revenues and SG&A. What about the bottom line?

Was not relevant, something around BRL20 million.

BRL20 million. Okay. And then to go back on the question about the inflows, were the inflows relatively stable throughout the quarter? Or did you see like a drop in September or an acceleration in September? And also, how do you think about your market share, right, like because the inflows, the organic inflows decelerated quite a bit. We saw data from some of your other peers that show like higher inflows than what you had. So some people are starting to speculate if you have already reached a mature market share that it will be very difficult for you to continue to gain share? How do you feel about that?

Yes. In response to your first question, Mario, we prefer not to provide monthly updates. We find that this can be misleading for investors due to the significant volatility in our business on a quarterly basis, let alone monthly. As for your second question, we remain confident about our potential. We are laying the groundwork and can provide more insights regarding our affluent clients, where we hold the highest market share in terms of client assets on the XP platform. The affluent client scenario reflects the industry performance, fund performance, and the benefits of staying in cash, which we have already discussed. This is a cyclical aspect of our business, and we are continuing to invest because of that cycle. The situation will improve at some point, and we will be prepared and larger. Our ecosystem has grown significantly, as illustrated in the slide I mentioned for the third consecutive quarter. It highlights the potential in the retail sector, which is not yet at a record high in revenues. However, in terms of key performance indicators like investment figures, client assets, active clients, and the number of advisers, all are at an all-time high. Therefore, we see opportunities for further market share growth.

Okay. Thank you very much.

Thanks, Mario. And now next one is Thiago Batista from UBS. Batistam can you hear us? So let's move to next one and try to get back to Batista later. Next one then is Mr. Tito Labarta from Goldman Sachs.

Hi. Good evening, Antonio. Good evening, Maffra, Bruno. Thanks for the call. Thanks for my questions. A little bit of a follow-up, but maybe basically a little devil's advocate, Bruno, and that slide. You mentioned on slide 12, right, where the core revenues are down despite all the investment that you're doing. I understand the cyclicality in the business. But you can look at this that you've made all these investments and your revenues are down, right? So aside from interest rates, do you think there's anything else at play there, maybe competitive environment has gotten tougher, which is also why your revenue is down and as rates do come down, do you need rates to get below that 9% level to go back to those all-time highs? Just to understand how sensitive it is to rates. Is there anything else going on in terms of competition or something else that could potentially limit the upside that you potentially see when things improve?

Sure, Tito. First, I want to emphasize that we have made significant investments in new verticals, leading to a revenue increase of 182% when comparing the last 12 months to 2021. Our investment in advisers for the core business has been focused on bringing in individuals from outside the financial industry who are looking to change careers. We leverage the educational aspect of our company to support this transition. We originally started as an education business, and we are using Modal's training programs to develop new advisers. We believe this industry relies heavily on relationships and human interactions. By bringing in the right people with strong soft skills and providing them with the necessary tools to understand the financial market, they can build trust and relationships with clients. This approach requires minimal investment. Furthermore, we see significant potential and high operating leverage in our core business whenever the macro environment becomes favorable. Can you remind me of your second question?

I think it's somewhat connected to the level of rates. Do you believe rates need to drop below 9% to see that change in 2021, where rates were decreasing from around 2%? How low do you think rates need to go to realize the benefits?

It's hard to say a number, honestly, because we don't know if rates are above 10%, but riskier assets are performing really well and delivering returns higher than that. It's a good environment. If we need single-digit interest rates for that to happen, then we will have to wait for single digits. So I don't have like a precise answer to your question. But I think we are, it is a good trend, but at a slower pace than we would like. But again, we do not control that.

Sure. Understood. Thanks, Bruno. Maybe just one quick follow-up on the inflows. I think in the past, I know your net inflows are low, but you mentioned in the past that your gross inflows are actually much higher, right? So you are seeing outflows. Any color you can give on gross inflows you're doing?

Yes. It's stable. It's not improving, but it's also not deteriorating further. Where we have more volatility in terms of gross inflows and outflows is in the corporate and company clients that with the threshold of BRL700 million of annual revenue, it's allocated into retail client assets. So there we have more volatility.

Hey, guys. Good evening. So a couple of questions. First, can you remind us what is inside of the revenues and the main contributions there? And why we saw such a strong pace this quarter, both in the sequential comparison in year-over-year. And also, we saw this quarter your effective tax rate come up both in the accounting and the managerial view. Can you remind us why is that? What's the driver of the ups and downs? Thank you.

I appreciate that, Gusan. Other revenue includes everything we cannot categorize within retail, institutional, corporate, and insurer services. The primary source of revenue in this area comes from the remuneration on our own cash through asset liability management. Additionally, there are various items that do not align with the previously mentioned segments. Specifically, in the third quarter, we experienced some one-time events that boosted revenue, which we do not expect to recur in the upcoming quarters. For instance, the termination of a pack had a financial benefit associated with it, resulting in a net effect of zero for EBITDA, but it positively impacted revenue by approximately BRL40 million while also increasing SG&A. Regarding the effective tax rate in the third quarter, it was largely driven by capital markets activity, particularly the revenue from broker-dealer operations. If you examine securities placement in our accounting income statement, you'll notice it's at an all-time high, and broker-dealers operate under a 40% tax bracket, which elevated the accounting effective tax rate. Over a longer timeframe, we anticipate that earnings before tax will grow more quickly than net income, largely because the effective tax rate is expected to rise moving forward. However, keep in mind that there will be quarterly fluctuations.

Hi, everyone. Congrats on the numbers. I have a question on your credit card business. We've been able to see a very strong growth in revenues. But I wanted to know if we should be thinking about this business as an important bottom line contributor in the future or not, right? I asked that because as far as I know, your clients that invest a lot probably have to offer like cash back or invest back. You have a lot of benefits. Your clients do not go into revolving, so I just wanted to try to understand this still, if it's possible to generate a good amount of bottom line in the future with that business. And also trying to understand your risk appetite, right? We just saw, say, the market as a whole going through problems, I think clearly, you didn't face the same, let's say, headwinds, but just trying to understand if you could increase your risk appetite and eventually attract more clients that don't have a lot of AUC with you using the credit card to do that, right? So thanks a lot.

Thank you for the question, Rosman. Currently, the contribution margin from credit cards is still negative, but we anticipate this will shift to a positive contribution by the end of this year or the beginning of next year. As you know, with credit card business, there is a J curve involved as we ramp up issuing new cards, and we are nearing the point where we expect to see positive results. Regarding non-performing loans (NPL), a significant portion of our portfolio, approximately BRL4.5 billion to BRL5 billion out of BRL7 billion, is collateralized, resulting in a very low NPL rate. For the entire portfolio, the NPL over 90 days is nearly 1%. Currently, we have provisions set at 2%, which means we have twice the provisions compared to our actual NPLs. This is largely due to the customer profile we have. Our NPL rate is considerably lower than the market average. We've also been expanding the Rico brand portfolio, which has a higher NPL but maintains a strong ratio of revenue to provisions, making both metrics very favorable.

No. Great, Maffra. If I may just another question here on another topic, right? I think Bruno was talking about that the company has excess, let's say, capital, right? And you actually paid a lot this year, right? If we add buybacks and the dividends, I'm assuming here, let's say, BRL4.5 billion, which is more than 100% the net income, right? Naturally, I don't think that, that's sustainable over time. But just trying to understand if it's your idea to over time to keep paying dividends and/or kind of buybacks on a recurring basis in the future. Thanks.

You want me to take that, Maffra? Yes, the answer is yes. We are going to keep returning capital to shareholders through buybacks or dividends. And what I mentioned in the presentation, when we look at our capital ratio at XP Inc. level, we ended this quarter, third quarter above 22%. So it's too under-leveraged. We are conservative in terms of our balance sheet. We are not going to be where the banks in Brazil, for example, that we compete against usually are with capital ratio around 14% to 15%. But we see room to leverage a little bit more, especially considering that we have a bank. Now we are under corporate restructuring in our group to have the bank as the parent company of the Prudential conglomerate with the broker-dealer below it and that's something ongoing in the Central Bank and that will give us the possibility to use the bank better. And by that, I mean, as the main vehicle for funding instruments because a bank, as you know, can fund itself cheaper with a strong depth in terms of market achievements. So going forward, we are going to keep our profitability. We expect to keep growing our earnings, and we do not need to retain capital to keep growing. And with that in mind, yes, you can expect us to keep distributing capital to shareholders as we move forward. Great. Thanks, Bruno and Maffra.

Thank you, Rosman. Now let's try to connect with Batista again from UBS. Batista, please.

Hi, guys. Can you hear me?

Yes.

Yes.

I have a question about XP's profitability. You've mentioned in the past that we should reach 30%, but when do you think this is achievable? Is it in 10 years, five years? I would like to understand the timeline. When we compare to international peers, some, like Fineco, have an ROE of 30%, while others have a lower ROE around 20%. I'm trying to figure out if it will take three, five, or ten years to reach that level. My second question is a follow-up regarding the new money. I know you have answered many questions about it, but how negatively have the latest LCA, LCI, and LIG impacted XP? Also, is part of your corporate structure designed to issue LCA? I understand that LCA is challenging, but at least LCA. Is this connected to your corporate structure?

I'll start with the question about ROE. We haven't set a specific target for ROE. The 30% you mentioned, Thiago, is essentially a mathematical calculation based on the second quarter earnings results. If we remove the excess capital from the equation and discount the post-tax remuneration from the BRL977 million net income in the second quarter, then annualize that new net income and divide it by the new equity, we arrive at approximately 30%. This is just a numerical representation to indicate our potential as we progress and begin to distribute more capital to shareholders. We will maintain a conservative approach to our balance sheet concerning liquidity and leverage; that will not change. However, we plan to utilize our resources more effectively, leverage more, and reduce our capital ratio over time. I prefer not to provide a precise timeline for achieving the potential 30% in the future since it could be seen as a form of guidance. What I can share is that there is an ongoing plan for corporate restructuring focused on maintaining a controlled efficiency ratio, which is essential. We will remain focused on improving net income while managing our capital ratio. As I mentioned during the call, our goal is to finish next year with a capital ratio below 20%, which we can only accomplish by distributing capital to shareholders. Now, regarding the question about net inflow, was that your second question, Thiago?

Yeah, the second question is about the LCA, LCI, and LIG. How bad things are.

Yes, the impact is difficult to quantify. There is currently more than BRL 2 trillion in cash within the system. When banking funding instruments are favored due to macroeconomic conditions, it turns the focus more towards balance sheet operations rather than pure investment activities. XP lacks the balance sheet strength that our competitors possess, and we do not want to rely heavily on that. During such times, we have fewer products like that available. However, we do offer a variety of fixed income products that yield good returns. We attempt to offset this with other offerings I have previously discussed with investors. For instance, we reached an agreement with one of the major banks to purchase some LCI from them, allowing us to distribute billions in just a few months. Our clients show a strong appetite for these types of products, especially in the current market conditions, but we do not have the same balance sheet capabilities as a bank, and that's a certainty.

Last follow-up, sorry, Bruno. But in your corporate structure to try to become a bank is it trying to issue at least LCA or not?

Not really. That's not the plan. The strategy has evolved beyond investments, allowing us to offer other products to help our clients move away from traditional banks completely. We are committed to this strategy as we proceed. Establishing a bank enables us, through corporate restructuring, to position it as the primary entity in Brazil for funding. This allows us to leverage more effectively and reduce funding costs. For instance, we have a corporate bond issue at XP Investimentos S.A. of about BRL 2 billion. It makes sense because the bank can issue a financial bill at a lower cost with ease. This aligns with our strategy for improved corporate structuring and is a natural progression. We are advancing as we develop the bank, but the focus is not on creating a traditional balance sheet business.

Hi. Congratulations on the result and thank you for taking my questions. Just had a quick clarification on what you mentioned about the Modal transaction. So what was the impact this quarter? And when do you expect the transaction to be accretive? And what is the level that is required to be accretive? Just clarification of that is very clear. Thank you so much.

As Bruno mentioned, and thanks for your question, Neha. As Bruno mentioned, the net income impact was close to BRL20 million positive, okay and we expect the due to be accretive in 2024. As Bruno mentioned, to be accretive, we have to make 150 million net income or more, okay? So that's what we expect for 2024. Okay. Super clear. Thank you so much, Thiago.

Hello. Thanks very much for taking the question and apologize for the background noise here. A quick one on the DCM revenues. Clearly, there were some big DCM deals in the quarter. Was there also an impact to retail revenues from those, I guess, on the distribution side? And could you help us quantify it. Thanks.

Yes. DCM, as you know, there is a secondary trading part and the primary issuances part, that is the channel fees. In this quarter, we do not disclose, Geoffrey, exactly the numbers between secondary and primary. What I can tell you is that secondary is still the most relevant one, and it was more relevant than primarily in the third quarter this year. But when we compare to previous quarters, the primary component of revenue in the third quarter compared to the second quarter, for example, was approximately double. So, yes, we did have some very good offers in terms of channel fees that helped fixed income to reach these historical revenues in a quarterly basis of BRL718 million.

Okay. Thank you. And then just a quick clarification. The capital adequacy ratio at XP Inc. You've been discussing of 22%, just over 22%, do you disclose the numerator and denominator on that anywhere?

Yes. Basically, our total RWA as we calculated, it would be around BRL78 billion. So basically, we have a balance sheet north of BRL230 billion. So 1/3 of our balance sheet is assets with risk. The other parts, basically, no-risk assets.

Thank you, Bruno, Maffra. I will limit myself to one question just on expenses here. This quarter was a little bit confusing, right? You had Modal, revenues were super strong. And I think this also usually trigger higher expenses. But you are within your guidance, right? Even if we assume another profit similar to the third quarter, you still will be able to deliver your SG&A guidance even with Modal. So just some qualitative tips from you guys. How do you see expenses? Do you believe expenses should, I don't know, accelerate because for some reason, invest more or to normalize, I don't know, compensation for XP? Or no? Or do you see more room for operating leverage and having expenses growing below revenues for 2024? Anything you can share on expenses, I think will help us to understand a little bit the outlook because you already made it clear during the call that revenues are not totally there yet on retail, like there are some improvements here, some improvements there, but revenues are still from my take here a little bit challenging. But on expenses, you are doing a good job. So I would like to hear from you your take on expenses. Thank you.

Thank you, Yuri. Going to your question, as Bruno already mentioned, this quarter, we have some impacts, okay? The first one is export. We have the revenue and we have the expense. We have the pack that Bruno mentioned. And of course, we have a Modal that we consolidated number that we opened at it was BRL111 million, okay? So if we sum up as FX, it's above BRL200 million, okay? So when we look at the year, the projection for the year, we will be delivering the target that we mentioned, the guidance that we gave. We will be there. Remember that the guidance we gave was excluding Modal, and now we are including Modal in the number. And for next year, we don't need to do any big investment, okay, to grow. That's why we have been saying about the operational leverage that we have. We don't need more investments to do more revenues on the core business investments. Of course, for all the reasons we mentioned here about the market, the riskier assets performed and so on. We don't know when we will see this recovery on the retail revenues. But once it happened, we expect to have gains of margin here. And what I can tell you is for next year, we will continue to pursue better efficiency ratios. Of course, we cannot guarantee and we will not give any guidance for that for next year, as we already mentioned. But you guys have our commitment that we are going to pursue even better efficiency ratios in 2024.

Thanks, Yuri, and congrats on the quarter. Thank you for your questions. It was the last one. So we would like to thank you all for participating in the call. We'll be available with the IR team to discuss the results with you later, and have a good night, everyone.