February 25, 2024

Millionaire loses XP as 90% of Americana shares plunge | capital Cities

XP would have lost about R$125 million as Americana’s assets were written down; The accounting write-off should affect the 2023 result

While most major banks decided to provide (recover) Americana debts at the end of 2022, mediation XP It has not yet written off the R$125 million it lost due to transactions with the retailer.

During the conference call with market analysts, XP executives said that savings of R$125 million should take place in the first quarter of 2023 and that this would reduce net income for the period. The effect should be around 15% of net profits for the first three months of the year. Calculations from UBS BB’s analysis team, based on what was said on the conference call.

Unlike banks, which extended credit directly to Americana, XP had debt securities, such as bonds, and retail store stock in their custody. Part of this was in the portfolio due to a regulatory obligation and part was in custodial custody – that is, the brokerage firm had purchased these assets from clients to pass them on to other clients.

Before the brokerage occurred, Americana reported an accounting problem of R$20 billion on the balance sheet. From there, the retailer’s shares began a staggering decline already down 90%. Debt securities have also become zero value, as this liability will be included in debts that will be reduced and renegotiated in the judicial recovery process.

From day to night, XP found itself with a “monkey” in its hands. If it decided to release the provision at the end of 2022, as the banks did, the company would have suffered an even worse result last year.

In the fourth quarter of 2022, XP reported a profit of R$783 million, which is 24% less than the same period in the previous year. In the year’s accumulated result, the result has been stagnant.

Revenue and fundraising were lower across all lines (both with retail clients, such as small investors, and wholesale, which includes large investors). In this year’s combined result, financing shrank by 10%.

XP’s own actions are a testament to how disappointing the outcome was. In the trading session following the release of the balance sheet, the brokerage firm plunged 20% on the New York Stock Exchange, where it has listed its capital. In the past six months, XP has lost nearly 40% of its market value.