Inter & Co, Inc. (INTR) Earnings Call Transcript

The incoming chief brings many years of industry experience. On top of that, we rolled out a fresh leadership framework known as DAC, which stands for Direction, Alignment, and Commitment. That effort had backing from our board of directors as well as outside advisors Howard Gutman and Nicola Calicchio. Together, this depth of expertise and cultural fit put us in a position to create a vibrant, forward-looking atmosphere and execution, which in the end drives Inter's success over the long term. At this point, I'd like to hand things over to Santiago, who will take you through our business highlights. Many thanks.

Thanks, João. Hi, everyone. It's a pleasure, as always, to be here and walk through what we accomplished this quarter. We're happy to report yet another exceptional year marked by expansion and profit. For another time, among Brazilian financial institutions serving more than 20 million customers, we stood out as the one growing quickest. That underscores how strong our brand is and how appealing our platform has become. Alongside drawing people in, we've watched them go deeper in their relationship with us; this December, we logged more than 21.5 million daily sign-ins. That works out to roughly 15,000 every minute — a meaningful jump from the 17 million logins per day we saw last December. On top of that, we handled 32,000 financial transactions each minute, which added up to close to 1 billion transactions across December. Such remarkable client engagement shows just how well our platform delivers. With an NPS holding steady at 85 points across multiple years, it also underscores the value generated by the interplay among our seven verticals, giving users a smooth experience. All year long, we turned in a record-setting showing both in bringing on new clients and in getting them active. We brought in 7 million new clients — our strongest annual result to date. That matters a lot, considering how mature Brazil's market is, with the majority of people already bankarized. Quality stays a top priority for us. Out of those new clients, 4.4 million turned active, which lifted our overall activation rate to 58% and pushed our total active client base to 25 million. Continuous upgrades to our super app drive these results — from improving onboarding and client services to sharpening communication strategies, targeting, and hyper-personalization, we've focused on giving our clients a smooth, engaging experience. These better activation rates are fueling substantial growth in transaction volumes. During the fourth quarter, our TPV rose 27%, hitting BRL 1.8 trillion in run rate. Pix transactions came to roughly BRL 1.5 trillion for the year, pushing our Pix market share to 8.5%. What's more, our transaction mix keeps shifting, with credit card volume exceeding debit card transactions for many consecutive quarters. That change contributes positively to greater interchange fee income. Notably, our TPV levels across cohorts keep improving as newer clients show more activity, transacting quicker and more often than other cohorts; on credit, before Santi goes deep on specific metrics, I want to call out three main topics: portfolio growth, private payroll loans, and credit cards. First, on our portfolio, we posted an impressive 36% annual growth, staying disciplined about ROE targets and keeping a balanced mix of secured and unsecured loans. About two-thirds secured, one-third unsecured. Second, on private payroll loans, we — this has been the year's main highlight, and our view on the product stays positive. We got to a portfolio of close to BRL 2 billion with somewhere around 400,000 to 500,000 clients. That demonstrates the power of our digital distribution and our capacity to scale a new product fast. Third, regarding credit cards, we're seeing solid movement as customers shift away from simply being transactors and into the portfolio that generates interest income — an effort we refer to as reshaping. Interest-earning products, or IEPs, currently account for more than 23% of our credit card portfolio, compared with 19% a year ago. During the fourth quarter, greater liquidity in the market helped stabilize the reshaping process. Even so, plenty of room remains to sustain the momentum we witnessed in 2025. Santi will walk you through the details of our robust loan book performance. Turning to the next page, we delivered yet another quarter of impressive market share gains. Our aim of reproducing Pix's success across other products is in motion, and home equity has already moved ahead of Pix. The progress this quarter is clear. Across every one of our businesses, market share keeps growing steadily. I'm confident we will keep bolstering our market position as additional products exceed the growth benchmark that Pix established. In closing, I'd like to emphasize that our seven verticals, together with our continued dedication to ongoing innovation, are what drive these exceptional results. Every vertical is essential to powering our growth, operating in a seamless, interconnected way that boosts client value and compounds profitability. That strong ecosystem is what distinguishes Inter and pushes us ahead; at this point, I'll pass things to Santi, who will take us through our financial results. Thank you.

Thank you, Alexandre, and good morning to all of you. I'm delighted to walk you through one of this year's most significant accomplishments, which is the expansion of our loan book. It rose 36% compared with a year earlier, and the quarterly increase sped up to 10%, equivalent to 40% when annualized. Let me now break this down by segment. To start, on the real estate front, mortgages were up 48% year over year, and home equity loans advanced 35%. Regarding private payrolls, we hit BRL 2 billion, versus close to nothing when the year started. Third, in credit cards, we posted 29% growth alongside sound risk management and steady gains from the reshaping strategy, which is boosting monetization and profitability. Broadly speaking, our aim has been to push deeper into credit penetration and, because of that, keep raising monetization. At this point, I want to call attention to how our asset quality metrics have evolved, since that shows the way we're delivering results through our credit underwriting strategy. The 15- to 90-day NPL ratio saw a 10 basis point gain, dropping from 4.1% to 4.0%, whereas the 90-day past due loan portfolio rose from 44.5% to 4.7%, largely driven by what's happening with the private payroll product, where the earlier cohorts have crossed the 90-day threshold and are now showing up in that metric. We got ahead of this trend by bringing provisions forward, which lifted our coverage ratio from 136% to 146% across the first nine months of the year. If we zoom in on credit cards specifically, NPLs keep performing strongly, which confirms the ongoing enhancements to our underwriting and collection models. Lastly, NPL formation and Stage 3 formation were likewise affected by the private payroll portfolio, which started showing up in those stages as we had anticipated. Our cost of risk ended the year at 5.3%, which represents a 10 basis point improvement, driven mostly by the robust performance of our credit card portfolio. Turning now to our funding franchise, we turned in yet another solid quarter of expansion, up 32% versus a year ago and 7% from the previous quarter, hitting close to BRL 73 billion, with an average balance of BRL 2,100 per active client. The expansion over the course of the year came mainly from time deposits, supported by the elevated Selic rate and the sustained success of My Piggy Bank account, our offering that makes fixed income investing simpler for clients. When it comes to transactional deposits, we enjoyed a strong quarter, with a 10% increase that pushed us past the BRL 20 billion threshold. As for loans to deposit, during this quarter we managed to allocate additional capital toward funding growth, which pushed our loans to deposit ratio up from 64% to 66%, and we still have plenty of room to put our excess liquidity to work. Our sound funding mix keeps translating into a key competitive edge, namely our low cost of funding, which stays an industry-leading figure among Brazilian banks and fintechs. In this quarter, our cost of funding came in at 65.6% of CDI, better than the 68.2% recorded in the prior quarter. One thing that stands out is how this edge has held up even while the Selic rate stayed at elevated record highs over a long stretch; that durability demonstrates the power of our funding approach and strengthens our capacity to run efficiently under varying macro and monetary circumstances. Turning to revenues, we put up a robust showing in 2025, with gross revenues totaling BRL 15 billion, which represents remarkable growth of 45% compared with a year earlier. That scale speaks to the size and momentum of our business as we keep expanding. Net revenues likewise produced meaningful gains, up 31% versus the prior year and landing at BRL 8.4 billion. The leading force driving this expansion was our credit portfolio, which pushed net interest income up 41% year over year; that pickup came from solid results in payroll loans, credit cards, mortgages, and home equity loans, every one of them important segments where we have achieved considerable scale and efficiency. Where fees are concerned, net fee revenues climbed 9% over the year; that increase was tempered by accounting rule changes made early in the year and by greater monetization of certain fee lines, such as Inter Shop, via net interest income following the launch of the buy now, pay later product. Turning now to unit economics, stronger client engagement is fueling quicker monetization throughout our boards, particularly via private payroll loans, the overhaul of our credit card portfolio, and larger transaction volumes. Consequently, our net RPAC hit BRL 35.1, the highest figure we have ever recorded. Our mature clients show still more upside, producing BRL 91 in net RPAC, which further highlights the opportunity that lies ahead. By pairing this robust monetization with our low cost to serve of only BRL 13.8, we posted our greatest gross margin per active client ever, arriving at BRL 21.2 in this quarter; now let us take a close look at our net interest margins. Both our NIM 1.0 and NIM 2.0, the latter of which leaves out the non-interest results of credit cards, keep rising quarter after quarter and keep setting new records. We have lifted our risk-adjusted NIM by an average of 15 basis points each quarter; in this specific quarter, two main drivers gave our NIMs a positive boost: first, private payrolls, the largest contributor to that growth, and second, credit cards, which also did well as the reshaping strategy keeps delivering results. That said, we encountered some headwinds during this quarter too. The first was lower inflation, which weighed on income from our real estate portfolio, and the second was a greater number of business days, which drove up our funding expenses. Taken together, these results meant our NIM grew at twice the pace of earlier quarters, demonstrating that consistency in our credit underwriting strategy is rewarding us by letting us capture a growing amount of value from our balance sheet. Last, our assets to equity ratio, which rose from 7.9 to 9.4, demonstrates the optimization of our capital structure, which remains heavily under-levered. Shifting to the expenses side, total expenses increased 25% on a year-over-year basis. Looking at the quarter-over-quarter comparison, three things were at play. First, administrative expenses: they were up 8% versus the prior quarter and 19% compared with a year earlier, which mirrors greater transaction volumes as our super app keeps scaling. With the business growing so quickly, we stay committed to renegotiating agreements with key vendors so that transaction costs come down further and efficiency gets better. Second, personal expenses went up because of seasonal effects tied to profit-sharing provisions and the annual collective agreement, plus the seniorization of our team. Even with those rises, headcount has held steady at roughly 4,100 employees throughout 2025. And third, depreciation amortization, up 33% from the previous quarter, or 5% compared with a year ago, mostly from a one-off impairment tied to POS terminals. Turning to operational leverage, we delivered yet another year of progress. Consequently, our efficiency ratio came down to 45.5% from 48.4%, an improvement of almost 300 basis points during the year. Those efficiency gains stem from our digital approach, process optimization, and disciplined cost initiatives; and finally, I couldn't be more excited about how far we've come on the path to greater profitability. As the page shows, we hit BRL 1.3 billion in net income this year and crossed an impressive milestone of 15% ROE in the most recent quarter. Even more striking is how consistent our performance has been, something the chart makes plain; it's an achievement that makes us proud and shows the strength of all our work done with discipline and consistency, always chasing excellence. With our platform performing better than at any point before, and our virtual cycle getting stronger and bigger, we're highly enthusiastic about what lies just ahead. At this point, João Vitor will come to the stage for the closing remarks. Thanks to everyone.

My thanks go out to the team for backing us along this path and for the tremendous work they deliver each and every day, which is what allowed these results to happen. It's my strong conviction that our platform has never been in a stronger position, and that gives me great confidence that 2026 will prove yet another outstanding year for Inter. At this point, I'll pass things to Rafa so the Q&A can begin. Many thanks to all of you.

Prior to kicking off the Q&A portion, I want to extend an invitation to all of you to come be with us in New York City on May 11th for our Investor Day. This will be a great chance to look back on the amazing path we've traveled and to offer some perspective on what lies ahead that we're creating together. You'll receive an RSVP through email; if you're unable to be there in person, a live broadcast of the event will be available. Looking forward to having you with us. So, let's begin the Q&A portion. Mario Pierry has the first question. Mario, the floor is yours.

Hello, everyone. Nice work on these numbers. João, I'd like to pose something to you, and I'll use the occasion, since this is essentially the annual release. You've now completed a second year of executing the 60/30/30 guidance you provided. Looking at the figures for those first two years, ROE sits at the halfway mark, 15%. Your target is 30% by 2027. On client count, you're also at the midpoint. But on the efficiency ratio, I either haven't witnessed or had anticipated quicker movement. During this quarter, when we examine it, efficiency got worse. So my question is this: what's your level of confidence in the 60/30/30 plan? Do you, well, do you expect any revisions to that guidance at the Investor Day you just announced for May 11th? And regarding efficiency, what steps can you take to ensure it begins moving the right way? The biggest objection I hear from investors is how slowly the efficiency ratio is improving. Thanks.

Alright, Mario, thanks for asking that. I'll do my best to cover all of it. First, it's worth noting that our 630/30 plan was introduced 3 years back; it was designed as a 5-year plan, and it remains one, and we're glad that those initial 3 years turned out to be a huge win. To quickly go over what you mentioned, we went from a ROE of 0% to 15% as of now. We had 25 million clients at that time, and now we have 43 million. Efficiency was at 73% when we started, and now it sits at 45%; also worth noting, Mario, is that our credit portfolio has grown to more than twice its size since then, going from BRL 22 billion to BRL 48 billion. With that said, at Inter we're certain that the digital banking model — which, by the way, we came up with 10 years ago — is poised to deliver growth, ROE, and efficiency in line with what this plan aims for. That's a key point to emphasize. I also think that 2026, our fourth year into the plan, will be an excellent year when it comes to moving nearer to those KPIs. We're strongly dedicated to that. As for timing — when and how we'll reach each of those particular goals, clients, efficiency, and ROE — we'll dig deeper and examine that further at our Investor Day in New York, and I'd like to use this moment to invite everybody to come, either at NASDAQ or online. Turning to your other question regarding efficiency, what do we think could assist us there? In our earnings presentation, the deck, we brought up certain efforts related to technology, innovation, and AI. We're confident that Inter is extremely well positioned, Mario, to capture all the advantages from these emerging developments in tech and innovation that are arriving. We think we possess all the data, all the back end, all the most advanced technology to support us on the cost side. And finally, as Santi tends to say, our aim is to keep growing our expenses; remember, we're still a company focused on growth, but our expenses will increase by less than our revenues, which generates operating leverage. Thanks so much, Mario.

Appreciate it, João. I want to pick up on the point you made at the close, all right? Since you're a growth-oriented business, so let me... and you keep using up capital, so allow me to ask about your dividend strategy, and the reasoning — I realize you made a payment last year too, but what's your thinking when it comes to dividends, and considering the capital you hold right now, and, right, if your loan book is expanding 36%, with ROE sitting at 15%, right? That tells me you ought to keep consuming capital. So could you share with us, like, what we should anticipate regarding dividends going forward? Thank you.

Mario, that is a great question. So, to sum things up, for 3 consecutive years now, our dividend payments have been made at a 20% payout ratio. Our view is that this ought to be the pattern ahead, provided it doesn't get in the way of the execution plan or the growth of the business. When it comes to capital, I'll hand things over to Santi, who will explain the way we balance growth, portfolio, dividends, and capital both at the bank level and at the holding level so the business keeps running. Santi, please go ahead and jump in.

Appreciate that, João. Morning, Mario. Regarding capital, let me restate: our capital exists on two tiers — the bank and the holding. At the bank tier, we sit at 14.4%, and during this past year, in 2025, we managed to optimize that capital structure via issuance of Tier 1s and Tier 2s, which represent a more evolved approach to handling our capital structure. Beyond that, roughly BRL 2 billion of excess capital sits at the holding level, equal to about 4.5 percentage points of CET1, which, when combined with the local CET1 held at the bank, brings us to a CET1 of approximately 19%; so we remain in a phase of consuming capital; that statement, Mario, we agree with, though it happens at a slower pace quarter by quarter, and we are getting there. We're nearer to achieving capital neutrality; however, we want to shift the excess capital from the OpCo over to the Holdco, since holding it at the holding level is more profitable, and that was designed intentionally, you know, back in 2022 when the holding was set up. So it's progressing as planned. Thank you.

Thank you!

Our next question comes from Tito Labarta. Tito, please go ahead.

Morning, and thanks for having me on the call. I'd like to pick up where Mario left off, if I may. When I think about it, efficiency was one of the biggest question marks on our side too. Particularly, I'd say, when it comes to fee income — my understanding is that Inter Pag's consolidation was in play throughout the full year, right? Now that we're looking at the quarter on a year-over-year basis, though, that factor should no longer be in the picture, and yet fees didn't really grow in any meaningful way; we're seeing fee expenses act as something of a drag. So I just want to understand: what's behind that sharp jump in fee expenses? And what should we be expecting from fee income down the road? At what point do you expect it to start expanding once more, in a way that tracks more closely with the growth of loans? What's causing us to keep running into some of those same headwinds? Thanks.

Hello. I appreciate the question. Xandre here. As for fees, I'd say there are several topics worth covering, correct? To start, the fee income ratio closed out last year at 25%. That represents a decline from the 30% recorded in 2024, and in some sense I see that as a favorable issue to deal with. NII grew substantially. The NII portion rose by 45%, which wound up putting some downward pressure on the fee income ratio. Now, turning to the actual fee income figures—Q4 came in at a healthy BRL 579 million. There were several bright spots: card TPV rose over 15% for the year, and the investments unit performed well, with AuC up 27%, 8.7 million active clients, and over 10 million insurance contracts, so insurance is also doing nicely. Those are the positives. On the negative side, we did face some headwinds. Intershop was somewhat strained because of everything the Chinese competitors are doing in Brazil, and that created pressure. Even so, our active client count came out ahead. Intershop functions largely as a tool that draws clients into establishing their main bank accounts with us, which makes it quite significant; and even with revenue pressure affecting Intershop, we recorded a 3% gain in active clients. Turning to the broader picture, nominal total fee income revenue grew roughly 9% over the past year. When you factor in some of those nonrecurring items we recorded—there were several tied to capital gains across 2024 and 2025—that contributes roughly three percentage points to the figure, which puts us back at approximately 13. And if we were to include Resolution 4966 from the central bank once more, together with the adjustments it obligated us to make, we'd be looking at growth of about 15%, which is a much more robust number. Essentially, that restores growth to its typical 15% level for 2025. We have numerous programs underway designed to deepen client engagement across our product lineup; our goal is to get back to what you might call hyper-personalization. We're rolling out a range of solutions for conversational selling, inside the app as well as outside it, and considering app-based options such as WhatsApp, which would let us move more fee income-related products and rebuild growth. We're seeing encouraging prospects here as we look toward 2026. Thank you.

Thank you, Andy. That was quite useful. Perhaps I'll just ask something further, since when we consider the Inter Loop costs along with the expenses tied to services commissions, correct? What I mean is, those represented something of a drag, correct? During the quarter, one of them rose by 34%, while costs linked to services and commissions climbed 10% over the same quarter; and is that the area where you observe that kind of strain originating, from the Chinese competitors, from an Inter Shop? And how ought we to regard that increase in fee-related costs going forward? Could there be space to make that better?

Tito, much of that connects to it. We regard it as a favorable cost. Take Loop, for instance — it's a significant engagement engine we employ with our customers, with numerous campaigns designed to activate and secure primary banking accounts. Furthermore, in various respects, we deploy cashback to drive credit sales. What this means is that we certainly monitor the figure, the costs themselves tied to fees, yet ultimately we are optimizing for net income by leveraging the instruments at our disposal to generate more sales, anticipating an improved bottom line at the conclusion of the calculation. That covers somewhat what we observe in that area; and regarding Loop specifically, it's something we feel great enthusiasm for, since it's among the primary... it is our loyalty program, and it is developing considerably. We're attracting many customers into the base to engage with it, and once they do, they usually become users with it as their main banking relationship. So that represents our perspective on that figure. In short, we are monitoring it closely. We'll maintain it in check, though we'll continue employing it to optimize sales and expansion across the various products.

Alright, that's quite useful. Appreciate it, Santi, for taking the time.

Yuri Fernandes is up next with a question. Go right ahead, Yuri.

Thanks, Rafa, and congratulations to João, Alexandre, and Santi for the step-by-step, such as the gain in margins and ROE. I'd like to ask about what might be the elephant in the room, at least based on my conversations here with investors about provisioning; and I realize provisions compared with bad loans formation, Stage 3 or NPL, can be volatile, correct? And I believe coverage was used this quarter that may have aided your EBT; and what we did here was attempt to examine it by product, simply to determine which products have Stage Three formation getting worse, how you are accumulating provisions for those products. This time around, the culprit wasn't what you'd usually expect. Credit cards have tended to play the villain in recent quarters, but not now — this quarter it leaned more toward personal loans. We saw Stage Three formation tick up on personal loans. On top of that, you're setting aside a bit less in provisions for that product, and the same goes for real estate. Real estate came in low as well. That's nothing new, though — my sense is that with collateral behind it, it's a safer product. So could you shed some light on what drove formation this quarter, how we should be looking at the cost of risk, and how we ought to be thinking about coverage? I'm just trying to get a handle on this, you know, since I think part of the pushback is that your provisions came in lower than Formation's, and what I've said in response is that you set aside more during Q2 and Q3. So I'm simply trying to grasp how all the pieces fit together here. Thanks so much.

Good morning, Yuri, and thanks for asking. Santi here. I'll handle this one, and I'll speak in broader terms, addressing the items you brought up. So, to start, the quality of the assets in our loan portfolio is coming in right on plan and in line with the credit underwriting approach we're carrying out. When we examine the composition of our portfolio and track how growth trends shift from one quarter to the next, what we're observing regarding asset quality aligns perfectly with what we had expected. Taking each portfolio individually, beginning with private payroll: the earliest groups of these offerings are now reaching maturity, having crossed the 90-day threshold, which accounts for their movement into nonperforming loan status and the resulting rise, along with the increases in NPL formation and Stage 3 formation ratios. The returns generated by this product, or its monetization, far outweigh this degree of delinquency, so the ROEs we're achieving there leave us satisfied. Still, there's a real cost here, particularly when you examine the credit quality numbers tied to this specific product. Where credit cards are concerned, and you're right about this, the fourth-quarter showing was genuinely solid. That period typically holds up well because cardholders tend to have more cash on hand, so they often make up some ground as the year closes. That made the performance in that segment quite robust. Turning to SMEs, nothing significant has shifted quarter over quarter. This portfolio, as you're aware, is mostly invoice discounting, so it stays fairly consistent across time. We haven't seen anything material change. On mortgages and home equity, you've got that right too. We saw a rise in stage three balances there, driven by a more conservative and integrated perspective on our clients. Allow me to clarify what I mean by that. Up until Q3, we kept mortgage loans that were being paid on schedule within their existing stage, without factoring in credit deterioration or events tied to the same borrower across different products. Beginning in Q4, when a client's mortgage is performing but other credit lines are more than 90 days past due, we likewise moved that mortgage portfolio loan into stage three; this adjustment was applied cumulatively, covering the entire balance within this one fourth quarter, and produced an additional BRL 140 million in stage three balance for this real estate portfolio. That's a catch-up we carried out to align with having best practices in place, consistent with a set of initiatives we're rolling out alongside our new CRO, who has been assisting us on this front. Had we adjusted this stage three formation factor coming from the mortgages, formation would have come in at 1.65%, which is flat compared with the previous quarter. Now, turning to 2026, to address your question about how we should view cost of risk, we keep evolving with a credit mix consistent with the one we had in 2025, which is something we'll see because we aim to capitalize on opportunities as they arise. Still, the way we look at it, credit mix in 2026 shouldn't differ too much from what it was in 2025. We'll operate with a cost of risk that ought to land between 5.5% and 6%, depending on how events unfold. A lot of people expect that asset quality will come under some strain throughout the industry, and that could move us up toward 6%. If that pressure turns out to be... not very severe, we might land closer to 5.5% instead. And again, to repeat what we consistently say, what we're after is the highest risk-adjusted NIM rather than the lowest possible delinquency figures, and we get there by providing products that are also sound for our customers. That means we don't have to rapidly turn over our client base as time passes. Our product contributes value to the economy, to those clients, and to us too, because the ROE on these offerings is quite accretive. Hopefully that addresses your question. Did that take a little more time?

That was really strong, Santi. Thanks a lot. And I suppose I'll just go over it again to confirm I have everything straight.

Mm-hmm

... regarding that 5.5 to 6 figure, I'd say it aligns with what people expect. The company, as I recall, has mentioned those numbers previously. As for the quarter itself, a one-time effect hit the real estate portfolio. If you set aside that effect from the risk model adjustment, your Stage Three would remain largely unchanged from one quarter to the next, and that ought to assist with formation. Broadly speaking, asset quality doesn't worry you. In the 50 to 90 day bucket, delinquencies are getting better. And risk-adjusted margin, which I consider a solid metric, should likewise perform favorably. Would you call that an accurate summary, Santi? Anything I've left out?

Excellent. Spot on. Thank you, Yuri.

No, Santi, I appreciate it.