Q3 2025 Inter & Co Inc Earnings Call
Speaker #2: Hello, everyone. I'm Rafaela Vitoria, IR officer at Inter, and I would like to welcome all to Inter & Co's third quarter 2025 earnings conference call.
Speaker #2: First of all, some instructions. This call is also available in Portuguese. To access it, press the globe icon on the lower right side of your Zoom screen, then select the Portuguese room.
Speaker #2: Please be advised that all participants will be in listen-only mode and that the conference is being recorded. You may submit online questions at any time today using the Q&A box on the webcast.
Speaker #2: A replay will be available at the company's IR website. With me on today's call are João Vitor Menin, Inter's Global CEO; Alexandre Rício, Brazil CEO; and Santiago Stel, Senior Vice President and CFO.
Speaker #2: Throughout this conference call, we'll be presenting non-IFRS financial information. These are important financial measures for the company but are not financial measures as defined by the IFRS.
Speaker #2: Reconciliations to the IFRS financial information are available in our earnings release and earnings presentation appendix. I would also like to remind everyone that today's discussion might include forward-looking statements, which are not guarantees of future performance.
Speaker #2: Please refer to the forward-looking statements disclosure in the company's earnings release and earnings presentation. Today, João will discuss Inter's strategy and business overview. After that, Alexandre and Santiago will take you through our financial and operating results in more detail.
Speaker #2: We'll then open the call for questions. I will now turn the call over to João. João, please go ahead.
Speaker #3: Thank you, Rafa. Hello, everyone. I'm excited to share that we have accomplished yet another remarkable quarter of growth. While continuing to build Inter for the future.
Speaker #3: This year is a very special one for us. It marks the 10-year anniversary of the launch of Brazil's first digital account. It's a moment of pride and reflection.
Speaker #3: As we look back to 2015 and remember the challenges we overcame to get where we are today. What makes us even prouder is that we have never lost our essence.
Speaker #3: Creating value for every single stakeholder and truly walking the talk of transforming Brazil's financial system into a better, more inclusive, environment. For our clients, our no-hidden-fees approach and, more importantly, our sustainable credit products offer an inclusive and accessible way to meet their financial needs.
Speaker #3: This has led us to come from zero to 41 million clients in this amazing journey. For regulators, being the pioneer launched the first digital bank back in 2015, we act as a partner of a better financial system, one that is efficient, transparent, and client-focused.
Speaker #3: For our holders, the discipline execution of our 60/30/30 plan allows us to deliver attractive balance of profitability and growth, ensuring long-term value. As shown in your path of growing our ROE.
Speaker #3: For our employees, Inter remains an exciting dynamic work environment where our people are empowered to innovate, grow, and contribute to meaningful change every day.
Speaker #3: As you celebrate a decade of innovation, remain true to our disruptive spirit. Inter is built for the future, and I believe that our next decade will be even more exciting than this one.
Speaker #3: As we celebrate our 10-year anniversary, I'm sure that our mission statement was the secret sauce that made it possible. Our mission statement is crystal clear: to create a world where interactions between people generate more value.
Speaker #3: This mission captures what drives us every day. We create products, services, and solutions that simplify lives and empower people and build stronger connections. Whether through innovation, flawless execution, or a customer-first approach, every interaction brings meaningful value.
Speaker #3: Our mission is deeply rooted in our culture. Which is built on four core pillars: first, is customer centricity. Always prioritizing our clients' needs and delivering great experiences.
Speaker #3: Second, we lead through innovation, we are always looking ahead, to anticipate our clients' needs. Third, our operational excellence. This means we aim on flawless execution for everything we do at Inter.
Speaker #3: And fourth, our winning mentality. By delivering the extra mile and achieving great results together, as a team. By living these pillars every day, we are setting the foundation to make our mission a reality.
Speaker #3: With these pillars as our foundation, my focus for the next steps is clear. Keep innovation alive within the company by leveraging AI, hyper-personalization, and introducing new features to our app.
Speaker #3: Today, we are at half 380 AI initiatives live at Inter. For perspective, during our 2024 Tech Day, we had just 80. Second, driving our global expansion.
Speaker #3: Enhancing our global account with new products and exploring opportunities in new markets to strengthen our international footprint. Three, investing in our talent team. By developing our executives, bringing market experts, and continuously nurturing the cultural pillars that make Inter unique.
Speaker #3: I'm tremendously proud of what we are building and the ability we have to create meaningful value for every client we serve. With that in place, I will pass to Shandy and Santi, who will present our operational and financial performance.
Speaker #3: Shandy, please go ahead.
Speaker #4: Thank you, João. Hello, everyone. Guided by our core pillars, we are on track for another outstanding year of execution. We're the fastest growing large financial institution in Brazil, among those with over 20 million clients.
Speaker #4: Pursuing what we believe is our market fair share, our net promoter score remains at the excellent zone at 85 points. These results come from clients who use our platform at a high frequency.
Speaker #4: In September, we saw more than 20 million daily logins, which is 14,000 per minute. On average, we process 20,000 financial transactions per minute, totaling over 850 million in a single month.
Speaker #4: This level of engagement shows how well our platform works and proves the value created by the synergy between our seven quarter, we set a new record and accounts opened.
Speaker #4: Performance in new active clients: We welcomed 2 million new clients, our highest number ever, beating the second quarter of 2022. This reinforces clients' view of Inter's strong value proposition.
Speaker #4: Our focus on quality remains strong, of these new clients, 1.2 million were active, bringing our overall activation rate to 58%. I'd like to stress three aspects that make us confident with the future.
Speaker #4: First, we have improved cost onboarding dynamics. And that's seen throughout the onboarding improvements helping us increase the number funnel, so several of new accounts.
Speaker #4: Second, we have been running an efficient client early activation journey. And that explains why we can consistently increase our activation rate. And finally, the sum of these two points is resulting in a fast payback of around two months after clients onboard.
Speaker #4: This engagement volumes. Our active clients transacted over 412 billion reais in our platform, a year-over-year growth of around 30%. A large part of this volume comes from PIX, which is a strong indicator of clients using Inter as a primary bank.
Speaker #4: Moving to our credit cards, volume reached a new record, surpassing R$15 billion for the first time. This represents a 20% growth on a yearly basis.
Speaker #4: This growth in TPV levels is consistent across all cohorts. But our newer clients present impressive results, transacting more and faster than older ones. Moving to our credit vertical, I have three key highlights.
Speaker #4: First, we continue to be disciplined in our strategy of high growth, respecting ROE targets, and maintaining a balanced ratio of secured to unsecured loans. Roughly two-thirds of our portfolio is secured, while one-third is unsecured.
Speaker #4: Second, private payroll loans have been the main highlight of the year, and we keep a very positive view on the product. We reached a 1.3 billion reais portfolio with over 300,000 clients.
Speaker #4: This shows the strength of our digital distribution and our ability to scale a new product quickly. We're also seeing operational improvements coming from data previews and companies' HRs.
Speaker #4: This increases product quality and our confidence in the delinquency levels that we're going to see long term. We also expect clients from the FGTS loan products to migrate to this product, given the similar profile and the new regulatory changes.
Speaker #4: That came in the last few months. And, third, two quarters ago, I introduced the concept of reshaping our credit card portfolio as a key focus for the year.
Speaker #4: We're making good progress in moving clients from being pure transactors to our Inter's turning portfolio. IEPs now represent over 23% of our credit card portfolio, up from 20% last year.
Speaker #4: This is happening through key initiatives like PIX Financing, monthly limit reassessments, and new installment plan offerings. Sant will provide more details on our strong loan book performance.
Speaker #4: Talking about market shares, consistency is the name of the game. We have always used our market share in PIX as an internal benchmark. Our goal was for other products to reach that same level of success.
Speaker #4: This quarter, I'm proud to announce that two of our key products have surpassed that goal. First, home equity for individuals. Thanks to the amazing work of our credit and distribution teams, we're now the second largest underwriter of the product in Brazil.
Speaker #4: We have reached an 8.9% market share in portfolio balance. Second, FX transactions. The success here is driven by the high engagement in our global account and the amazing UX of this product.
Speaker #4: We have reached 8.4% of the market transactions. I have highlighted two products. But this product, this progress is visible across all of our businesses.
Speaker #4: With consistent growth quarter after quarter, I am confident we will keep strengthening our position in the market and that more and more products will surpass the PIX benchmark.
Speaker #4: To finish, I want to emphasize how this outstanding results are powered by our seven verticals and our commitment to continuous innovation. Each vertical contributes to our growth, working seamlessly and interconnected to enhance client value and compound our profitability.
Speaker #4: This ecosystem is what makes Inter unique and drives us forward. Now, I'll pass the word to Santy, who will walk us through our financial performance.
Speaker #2: Thank you, Shande. And good morning, everyone. Moving to our loan portfolio, we deliver another quarter of strong results. Our loan book grew 30% year on year, with quarterly growth accelerating to 9% over the 6% on an annualized basis.
Speaker #2: Within collateralized loans, we achieved an impressive growth, led by private payroll loans. In credit cards, the reshaping strategy mentioned by Shande together with our continuously improving underwriting and collection processes gives us confidence to continue growing at a pace of around 30% year on year.
Speaker #2: Looking at SMBs, we have been prioritizing profitability over long growth, though we see a great potential to accelerate growth soon with the upcoming centralized invoice discounting clearing house known in Portuguese as duplicatas escriturais, which is said to be launched by the central bank early next year.
Speaker #2: Once again, we outpaced the market in our key portfolios. Private payroll, home equity, and credit cards. In payroll and personal loans, we are moving quickly to capture the private payroll market opportunity.
Speaker #2: And in just six months, we built a 1.3 billion reais portfolio from scratch. The overall market also considers public and other personal loans grew 22%, while we reached a growth of 38%.
Speaker #2: In mortgages, we are differentiating our offering through digital distribution and we have been able to grow at 37% on an annual comparison reaching a 9 billion reais portfolio.
Speaker #2: In home equity, we are the number two player in originations, growing 33% year on year. Significantly outpacing the market growth of 21%. And in credit cards, we reached 30% growth, while maintaining our conservative approach to risk underwriting.
Speaker #2: As Shande mentioned, we are also successfully reshaping this portfolio to further improve its profitability. Moving to asset quality, our metrics show strong performance this quarter.
Speaker #2: The 15 to 90-day MPL ratio stayed stable at 4.1%, while the 90-day past due metric improved by 10 basis points, decreasing from 4.6% to 4.5%.
Speaker #2: The credit card MPLs, when analyzed across cohorts, continue to show strong performance, validating the improvement made in our underwriting and collection models. And finally, MPL formation and Stage 3 formation stood at 1.65% and 1.46% respectively, in line with historical trends.
Speaker #2: Here we see the evolution of our cost of risk, which reached 5.35% this quarter. The main driver of the recent increase is the new private payroll portfolio, which requires upfront provisioning.
Speaker #2: The coverage ratio shows the increase associated with those provisions. On the right-hand side, we show an illustrative chart of the return profile of the new portfolio.
Speaker #2: In which we have been investing throughout this year as we build the portfolio, and now past the breakeven point, and from now on we expect high profitability.
Speaker #2: Our funding franchise had another great quarter. Growing 35% year on year, reaching 68 billion reais. This growth was primarily led by time deposits, driven by the higher selling rate and the success of my piggy bank.
Speaker #2: income investing easy for our Our product that makes fixed clients. Our transactional deposits which are a core competitive advantage of our platform also had strong quarter, growing 1.3 billion reais or 7% this quarter.
Speaker #2: And lastly on this page, our active clients are past for the first time ever an average of 2,000 reais in deposits, which is a great milestone that shows how our clients trust our platform with their deposits.
Speaker #2: This strong funding franchise translates directly into a key competitive advantage. Our low cost of funding, which this quarter reached 68.2% of CDI. What we added this quarter is a complementary metric, which fixes the number of business days making the comparison across quarters better.
Speaker #2: In that sense, our ratio reached 65.1%, which was the best one so far this year. Our strong operational performance translates directly into strong revenue growth.
Speaker #2: In that sense, our net revenue reached R$2.1 billion, up 29% year on year and 8% sequentially. The key driver this quarter was our growth in our credit book, with NII increasing 39% in a yearly comparison.
Speaker #2: As already mentioned, this was fueled by strong results in private payroll, credit cards, mortgages, and home equity portfolios. As Shande showed, higher client engagement is driving faster monetization across our cohort.
Speaker #2: As Shande showed, higher client engagement is driving faster monetization across
Speaker #1: shows These are potential as a mature clients are already generating close to 90 . His . When we combine these strong monetization with our to serve low cost of 13.1 , the result is our best ever gross margin per active client , which reached 20.2 .
Speaker #1: We are confident that the success of new products like private Payroll will continue to drive monetization even higher in the coming quarters . Now , let's dive in .
Speaker #1: Our net interest margins . Both our Nim 1.0 and our Nim 2.0 , which excludes the non-interest receivables of credit cards . As consistently showing growth quarter after quarter and achieving new record levels .
Speaker #1: As you can see in the page , we have improved our risk adjusted Nim by an average of 14 basis points per quarter in this quarter .
Speaker #1: In particular , our new was positively impacted by private payroll and credit cards . Given the reshaping of this portfolio . However , we face lower inflation , which impacts our real estate portfolio and higher number of business days , which increases cost of funding .
Speaker #1: With all these impacts , together , our team continued to expand both before and after cost of risk . Lastly , we continue to optimize the use of our capital structure with our assets to equity ratio .
Speaker #1: Increasing from 7.9 times to 9.4 times year on year expense . side , On the this quarter allows us to have a comparable basis given the acquisition of Interpark back in the third quarter of 2020 .
Speaker #1: For our strong cost control focus allowed us to report a expense growth of total 5% quarter on quarter and 16% year on year .
Speaker #1: This growth is approximately half of the pace of our annual net revenue growth , showcasing the strong operational leverage of our business . The quarterly growth in personal expenses reflects mandatory annual salary adjustments , as well as bonus linked to our growing earnings .
Speaker #1: As our business continues to expand rapidly , we remain focused on renegotiating contracts with major vendors to reduce our cost per transaction . Are further improve our efficiency .
Speaker #1: In terms of the result of ratios , our cost control is an efficiency ratio improving from 47.1% to 45.2% . This quarter . This 190 improvement is a very significant one , which demonstrates that the operating leverage of our digital banking model is very promising .
Speaker #1: Finally , I'd like to highlight the progress we've made in profitability this quarter . We reached 14.2% ROE and delivered a record net income of 336 million , a true milestone in our journey .
Speaker #1: What makes this quarter even more meaningful is that we maintain this profitability while investing heavily in innovation , enhancing the client experience , and improving operational excellence .
Speaker #1: These efforts , they are strong foundation as we continue positioning Inter as a class financial institution world . Thank you all . I'll pass it now to Joel for his final remarks .
Speaker #1: you Thank Shunji , and thank after they hearing what shared , it's clear that our powerful ecosystem is running seamlessly and we are exceptionally well positioned within .
Speaker #2: The evolving banking trends . Being shaped by the regulators in Brazil . The focus on sustainable credit , client centric solutions and lowering borrowing costs is perfectly aligned with the inter by design concept .
Speaker #2: We are laser focused on finishing 2025 with strong momentum , setting the stage to start 2026 energized . We are committed to keeping pushing forward , creating value for our clients , partners and , shareholders employees have .
Speaker #2: Let's now open the Q&A session . Thank you all .
Speaker #3: We'll now open the call for the Q&A . We'll take one question and one follow up from each participant . Our first question is from Tito Labarta Tito .
Speaker #3: Your mic is open . Please go ahead .
Speaker #4: All right . Thanks , Rafa . Good morning , Joao . Sandy . Sandy . Thank you for the call . And taking my question .
Speaker #4: I guess my question is more thinking about the the longer term guidance that you've given of the 60 , 30 , right . Because I 30 , mean , you know , trends are looking very healthy , right ?
Speaker #4: Nim is expanding risk adjusted . Nim expanding loan growth , is doing well . Efficiency is improving . And ROE is up to 14% .
Speaker #4: But just to think about , you know , to get to that 30% in the next two years , what else would need to drive that ?
Speaker #4: I mean , you mentioned that you're delivering this ROE despite investing a lot in the business . Do you expect some of these investments to begin to subside or will pay off ?
Speaker #4: And that's going to boost the ROE just because looking at the trends , right ? I mean , I think you've mentioned in the past should continue to expand through next year .
Speaker #4: You're still repricing the loan book , but just help us kind of bridge from where you are today to sort of that longer term view that you had previously given .
Speaker #4: what can And drive that , continued ROE improvement . Thank you .
Speaker #2: John . Vitor speaking . Thank you for thank you for the question . So let me start by saying that we're really we are really happy with what we have achieved .
Speaker #2: Having this six 3030 plan as a guideline for us , for the past , I'd say almost three years . If you recap , we came from a 0% ROE back then to almost 15% .
Speaker #2: Now on a running basis for three Q so this is something that highlights what we have achieved in terms of profitability . Also , the first number of it , 60 , talking about the 6 million clients that we want to achieve this quarter was the best quarter ever in terms of client additions .
Speaker #2: And also October was the best month ever for the past three years . So we're really doing a great job in bringing clients to our ecosystem on efficient on on efficiency ratio .
Speaker #2: Also , this quarter was a very good one . We dropped almost 200 bips in that . So we see that we are on the right direction .
Speaker #2: About the ROE , which is what was our specific question . To be honest , we know that we have a tough environment in terms of silicon different from where when we predict the 630 plan and therefore our credit portfolio exposure today is lower than it was to supposed be .
Speaker #2: But we see very good trends ahead , such as the private payroll loan . We see coming in next year . The the factoring clearinghouse that is going to help us to grow a lot .
Speaker #2: Our exposure to SMEs , which are very excited and without that in place , it's hard for us to to predict if we're going to on be the 30% ROE by the end of 2027 or on , later but the important thing is that the trend is good .
Speaker #2: The team is committed . And last but not least , we do have a very strong a very positive , a very positive room to grow our our our credit portfolio ahead .
Speaker #2: I like to say that it's good that we have been growing at 30% . Ratio year over year , but we still have in most of the portfolios that we operate today , single digits , low single digit and market share .
Speaker #2: that in Without place and maybe with the going silky now , we can grow faster on the credit portfolio that will help us to get to the 30% ROE by end of 2027 , or I don't know .
Speaker #2: Somewhere on 2028 . So very committed , excited . And I that the believe platform is well known for us to keep achieving the six
Speaker #2: 3030 .
Speaker #4: . Very helpful . Thank you for that . I guess maybe just to ask it a slightly different way , but maybe to paraphrase a little bit , what you said would the biggest think headwind you be more macro , just given , you know that rates , as you mentioned , are 15% .
Speaker #4: Is that the biggest headwind to be able to achieve that 30% ? Because execution wise , I mean , you seem to be doing everything that you said , right ?
Speaker #4: So just what the biggest risk to achieving that could be ?
Speaker #2: Yeah , I would say that as of today , the biggest headwind is the . So therefore the for instance , the payroll segment grows slower , the margin and everything grows is lower .
Speaker #2: But as you mentioned , everything that is on our hands , we're doing well . I mean , we're bringing deposits . We're improving asset the side , we're improving the by being efficiency more diligent on the expense , trying to use AI to optimize how we run the machine .
Speaker #2: So that's it . I see that as of today , our our biggest headwind is the is the interest rate in Brazil , right ?
Speaker #2: Okay .
Speaker #4: Very clear .
Speaker #2: a right It's assumption okay .
Speaker #4: Great . Thank you very And much . congrats on the results .
Speaker #3: Our next question is from Gustavo . Gustavo , please go ahead .
Speaker #5: Hi . Can me ?
Speaker #3: Yes .
Speaker #5: Okay . So good afternoon and thanks for for And congrats on the the call . on the high quality results . My question is specifically about the the this higher cost of risk that we , we saw in the quarter .
Speaker #5: You mentioned that it is related to to private payroll loans . While we saw the NPLs totally under control . So my question is this is a new level of cost of risk that we should work , work with for for the coming quarters or the the increase in in coverage ratio that you , you did in this quarter is , is is enough for for the coming quarters .
Speaker #5: Thank you .
Speaker #1: Good morning Gustavo . Thank you for the question . And yes , so what what happens in the in the sequence of factors as we build a new portfolio , a cost of risk picks up first since we have the expected credit loss model and we have to provision upfront .
Speaker #1: And then as the quarters go by , the delinquency starts passing the 90 day mark and then the NPL follows . We haven't seen that NPL increase yet .
Speaker #1: It was very minimal, yet given the life of the book, it is close to six months by now, and the majority of that was built on the second part of those six months, meaning on this last third quarter.
Speaker #1: So the the NPL should start to catch up a bit . of And the cost likely stabilize very close to the current level of around 5.5% .
Speaker #1: But again , as we mentioned many times , we're working . To maximize risk adjusted Nim , not to minimize cost of risk .
Speaker #1: That's the variable aim for us in a sustainable way, as we call it in the interval design. By providing our clients with products that are good for them and tend to lower their borrowing costs relative to alternative products that they have in the market.
Speaker #1: So we think we're outcome there in the in driving the the proper way . The the coverage ratio also anticipates in that way , together with the cost of risk .
Speaker #1: But stage three and Mpls are the ones that follow should see later . We going bit in the that in the up a quarter next without increasing further .
Speaker #1: The cost of risk to the level that we have reported this quarter .
Speaker #5: great , So . I'll follow up on this . A parallel , because private even with this higher cost of risk that you mentioned , product , will show it a slide , nice demonstrating that the product has reached the break even quarter second .
Speaker #5: and And now it positive is at a Right . territory . So my could you share question is us what is the with level of profitability you are delivering in this in this product ?
Speaker #5: If and if there is further room to the improve profitability in the private loan ? Thank you .
Speaker #1: It's super high; by now, we are starting to see the cost of risk or delinquency level converge towards the high single-digit level in the prior cohorts.
Speaker #1: The first few months higher and was was as the months go by and the system starts working , working as it starts was designed originally and then the the cost of risk hits the high single digit with high single This is digit .
Speaker #1: significantly higher than than 30% ROE . What we will , we think will likely is that the happen interest rate on the asset side will probably go down as more competition comes For now , in .
Speaker #1: we're seeing it in in the high threes percent per month . And with that level of of interest rate , the mentioned ROE as I , is highly above the 30% mark .
Speaker #1: It's the highest ROE product we have in the in the portfolio . Nicely . It's 1.3 billion . And counting in the loan book .
Speaker #1: So it starts moving in the name in the in the right as I direction . It's mentioned in the prior question , a product that will the clients have available to go away from more expensive alternatives .
Speaker #1: And this one is one that they can use their income to finance their daily needs or their financing needs in a much better way, which is what we call the Inter by design.
Speaker #1: So it's a really win win product , hats off to the regulators in having it designed this way . We think that the Tam is really significant .
Speaker #1: It should be multiple times more than the public payroll . Tam . Given that you have three times more employees in the private sector than in the public sector , but we'll see how how much it continues growing in the future .
Speaker #1: But so far , we're very pleased with the results .
Speaker #5: Okay , great . Thank you . And congrats on the on the execution .
Speaker #3: Our next question is from Mario . Mario , please go ahead .
Speaker #1: Hi guys .
Speaker #6: Good morning . Congrats on the quarter . me ask you two questions . First one is on your net interest margin expansion , right .
Speaker #6: You're growing your margins 10 to 20 basis points per quarter, as you had talked about at the beginning of the year. In part, that reflects some of the repricing they had done to your portfolio in the past.
Speaker #6: So have we seen the full benefits of the repricing yet ? And should we think about margins now forward being going more stable , especially as the loan book is shifting , right .
Speaker #6: Like I would imagine , right . The rates you charge on the private payroll product is lower than a credit card . So help us understand how you thinking about the outlook for for net interest margin .
Speaker #6: And then I'll ask my second question later.
Speaker #1: Morning, Mario. Good, and thank you for the question. So the three drivers of NIM expansion are: one, repricing; two, better mix; and three, investment yield going up.
Speaker #1: Are the three drivers on those repricing? We have done a very high share of that repricing since we started this a few years ago.
Speaker #1: did more on Surprisingly we on mortgages than on a payroll because mortgages had higher growth than public payroll , even though it has a higher , longer duration .
Speaker #1: And then on payroll , we still have a significant of part loans of our that are rate not very far from 11. 2% per month that have some upside on repricing .
Speaker #1: So there is some element it's no longer the higher driver of Nim expansion as it was in the early days . 30 , 30 .
Speaker #1: But there is still some of the 60 potential. I would say that around one third of those still have upside in terms of portfolios of interest rates.
Speaker #1: And the good thing is that on payroll , public which hasn't grown for several public quarters , specifically , payroll has grown it in the last two quarters .
Speaker #1: And and that that accelerates the repricing or the increase in the yield of that portfolio in terms of of mix within the loan book , the two main drivers were Fgds and home equity .
Speaker #1: In the years . This prior year is a bit more private led by payroll credit cards . Through the reshaping that alluded to and then on the investment yield .
Speaker #1: Also , we have been improving in that sense , but we still have to go to make some more progress on capital is on .
Speaker #1: We done haven't much very complicated structures yet in terms of physics or structural vehicles to optimize the capital more than what we could .
Speaker #1: That's another lever that could be added to the list of the three that I mentioned But when you put all that before . together to to summarize the answer , Mario , we think that the of of trend Nim expansion still has an ample room to continue to improve .
Speaker #1: And we have answered this in the prior calls , at least in the in the next four a quarters , we see continuation in the trend of the risk Nim in the line adjusted in have seen in prior quarters .
Speaker #6: Okay , so that's clear . And now second question my on then slide 19 , right , you showed that you're growing faster than the market in all of the products .
Speaker #6: gives you What confidence ? Right . Because when we talk to the big incumbent banks , they are they seem more concerned about the economic outlook .
Speaker #6: They seem like they are de-risking their loan books while you're doing the opposite . Right ? You're trying to accelerate growth . And maybe this is the best time to grow , right ?
Speaker #6: When when the slowing competition is down , you probably can get like very good clients at attractive spreads . So first of all , so then the question is what makes you comfortable to be growing your loan book at 30% pace when everyone expects the economy to decelerate how do you you can think maintain this ?
Speaker #6: Growth will accelerate once the traditional banks start to lend again. Thank you.
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Speaker #6: Pope's .
Speaker #2: Linked mortgages is really good . And this Inter . for So we have been originating for more than ten years , mortgages at market based pricing .
Speaker #2: And this is gives us confidence that we're going to keep on growing both mortgages and home equity as the entire market should derive to a more market based that solution we believe is a lot more sustainable , long term .
Speaker #2: this So takes care of mortgages , payroll , loans , mentioned as as already , we have in the client base having digital the experience and being playing in a market that should achieve between 250 and 300 billion , we should keep on growing credit cards .
Speaker #2: Another point that we have been growing fast , and we believe we can stay there in here . And a lot about share of wallet .
Speaker #2: So we're occupying still a relatively small part of the wallet share of of our customers . And as we improve , as we keep doing all the improvements that we have been doing in underwriting , in growth , in UX , we will keep expanding our penetration .
Speaker #2: So all of having this said , , it's a lot about continuity of good execution and our team is getting stronger and and we will keep on it to sustain stronger this growth levels that that we have been seeing .
Speaker #6: Very clear . Thank you very much .
Speaker #3: Our next question is from Pedro Leduc . Leduc . Please go ahead .
Speaker #7: Thanks , guys , for the call . Congrats on the journey so far . Question on credit cards . We've been we've been watching it carefully .
Speaker #7: A simple math interest minus provisions was negative break . Even now this quarter positive and sustainably positive . So if you could share with us what you have learned what actions are have led to this .
Speaker #7: And maybe now at these . But look to be much more healthy . ROE levels for the product stand alone . If we could expect a more meaningful penetration increase within your client base , which is still fairly under-penetrated , I would say .
Speaker #7: So, trying to just see if now this product is at the economics that seems fruitful for you to roll it out a little bit more aggressively, imagining that maybe it could grow ahead of the overall loan book in 2026 again, maybe even faster than it grew this year.
Speaker #7: Considering also the income tax boost that a lot of your clients are going to have . Thank you .
Speaker #2: Have a look . This is Sean speaking . Thank you for your question . So yeah , we're very positive on what's been happening in the credit card portfolio .
Speaker #2: So as you know , we've been evolving on a 360 view . So both credit team getting more and more mature and models getting more and more mature collections .
Speaker #2: Same thing . And the product team very engaged on on making these this evolution that we saw last in this periods . So this is first to say that like the the ground to keep the good execution is set we're very and positive on that when we get on the the metrics and the portfolio , we go back to the , to the reshaping that we talked also during the during the call .
Speaker #2: So about two quarters ago , we started saying that the percentage of interest portfolio at Inter was asymmetrical as compared to the market we were at only about 20% interest earning .
Speaker #2: And the idea is to expand this . So the result that we see in interest is all about the execution or the good execution of the of the reshaping We're now portfolio .
Speaker #2: more than 23% interest earning . And as we execute , we should this see . This interest earning portfolio expanding and the good thing about the lessons learned and the US about the lessons learned that I want , that it's important to explore is as we increase interest , earning portfolio and we want to get to say , 25 , 26% , we're also helping clients before , we have the number of collection didn't that we have today .
Speaker #2: as we And implement them , we help clients pass through moments where they need more time to pay . So it's it's truly a win win for the portfolio .
Speaker #2: And we'll keep on it to deliver this , this , let's say this first goal of interest earning portfolio at 25 , 26% .
Speaker #2: Thank you .
Speaker #7: about maybe rolling and more. Tech.
Speaker #2: Lidocaine speaking here on that I think that was explaining how are more confident on underwriting more credit cards . And we're doing that .
Speaker #2: But also on the other hand when connecting to my question about the market being not to aggressive in credit underwriting , we always connect that type of question too .
Speaker #2: We want to design where we have the opportunity to explore more. The collateralized credit solutions, private payroll, and the receivables for the company that is going to roll out next year on credit card.
Speaker #2: We we believe that we're growing in the right honest . pace . To be I mean , we are growing a lot . I'd say , but we don't want to just go all in on that product .
Speaker #2: We know that this is a product that gets more impacted when the economy is not doing well. So, as we always say, we like to produce alpha on our credit portfolio to try to get away from the beta.
Speaker #2: So even though the might not employment be doing well next year or whatever the interest rate is too high . We don't want to get that exposure .
Speaker #2: So what we're trying to to do , I think are we building exposure to credit . As you can see , growing 30% year over year .
Speaker #2: But doing that in a cautious way , a good balance between unsecured and secured , which is today's one third to third . And that's how we want to to to keep doing ahead .
Speaker #2: So I wouldn't expect you should not expect anything to massively grow in our exposure to credit cards going I would forward . say that we want to compound our portfolio , increase Nims .
Speaker #2: As mentioned , but without doing unforced errors . So and consumer finance is is a segment that we need to be cautious . So that's how we are running the business .
Speaker #2: For the years to come . Okay .
Speaker #3: next question is from Yuri . Our Yuri , please go ahead .
Speaker #8: Thank you . Have a are the team also congrats on the journey . A follow up and I think John already clarified part of my my questions here on stage three and stage two .
Speaker #8: Like on stage . It's true . My question is . What drove the increase quarter over quarter like on your total balance ? last quarter was a little bit low .
Speaker #8: Or maybe it's a base . I'm not sure what happened in the second quarter , but stage two balance , they went up 28% quarter over quarter .
Speaker #8: just trying So to understand what drove it . And regarding stage three like your your new stage three formation is mostly stable . There was a marginal marginal increase .
Speaker #8: But when we break it down by products and take a look at personal loans and credit cards, we usually look at them together, right?
Speaker #8: Because sometimes refinance , they are part of personal loans . And all this , these two products together they are up 20% quarter over quarter .
Speaker #8: And I think the Duke was thinking, and I'm very happy in maintaining interest income because, in the end, I think you are building more provisions, but you are pricing the risk, and your interest income is higher.
Speaker #8: But given we are in a in a moment that people are getting a little bit more concerned about asset quality in Brazil , what explained this increasing information for those two products is private payroll the with personal loans , like is there anything on credit cards ?
Speaker #8: And again , I think John was very clear saying that he is and not cautious the time to be so progressive . On , you know , on , on cards .
Speaker #8: But I would love to understand a little parts bit the moving here on, on two and stage three. Thank you.
Speaker #1: Yuri here . So starting with stage three , you are correct that on a by product basis it varies , but it's personal loans category which includes private payroll .
Speaker #1: The one that led the growth went from 2.1% last 2:45 point four . The remaining ones , including credit cards , were quite stable .
Speaker #1: A quarter over quarter . So the driver was the private payroll . And that's the main one on stage two as well . Even more pronounced on stage two , given the the fact that the the tenors of the stage two captures the life of the portfolio being at six months old it's more portfolio , predominant by now in stage two and stage three , but both drivers are having private and we payroll think there's going to be hitting more proportionally .
Speaker #1: Stage three in the in the coming quarters . And as well as the portfolio continues to to grow in size .
Speaker #8: No , no , thank you . And regarding the stage three that usually 90 days do as an absolute trigger the increase on on private payroll is because of operational risks is too high .
Speaker #8: And you know like this should be the level because it was just trying to understand because given this new product , H2 is fine , but I would not be expecting stage three to be a for this product right now .
Speaker #1: It's within the expected losses that we had. Nothing out of the ordinary in terms of the expectations. It's the way we modeled it.
Speaker #1: Yuri and differentiating risk operational from risk in a credit product is very early stage . Sometimes it's a bit blurry , but as we mentioned , we are converging to a high single digit delinquency level in this product .
Speaker #1: And with that , the return profile is , as I mentioned in a prior question , north of 30% . So it's very accretive for the results .
Speaker #8: No , no thank you . Thank you , I'm clear on your answers . And congrats on pricing . You know , those loans .
Speaker #8: Thank you .
Speaker #2: Thanks .
Speaker #3: Our next question is from Marcelo Mizrahi . Marcelo , please go ahead .
Speaker #9: Hello everyone . Thanks for the question and congratulations for a very solid result . My question is regarding the fee business . So we were seeing the last couple of quarters are this is especially in the this last one on the growth of the fees .
Speaker #9: Can you share a little bit your your ideas and the strategy here . So of investment here in insurance and the international account .
Speaker #9: So why why do you believe that the growth is slowing down and how to to . Accelerate that . Thank you very much .
Speaker #2: Marcelo speaking . Thank you for your question 30 will deep dive . on the on the numbers and on the KPIs and economics later on .
Speaker #2: But just to highlight , we have been since I would the launch of our digital account trying to put more and more , more and more service business on our platform .
Speaker #2: That will get us more fees , a better fee ratio . We were running between 25 and 30% back then . What happened is because we're growing more on credit recently due to private payroll , mortgage and everything that we just discussed on this call , the ratio was is lower .
Speaker #2: There are some one offs here to cover , but the thing is , of out the our seven verticals , five of them are focused on on on fees .
Speaker #2: So we have effects . As you mentioned global account . We have investment insurance loyalty , loyalty . Our loop program and our inter shop .
Speaker #2: So this is something that is in our DNA regarding new products, and we'll keep doing that. We are increasing the addressable market for that.
Speaker #2: We don't know how our breakdown between fees and Neo will behave . Going forward because again , as as I mentioned , we're growing fast on NII .
Speaker #2: But we see still a good opportunity for us to keep running on this 25% range going forward . And again , I'm sure that once some these of verticals get more mature , we believe that this could be a tailwind for us .
Speaker #2: So we will we will mention about the the change between quarter over quarter and year over year on that metrics . Okay . Thank you .
Speaker #1: Good morning Marcelo . Just to compliment Joao , we had two one offs in the fee side impacting negatively . One was we shut down and or sign which is a company that we co-owned with a graphic design company acquired many many years ago .
Speaker #1: And that had an impact of $15 million. His in the in the fee as line well. And another one is the $4,966 impact of deferred fees associated with credit of around another $15 million.
Speaker #1: So, those two one-offs together would have given us $30 million of additional NII to make it an apples-to-apples basis to what we had in the same third quarter of last year.
Speaker #1: And with that , the growth would have been 7% instead of of 1% . So it's it's a a line that is growing less an AI than , than .
Speaker #1: As we mentioned, NII is growing consistently around 40% over the last five quarters. We had growth at that level. This is trailing a bit behind that.
Speaker #1: But we would need to have high hopes on this being a key driver of revenue growth and profitability.
Speaker #9: Okay . Thank you .
Speaker #3: next question Our is from Nihar . Neha , please go ahead . Neha , your mic is open .
Speaker #10: you hear Can me ?
Speaker #3: Yes .
Speaker #10: Okay . Perfect . So sorry about that . Congratulations on the results . Just following up on the discussion here . So we do understand these one offs which led to the weakness .
Speaker #10: But would it be fair like as as Joel mentioned , that going forward we could still see net fees growing in the 20% range ?
Speaker #10: Or is that too high ?
Speaker #1: Chinese this year ? So yes , that's quite accurate . So if we decompose a bit by line , the biggest component of fees is credit card .
Speaker #1: And that's highly associated with TPV growth . As Chandra showed , TPV root 20% . So this fee line is growing quite in line with it .
Speaker #1: An interesting thing to mention is that inter shop or e-commerce platform has a big part of the monetization . Now being driven on the NII through buy now , pay later , how we call it in in Portuguese .
Speaker #1: So that's that's a fee driver of NII indirectly . And FX is performing very well . It's still a line , but smaller it's growing very , very high .
Speaker #1: So all of that together , we think in the in the 20s or around 20% is a fair assumption to have . And which is lower than in AI , but still it's a higher an important component of our revenue base .
Speaker #10: Okay , perfect . Then on the on the private payroll , we already had a lot of discussion on that , but it it seems from your comments that things have been improving , the collateral is still not fully functional .
Speaker #10: The collateral has been delayed until next year, but it seems like things are going in the right direction. Have you seen?
Speaker #10: More competition from, maybe not the incumbent banks, but some other smaller players, become a bit more aggressive if the product seems much more viable than it was six months ago.
Speaker #3: I knew .
Speaker #2: Her so . So I'm going to talk a little bit . This is Alex speaking , and thank you for your question . So talking about the payroll loans , we .
Speaker #2: looking at at the product as a whole , we're very happy with what we're from any angle . We look at . So from the capacity of underwriting more we're happy .
Speaker #2: So we're growing underwriting . We're doing evolutions our in credit model and our credit policies . And this has been driving increased underwriting volumes .
Speaker #2: Day after day . So very happy . There . From a collection standpoint , we're also seeing improvements . And as mentioned , we should converge longer term to high single digits , which is much better than what we initially forecasted .
Speaker #2: Or how initially calculated the profitability of the product that , as we mentioned before , we had a scenario of up to 15% , and now we're looking at long term high single digits , much lower , much higher ROE .
Speaker #2: And from from a competitive standpoint , we don't see any concerns yet . As we mentioned . Also earlier , we're talking about a 250 to 300 billion potential portfolio that today is close running to 90 billion .
Speaker #2: So a lot of expansion to happen . And the idea now and the idea in the upcoming quarters is to keep absorbing as much demand as we can on a on a static basis .
Speaker #2: The , the , the market share is at 2.1 , but on an underwriting basis , we're we're executing at a much higher percentage of market share , probably in the getting close to the 10% range of market share .
Speaker #2: And we'll keep on it . And John will follow up . Also on the question , Neha , hi , John speaking just more of a high level view on terms of competition .
Speaker #2: As you ask . We see Inter in a I'd say in a sweet spot in terms of competing in Brazil . We have elements that the incumbents , they do have , such as massive number of a clients , all the products we do have elements that only the , the fintech players have , such as digital distribution , good NPS , good service , and also we have elements that the the incumbent banks , they do have and they fintechs , they don't have , which is a very good cost of funding .
Speaker #2: So when we combine all of that, and think that I really you are in a sweet spot between the incumbents and between the fintech players in.
Speaker #2: So . On the of north 30% a year over year . So and again we have been built in this platform for many , many years to be in that position .
Speaker #2: We started from the beginning , from the basics of a good . From a good banking approach . So we started having the clients .
Speaker #2: We started doing the digital distribution . We start to to bring very good deposits base . So we have all that in place .
Speaker #2: don't So I see competition as an issue . As I mentioned . And again , just to repeat , we are in a position to keep producing alpha in terms of credit underwriting and not just to follow the market , to follow the trends .
Speaker #2: And last but not least , when we think about the incumbent that they have are banks at a huge market share on most of the products out there on the credit products , we still have small market share on that But when products .
Speaker #2: We connect that to our market share on Pix, which is about 8.5%. We do see that going up. Our clients will be flowing to the credit products.
Speaker #2: credit , to With this . So we are very excited with the future ahead . And we don't think that competition between the , the , the digital players will be a headwind for us going forward .
Speaker #2: Thank you .
Speaker #10: Thank you so much , Stephen . very And a interesting performance in terms of net adds and the deposit growth , will which help you keep , maintain that funding edge that you mentioned .
Speaker #10: Thank you so much .
Speaker #3: With that, we conclude the Q&A session. I will now pass it to Jerome for his closing remarks.
Speaker #2: everyone Raffaele . with Thank you us for for being this last hour , I would like our also to thank employees . We have a very hard every day working put in ahead of the a competition to drive us to the next chapter .
Speaker #2: for all the shareholders that have Thank you been supporting us since 2018 , when we listed the company and hope to see you soon in a few months , for us to discuss the four key results .