Wires

UPDATE 1-Brazil's XP to boost banking unit after IPO; shares pop in U.S. debut

Carolina Mandl and C Nivedita

debut@ (Adds CEO comments, analyst)

Dec 11 (Reuters) - XP Inc, Brazil's largest digital broker, saw its shares soar 25% in its Nasdaq debut on Wednesday, and the company said it will use the $1 billion proceeds from the share offering to boost its banking unit.

The company's chief executive, Guilherme Benchimol, told journalists on a call that by widening its range of financial products, including offering credit cards for the first time, XP aims to grab a bigger chunk of its current clients' assets.

Benchimol estimates that consumers invest 45% of their savings at XP, with the rest parked with retail banks. "Banking concentration in Brazil is still brutal," he said.

Founded in 2001 as an independent financial adviser, XP has been challenging Brazil's top five banks, which hold 82% of total assets. With more than 1.5 million clients, XP has 350 billion reais ($83 billion) under management.

The company's Class A shares were trading at $34 in early afternoon, up from its initial public offering price of $27. The offering raised about $1.96 billion, not considering overallotments. The $34 trading price valued the company at nearly $19 billion, or half the value of Banco Santander Brasil SA, the country's third largest private-sector lender.

"I think regulations in Brazil have been loosened on the financial side. So it is opening up more competition," said Jeff Zell, a senior research analyst at IPO Boutique. "And a lot of what American investors are trying to grab (is) that projected growth from the newly open markets."

Benchimol said XP may consider acquisitions and an international expansion, but that is not its main focus at the moment.

This was the second time XP pursued an IPO. In 2017, it had been about to list its shares when it struck a deal with Itau Unibanco Holding SA, Brazil's largest private-sector lender, which paid 6.3 billion reais in cash and shares to buy a 49.9% stake.

According to XP's latest regulatory filing, the company had total revenue of 3.44 billion reais ($819.75 million) in the first nine months of this year, while net income attributable to owners of the parent company in the same period was 692 million reais ($164.90 million).

XP's shareholders include private equity firm General Atlantic LLC and founder Guilherme Benchimol.

Goldman Sachs, JPMorgan Chase & Co, Morgan Stanley, Itau BBA, XP Investments, BofA Securities, Citigroup, Credit Suisse and UBS were the underwriters for the IPO. ($1 = 4.1964 reais)

(Reporting by Carolina Mandl in Sao Paulo and C Nivedita in Bengaluru; Additional reporting by Abhishek Manikandan; Editing by Shailesh Kuber and Leslie Adler)