Citi raises Inter & Co stock price target to $9 on structural improvements

Citi raised its price target for Inter & Co Inc. (INTR) to $9.00 from $7.50, maintaining a Buy rating, citing increased confidence in the company's sustainable return on equity and consistent performance, driven by progress on its '60/30/30 agenda' and expected improvements in risk-adjusted net interest margins. Management projects 2025 efficiency to reach approximately 45% with 25-30% loan growth, translating to high-teens or 20% ROEs. Concurrently, Inter & Co has filed recent financial statements, disclosed an equity sale, initiated a conversion period for its BDRs/Class A shares, and issued R$500.1 million in Subordinated Financial Bills to enhance its Basel Ratio, while Banco BTG Pactual acquired a 5.69% equity stake for investment purposes.

Analysis

Citi has upgraded its price target for Inter & Co Inc. (INTR) to $9.00 from $7.50, maintaining a 'Buy' rating based on increased confidence in the company's ability to generate sustainable return on equity (ROE) and maintain consistent performance. This optimism is underpinned by progress on its '60/30/30 agenda' and expectations for continued risk-adjusted net interest margin expansion as the bank reprices its loan portfolio. Management has provided robust guidance for 2025, anticipating 25-30% year-over-year loan growth and an improved efficiency ratio of approximately 45%, which is projected to yield an ROE in the high-teens or around 20%. While near-term investments have elevated the cost-to-income ratio, management views 2026 as an inflection point for operating leverage. Reinforcing this outlook, the company is actively managing its capital structure through a R$500.1 million subordinated debt issuance to boost its Basel Ratio by about one percentage point and a significant equity sale. Furthermore, Banco BTG Pactual has acquired a 5.69% equity stake, signaling a vote of confidence from a major financial institution, even while stating the investment does not aim to alter corporate control.

Key Decisions for Investors

• Investors should view Citi's price target upgrade and management's ambitious 2025 guidance for 25-30% loan growth and a near-20% ROE as a strong positive catalyst for the stock.
• It is crucial to monitor the execution of the company's efficiency targets, as achieving the guided 45% ratio is key to unlocking the projected operating leverage and profitability.
• Consider the recent capital structure adjustments, including the subordinated debt issuance and significant equity sale, to evaluate their combined impact on the company's balance sheet strength and potential for shareholder dilution.