Inter & Co, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Business Model: Combined growth and profitability with a virtuous cycle, leveraging a complete product offering, best-in-class UX, low-cost structure, and strong share in services.
• 2024 Highlights:
  • Credit: 100% digital payroll offering accounts for over 50% of new underwrite; consumer finance 2.0 portfolio scaled.
  • Products: Forum launched in Q3 2024 with millions of users; commerce platform combined commerce with finance; Loop loyalty program surpassed 11 million clients.
  • Global Expansion: Reached 3.9 million global account clients; launched dollar credit cards.
  • Team Hires: New talents added to finance, business, legal, and other teams; promotions and new board members.
  • Execution of 60-30-30 plan: Successfully executed the second year, key to continuing growth and innovation.

Segment Performance

• Banking: TPV increased 45% year over year to a 1.5 trillion reais run rate in 4Q24. PIX transactions totaled 1.1 trillion reais for the year, with Inter & Co, Inc. gaining 14 basis points in PIX market share to reach 8.3%.
• Credit: Loans reached 41 billion reais, a 33% year-over-year growth. FGTS and home equity loans grew over 50% each. Credit cards surpassed 11.8 billion reais, with 10% quarter over quarter and 25% year-on-year growth. Personal loans, mainly payroll, are growing with digital underwriting.
• Investments: AUC increased 54% yearly, with active clients growing to over 6.8 million. Achieved 20% market share in Tesouro Direto investors.
• Insurance: Had remarkable performance in 2024, reaching over five million active contracts and more than five million units sold, with a 312% growth year-over-year.
• Marketplace: Net revenues grew 79% year over year, GMV grew 42% to nearly five billion reais, with 7% of GMV in 4Q24 from buy now pay later.
• Global Expansion: Reached 3.9 million clients using the global account, with deposit balance increasing 52% year over year. Launched dollar credit cards and new investment products.
• Loop (Loyalty Program): Finished 2024 with over 11 million clients, expanding options for earning and redeeming points.

Guidance

• Loan Growth: Expect to continue growing loan book near 30% level despite macro challenges, with diversified credit portfolio and good collateralization.
• NIM: Expect NIM to continue trending upward, with positive trend in NIM 1.0 and 2.0, and marginally positive to CDI movements due to hedging and loan mix.
• Efficiency Ratio: Committed to bringing efficiency ratio to 30% range as per 60-30-30 plan, with ongoing cost reduction initiatives.

Risks

• Macro Environment: Uncertainty in Brazil's macroeconomic conditions and interest rate environment could impact loan growth and margin.
• Competition: Intense competition in the financial services sector could affect market share and profitability.
• Asset Quality: Potential increase in delinquency if underwriting standards are not maintained, affecting cost of risk.

Question and Answer

Q: Mario Pierry asked about loan growth near 30% level and NIM behavior in rising rate environment.

A: João Vitor Menin stated they have a diversified credit portfolio and good collateralization, and Santiago Stel mentioned hedging loans and positive NIM trend despite rising rates.

Q: Tito Labarta asked about expense growth, efficiency, and capital base.

A: Alexandre Riccio and Santiago Stel discussed commitment to efficiency ratio, expense control tied to revenue growth, and capital allocation plans.

Q: Gustavo Schroden asked about loan-to-deposit ratio and cost of risk.

A: Santiago Stel responded on deposit growth and mix, and expected cost of risk to stay around 5% to 5.2%.

Q: Yuri Fernandes asked about taxes, fees, and dividends.

A: Santiago Stel explained tax normalization, Alexandre Riccio discussed fee income trends, and João Vitor Menin talked about dividend payout balance between growth and shareholder reward.

Q: Eric Aito asked about NIM breakdown, treasury results, and credit card portfolio.

A: Santiago Stel and Alexandre Riccio discussed NIM components, treasury impact, and credit card portfolio strategy to shift to interest-earning products.

Q: Pedro Leduc asked about credit card volume and capital gains.

A: Alexandre Riccio explained credit card portfolio strategy to reduce delinquency and increase interest income, and Santiago Stel discussed capital gains from InterPact acquisition.

Q: Neha Agarwala asked about consumer finance portfolio and private payroll loans.

A: João Vitor Menin and Alexandre Riccio discussed positive trends in consumer finance 2.0 and interest in private payroll loans, emphasizing underwriting and growth potential.