Inter & Co (INTR) Q2 2026 Earnings Call Transcript

Inter & Co reported Q2 net revenue growth of 32% YoY to BRL 2,637m and record net income of BRL 421m (+34% YoY), with ROE rising 240bps to 16.3%. Net interest margin reached 10.1% (first time above 10%) as loan mix shifted toward higher-yield credit (credit card interest income +64% YoY) and the efficiency ratio fell to 42.1% (down to an all-time low). Loan portfolio expanded 29% YoY to BRL 55.4b and total funding rose 24% YoY to BRL 77.2b, while asset-quality remains a watch item: cost of risk was 5.9% and private payroll delinquency stayed elevated, contributing 53bps to NPLs; management guided cost of risk around ~6% for the year. Management also launched/announced credit insurance in August 2026 and is pursuing continued NIM/efficiency improvement with stable headcount (~4,000).

Analysis

Inter is at an inflection point where the equity story shifts from "grow at any cost" to a compounding funding franchise: self-funding loan growth plus stable deposit costs means incremental balance-sheet expansion is now much less dilutive. That is structurally positive for valuation, because the market can start underwriting higher sustainable ROE rather than discounting repeated capital raises. The caveat is that part of the margin step-up is mix-driven and timing-related, so the earnings power is better than it was, but not all of the current run-rate should be extrapolated linearly.

The competitive read-through is most relevant for Brazilian retail banking and digital challengers. Inter’s cost of funds and distribution density give it a real pricing edge in secured lending and primary-bank relationships, which should pressure incumbents like ITUB/BBDC on affluent digital clients and force weaker fintech lenders to defend share with thinner spreads. The second-order effect is that continued credit penetration inside the existing client base can lift LTV faster than CAC, making Inter harder to copy than a pure payments app.

Risk is mainly 1-3 months, not 1-3 days: investors will likely focus on whether private-payroll delinquency normalizes and whether the reported double-digit margin survives once timing effects wash out. If cost of risk drifts above ~6.5% or NIM slips back below ~9.5% ex-timing adjustments, the bull case loses urgency. Contrarian view: the market may be over-obsessing on gross NPLs and missing that management is deliberately trading some asset quality for higher unit economics; however, if Brazil credit weakens into the election/fiscal backdrop, the unsecured mix can deteriorate faster than the model implies.

Key Decisions for Investors

• Long INTR on post-earnings pullbacks over the next 2-4 weeks; this is a quality-vs-consensus setup where the market may underwrite a lower steady-state ROE than the business can now generate. Falsify if next-quarter NIM falls below ~9.5% ex-timing or cost of risk trends meaningfully above 6.5%.
• Pair trade: long INTR / short EWZ for 1-3 months to isolate idiosyncratic operating leverage from Brazil macro noise. The thesis works if Inter keeps converting deposit franchise strength into loan growth while the broad Brazil tape remains range-bound.
• Relative-value long INTR vs. Brazilian incumbent banks (ITUB or BBDC) for 3-6 months if you want to express share gains in primary-bank relationships and card monetization. Risk is that incumbents defend with pricing, compressing Inter's spread advantage sooner than expected.
• Use a call spread rather than outright stock if entering after a strong gap-up: 3-6 month upside participation with capped downside makes sense because the main near-term risk is not business breakage but multiple compression if investors question earnings quality.