Inter & Co, Inc. Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Platform Differentiation: The financial Super App has a differentiated platform with a 4.8 rating in the Apple Store, offers products globally, and has 35 million clients with 15 million daily logins.
• Innovation Initiatives: Hyperpersonalization drives conversion and sales. AI-powered Inter Shop Concierge launched for e-commerce growth. The Forum content platform, launched last quarter, has over 5 million users.
• Financial Performance: Loan book grew 7% to surpass BRL 38 billion. FGTS and Home Equity loan balance reached record levels over BRL 6 billion. NIMs reached record levels, and ROE was 11.9%.
• Business Vertical Growth: Business accounts increased 22% year-over-year to 2.2 million, representing 10% penetration in Brazilian businesses. Focus on small and medium-sized businesses for higher activation rates and ARPAC.

Segment Performance

• Banking: TPV increased 46% year-over-year to BRL 320 billion. PIX transactions totaled BRL 294 billion in the quarter, with Inter capturing 8.1% of the market. Credit card TPV volumes surpassed debit, driving a 38% year-over-year increase in interchange revenues.
• Credit: Consumer Finance 2.0 portfolio (including PIX financing, Buy Now Pay Later, and Overdraft) saw a solid 52% quarterly increase, reaching BRL 503 million in portfolio. Growth is expected to continue with improved user experience.
• Marketplace: GMV grew 59% annually to BRL 1.4 billion. Hyperpersonalization boosted conversion rates, and Buy Now Pay Later accounted for ~6% of total GMV.
• Loyalty: Reached 10 million Loop clients. New redemption options (e.g., PIX, Insurance, Soccer tickets) were launched, with Loop clients generating twice the ARPAC of non-Loop clients.
• Investments: AUC exceeded BRL 122 billion, with over 6.3 million active clients. Piggy Bank (Meu Porquinho) achieved 2 million clients and 48% quarter-over-quarter growth in AUC, contributing nearly 7% of total funding.
• Insurance: Sales surpassed 1.3 million, with 3.4 million active contracts and 115% year-over-year growth in a high-margin vertical.
• Global: Deposits, AUC, and AUM reached $1.4 billion, with 3.6 million clients in the US using the Global Account for investments and services.

Guidance

• Consumer Finance 2.0: Expect the portfolio to reach ~BRL 700 million by year-end, with continued growth in 2025 and beyond, monitored for delinquency.
• Efficiency Ratio: Aim to progress towards the 30% target of the 60/30/30 plan, leveraging revenue growth from cross-selling.
• Credit Card Growth: Plan to accelerate credit card growth by increasing limits and enhancing financing options like PIX Financing.
• Global Expansion: Intend to expand the Global Account via bank-as-a-service model to other markets, starting with strategic evaluations.

Risks

• Macro Environment: Impact on client repayment ability, requiring cautious growth monitoring in consumer finance products.
• Regulatory Changes: 4966 Resolution may affect NPL formation and provision expenses, with NPL and Stage 3 formation trends expected to increase.
• Integration Challenges: Inter Pag integration initially impacted expenses, but synergy gains expected from cross-selling and cost optimization.

Question and Answer

• Q: Tito Labarta asked about Inter Pag incorporation and expense growth.

A: Santiago Stel discussed efficiency ratio progress, noting factors like inflation, structured notes, and Inter Pag synergy potential.

• Q: Ricardo Buchpiguel inquired about Consumer Finance portfolio growth.

A: Joao Vitor Menin expected ~BRL 700 million by year-end, with cautious growth monitoring delinquency.

• Q: Pedro Leduc asked about credit card cohort performance and international US operations.

A: Alexandre Riccio discussed credit card cohort improvement, and Joao Vitor Menin talked about Global Account expansion plans via bank-as-a-service.

• Q: Gustavo Schroden asked about credit appetite and 4966 Resolution impact.

A: Joao Vitor Menin emphasized conservative credit growth, and Santiago Stel explained NPL formation related to 4966.

• Q: Andrew Geraghty asked about NIM outlook.

A: Santiago Stel mentioned NIM trend continuation based on capital allocation and portfolio efficiency.

• Q: Neha Agarwala asked about PIX financing trends and Global Account expansion.

A: Joao Vitor Menin discussed PIX financing cautious growth due to learning, and Global Account expansion plans via bank-as-a-service