Inter & Co. Inc. Q2 2025 Earnings Report

Inter & Co. Inc. EPS Results

• Actual EPS: $0.13
• Consensus EPS: $0.12
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: N/A

Inter & Co. Inc. Revenue Results

• Actual Revenue: $365.45 million
• Expected Revenue: $2.04 billion
• Beat/Miss: Missed by -$1.67 billion
• YoY Revenue Growth: N/A

Inter & Co. Inc. Announcement Details

• Quarter: Q2 2025
• Date: 8/6/2025
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 10:30AM ET

Inter & Co., Inc. Is a holding company, which engages in the provision of financial products and services. It operates through the following segments: Banking, Securities, Insurance Brokerage, Marketplace, Asset Management, Service, and Other. The Banking segment offers checking accounts cards, deposits, loans and advances, and other services through mobile application. The Securities segment is involved in the acquisition, sale and custody of securities, the structuring and distribution of securities in the capital market, and the provision of administration services to investment funds. The Insurance Brokerage segment includes insurance products underwritten by insurance companies, such as warranties, life, property and automobile insurance, and pension products, as well as consortium products provided by a third party. The Marketplace segment operates a digital platform, which offers goods and services to its customers. The Asset Management segment is composed of the operations related to the management of fund portfolios and other assets. The Service segment consists of collection and management of personal information, development and licensing of customized computer programs, development and licensing of non-customized computer programs and technical support, maintenance, and other information technology services. The company was founded on January 26, 2021 and is headquartered in Belo Horizonte, Brazil.

Inter & Co. Inc. Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Profit growth compounded for ten consecutive quarters, underpinning a solid foundation for future expansion.
• Positive Sentiment: Launched MyCredit and My Piggy Bank features to boost financial education and responsibility, with over 425,000 users creating more than 52,000 savings goals in under a month.
• Positive Sentiment: Client engagement remains strong at 40 million users, an NPS of 85, nearly 19 million daily logins and 780 million monthly transactions, adding over 1 million active clients per quarter.
• Positive Sentiment: Credit portfolio grew 8% Q/Q with penetration at 33.8%; private payroll loans jumped to BRL 728 million across 153,000 clients and real estate lending rose 37% YoY, while cost of risk stayed at a healthy 5%.
• Positive Sentiment: Efficiency improved with an operational ratio of 47.1% (ex-tax) and a record ROE of 13.9%, driving net income to BRL 315 million.

Presentation

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Good morning, everyone. I'm Rafael Aventura, Intra's IR Officer, and I would like to welcome all to Intra's Second Quarter twenty twenty five Earnings Conference Call. 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.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

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 and A box on the webcast. A replay will be available at the company's IR website. With me on today's call are John Vito Menin, Inter's Global CEO Alessandra Gisu, Brazil's CEO and Santiago Stel, Senior Vice President and CFO. Throughout this conference call, we'll be presenting non IFRS financial information.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

These are important financial measures for the company, but are not financial measures as defined by the IFRS. Reconciliations to the company's non IFRS 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 guarantee of future performance. Please refer to the forward looking statements disclosure in the company's earnings release and earnings presentation. Today, Jean will discuss interest strategy and business overview.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

After that, Alessandro and Santiago will take you through our financial and operating results in more detail. We'll then open the call for questions. I'll now turn the call over to Jean. Jerome, please go ahead.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Thank you, Hafta. Good morning, everyone. Today, I'm happy to share that we had another quarter of solid results. I'm also excited about our progress as we keep innovating and making the client experience better every day. Inter was designed with a clear focus.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

From the beginning, we choose to offer sustainable credit options for us and for our clients. We also work hard to diversify our source of fees and to build a strong funding franchise. Because of this choice, our profitability has compounded quarter after quarter. For the last ten quarters, we have grown our profits in a consistent way. This compounding effect gives us a solid foundation for the future and we plan to keep building on it.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

What gets me really excited is, in addition to deliver increasing profits, we are building long term value for our stakeholders. This quarter, we delivered two features that exemplifies this value creation, one on the asset side and another one on the funding side. Let's start with MyCredit. This is a new journey inside our app to help clients build a healthy credit relationship with Inter. Our goal is to expand credit access in a safe and responsible way.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

With My Credit, clients can now track their scores with us directly in the app. This is much more transparent than what you usually see in Brazilian banks, where your score is often hidden. Through MyCredit, clients can take steps to improve their scores and unlock higher limits, all in clear states. This feature is not just for those who are behind on payments and want to rebuild their credit. It is also for clients who want to improve their scores and plan their finance better.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

We believe MyCredit is a strong tool for financial education and it will help us grow credit penetration in a sustainable and healthy way. Now moving on the funding side, we have launched My Piggy Bank by Savings Goals. With this new feature, clients can organize their savings for a specific purpose, like buying a new car, planning a vacation or getting a new smartphone. It is a simple way for people to take control of their future. The response has been excellent.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

In less than one month, over four and twenty five thousand clients have used this feature, creating more than five and twenty thousand savings goals. This shows how engaged our users are and the strength of our platform. For example, if a client is saving for a new smartphone, we can offer a special promotion from Intershop and send tailored communications. If someone is saving for a new home, we can present our more live solutions. By understanding our clients' goals, we can offer the right products at the right time.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

This is a powerful tool for monetization as it drives cross sell across our verticals. Features like My Piggy Bank, My Saving Goals and My Credit show how we listen to our clients and bring useful solutions for their everyday lives. By doing that, we were able to continuously grow our client base. Just a few days ago, we reached 40,000,000 clients. This is a clear sign of the trust people place in our platform.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

We know this trust will keep growing as we deliver real value to our clients. That's why user experience is always at the center of what we do. Every interaction must be simple, intuitive and enjoyable. This approach has helped us build a strong brand. We're proud that Inter was named the seventh most powerful brand in Brazil and the number one banking brand for Gen Z.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

These achievements tell us that we are on the right path. We want to create lasting and meaningful relationships with our clients. We're very grateful for their trust. Now, Shange and Santi will walk you through the quarterly results. Shange, please go ahead.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Thank you, Joao. It's incredibly exciting to see 40,000,000 clients embrace our platform and joining us on this journey. The strength of our brand is rooted in the close relationship we've built with our customers. Our Net Promoter Score remains firmly in the excellence zone at 85 points.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

We also continue to receive outstanding feedback with ratings of 4.9 in the Apple Store and 4.8 in the Play Store. These numbers aren't just statistics. They reflect the trust and engagement of real users who interact with our platform every day. In June, we saw nearly 19,000,000 daily logins and we now process over seven eighty million financial transactions each month. All these achievements highlight the high level of engagement our clients have with our ecosystem, as well as the value and synergy we create across our seven verticals.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Moving to the next slide, let me start by highlighting our ongoing robust client growth. We've consistently added 1,000,000 to 1,100,000 active clients each quarter, showing how attractive and relevant our platform is to millions of people. Our activation rate has reached 57.7% with a clear upward trend towards 60%, driven by continuous improvements in marketing, onboarding and personalized experiences. Our private per payroll loan is helping us reactivate former clients and attract new active users from day one. On the business side, our client base grew 19% year over year to 2,400,000 accounts with strong engagement and rising RPAC levels.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

These achievements demonstrate the power of our platform and our commitment to delivering innovation and value. Moving to the next page, when we look at banking performance, we see strong momentum. Total payment value grew by 33% year over year and reached BRL374 billion, a new record high. PIX was a major driver accounting for BRL346 billion and achieving an 8.2% market share. On the chart on the right, we can see that TPV levels keep rising across all cohorts with the darker lines representing our newest clients.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

These cohorts are transacting even more intensely and at a faster pace, showing higher engagement levels from the beginning. These results highlight the growing engagement of our users and the power of our platform to drive sustainable high quality transactional growth. Moving to the next page, we see that we had a strong quarter in credit across both secured and unsecured products. Credit penetration among active clients continues to climb now reaching 33.8%. This healthy and sustainable growth is underpinned by initiatives such as the high credit journey that Ron presented, as well as our monthly credit reassessments to make sure we're supporting our clients.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

A standout highlight this quarter is our private payroll loan portfolio, which soared to BRL728 million and now serves 153,000 clients. This success demonstrates the strength of our digital distribution and how seamlessly this product fits into our strategy, truly inter by design. Real estate lending also continues to perform exceptionally well. Despite a high interest rate environment, our portfolio grew 37% year over year, reaching BRL13.3 billion including mortgages and home equity loans. In the last quarter, I shared our focus on reshaping our credit card portfolio.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

We're continuing to increase the share of installment products that help clients organize their financial lives. Santi will provide more details on our strong and balanced loan book performance in the next session. Altogether, these results reinforce the effectiveness of our credit strategy and our commitment to delivering sustainable high quality growth across all of our lending products. Moving to the next page, let's now look at the strong performance of our other verticals. Investments continues to deliver impressive results, reaching 7,900,000.0 active clients, a growth of 38% year over year.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

This was fueled by the success of MyPD Bank with its new savings goals feature driving high engagement. As a result, assets under custody grew by 47% year over year. Insurance adoption continues to rise, reaching 10,000,000 active contracts, up 272% year over year. This reflects the success of our fully integrated offering across other verticals, including e commerce and banking. In shopping, our in app e commerce platform, we saw our net take rate increase to 7.6%, while GMV grew 9%.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Additionally, 9.3% of our total GMV was converted into buy now pay later, highlighting our ecosystem's strong cross selling power. Finally, in loyalty, our client base grew 64% year over year to 13,600,000. Member of our loyalty program are highly engaged, transacting three times more than non members and using more products across our platform. These results show how each vertical not only grows individually, but also drives greater engagement and value through integration within our ecosystem. Our global front in the next page continues to accelerate with a remarkable result this quarter.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

The number of global account clients grew 34% year over year reaching 4,400,000. We also had a record performance in deposits, which surpassed $294,000,000 this quarter, up 90% year over year, marking our best ever quarterly growth. This vertical is becoming increasingly relevant for our clients, whether they're traveling, diversifying their investments internationally or doing business abroad. This significant deposit growth is a clear sign of the scale and importance we have achieved with our global account offering. These results confirm that our global platform is not only gaining traction, but also building real materiality for Inter and our clients around the world.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

To wrap up on the next slide, I want to highlight our continued and impressive market share gains across some of our key the key markets we participate. Quarter after quarter, we see tangible progress in both our credit and fee based businesses. This momentum is a result of giving our clients real access to our complete range of solutions, which increases our share of wallet and compounds the positive impact on engagement. Our strong performance in market share demonstrates not only our capacity to attract new clients, but also to deepen relationship with existing ones, showing the strength and relevance of our platform. I'm confident that we'll continue strengthening our position and capturing even more opportunities ahead.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

With that, I'll hand it over to Santi, who will share more about our financial performance.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Thank you, Chande. Starting with loans, we had another great quarter. The total portfolio grew 8% quarter on quarter with a run rate basis that is slightly over 30%, marking a slight acceleration versus the growth we experienced in the prior quarters. The quality of our portfolio mix continues to be very strong with close to 70% of it being collateralized and therefore resilient to asset quality cycles, while maintaining strong profitability as our mix continues evolving towards the high ROE products. As shown on this slide, we outpaced the market growth rate in most of our portfolios.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

FGTS and home equity grew at around 40% on a year on year basis, continue to gain market share and prominence in our loan mix. Mortgages, as Sander mentioned, performed very well, growing 27% year on year, benefiting from an operating environment where incumbents are struggling to grow through earmarked loans. On payroll and personal loans, we accelerated to 27% led mainly by digital private payroll, where we have been aggressively seizing the opportunity given a strong fit in the inter by design model. Credit cards also grew nearly 1.5 times the market, reaching a 24% year on year growth level. This was achieved while working on the reshaping of the portfolio, as alluded by Sande, and therefore, improving the profitability profile of the product.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Lastly, on SMEs, we have strongly prioritized profitability over loan growth, focusing on secured working capital lines such as Pronap and FGIPAC or in Portuguese, FJE PIAAC. Moving on to the asset quality metrics. The fifteen to ninety day NPL improved 20 basis points, while the ninety day past due demonstrated a stable trend. The credit card NPLs when analyzed across cohorts continue to show strong performance, validating the improvement made in our underwriting and collection models. And finally, NPL formation and Stage three formation stood at 1.61.5% respectively in line with the historical trends.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

As we observe the evolution of our cost of risk, we reached 5% this quarter. It is worth reminding what I've mentioned in prior calls that we're not solving to minimizing this metric, but to continuously expand our risk adjusted NIM on a healthy and sustainable basis, both for us and even more importantly for our clients. This level of cost of risk allowed us to build a coverage ratio of 143% since the prior quarter, which is approximately 10 percentage points higher than the one we operated in the prior quarters. We had another strong quarter of funding growth, increasing 30% in one year and surpassing the BRL62 billion mark. This growth was driven primarily by time deposit, which is mainly explained by the Selic increase and the success of Mypiggy Bank, our product through which clients can invest in fixed income.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

It is also important to mention that our active clients had, on average, nearly BRL2000 in deposits, our second highest level on record or the highest outside of our fourth quarter, which is typically the moment of the year where the liquidity is at the highest. Once again, the healthy growth and mixed funding shown in the prior page enabled us to have an industry leading cost of funding, which stood at 64.8% of CDI. It is interesting to note that even though our funding mix may be affected at times of high interest rates as clients naturally gravitate towards higher yielding deposits, on the other hand, this funding cost becomes more advantageous to our performance, the highest the nominal interest rate level is. Jumping into revenues. We achieved billion in total gross revenues and BRL2.0 billion in net revenue, a year over year growth of 4835%, respectively.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Quarterly growth levels were also strong at 139%, respectively. This quarter, the fees performed even stronger than NII, as explained by our growth in interchange investments and shopping. As we are experiencing higher engagement, as presented by Sande, we observed acceleration in client monetization across cohorts. On a mature basis, we reached BRL 128,000,000 and BRL 89 on gross and net basis, respectively, while the average across active clients reached BRL 54,000,000 and BRL 32,000,000, respectively. These strong levels, combined with a cost to serve of BRL thirteen, allowed us to print our second best quarter of gross margin per active client, which reached BRL 19.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We are excited with the performance we're seeing in the monetization of our customers across Cohorts and believe the success in products such as private payroll will enable us to continue seeing performance in the coming quarters. Now let's deep dive in our net interest margins. Both our NIM one point zero and NIM two point zero, which exclude the non interest receivables of credit cards, are consistently showing growth quarter after quarter and achieving new record levels. This performance is a result of having a healthy mix across products with an ROE driven credit origination model, which is resulting in an increasingly optimized capital allocation of our balance sheet. When we consider the risk adjusted NIM, which deducts the cost of risk from the NIM, the performance is strong too, demonstrating the compounding result of our strategy.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

It is interesting to see that despite the big movements, macro variables such as inflation and CDI, the trend in our NIMs has remained stable moving in the right direction. We think this is a good example of how our ALM strategy is growing successful. On the expense side, we grew this quarter 5% reaching million dollars A few important remarks. We continue to make strategic investments in marketing to strengthen our brand awareness. This has resulted with a record net adds of 1,100,000 new active clients this quarter.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

On the personal side, we continue to invest in the seniorization of our team. An example of this is the addition of Marlos Araujo that joined us as the CRO of the company after having a highly successful career of more than twenty years at Bradesco. We are also actively investing in technology, focusing on process automation and providing a similar experience to our clients. As our business continues to expand at a strong pace, we are focused on converging the contracts with major vendors to further reduce our cost per transaction and improve the overall efficiency as we continue to scale up. We continue focusing on operational leverage, which is one of our core pillars of our digital banking model.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

As a result, we're able to see improvement in our efficiency ratio, where we delivered 100 basis points improvement, moving from 48.8% to 47.8%. We added this quarter another version of the efficiency ratio, which exclude the tax expense that comes from paying interest on capital or JCP in Portuguese, which isn't an operational expense, but instead a tax one. We think that this metric is more accurate to observe and assess our operational leverage evolution. And in that basis, we reached 47.1%, a record low level. Same as with all of our other KPIs, we added the detail of this metric in our historical Excel series, which is available in our Investor Relations website.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

And last but certainly not least, I'd like to highlight our journey towards higher profitability. We reached a record ROE of 13.9%, delivering a record net income of BRL315 million. On a quarterly basis, we think that the page speaks for itself, showing a remarkable consistency that makes us very proud. And it does so because we achieved it while keeping a fortress balance sheet, while continuing to invest in our long term franchise. With that said, I'll pass it back to Joao for his final remarks. Thank you.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Thank you, Shange and Santi. After sharing the quarter highlights, I want to share why I'm so excited about Qinters future. Back in 2015, when we started this journey, our focus was on building the platform. Over the last two years, we have added consistent profitability to our story. Today, growth and profitability working through symbiosis.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Each one is strengthening the other. And this is the engine behind our network effect. As our client base grows, we gain scale and efficiency. This greater efficiency feeds our profitability. With higher profitability, we are able to invest more in our platform, improve our products and bring even more clients.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

This restarts the cycle stronger and larger each time. Thank you to our clients, partners and the Inter team for making all of this possible. Let's keep building the future together.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Before we move to the Q and A, I'd like to remind our investors about the current subsidy period for converting BDRs to Class A shares. We've been highly successful in our journey to migrate our share liquidity to The U. S. Market since 2022, and it's now surpassed 50% of combined volume on most trading days. I want to emphasize that the subsidy period ends at the close of this month on August 30.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

If you have any questions, please don't hesitate to reach out to us. On our IR website, we've made available all the conversion rules and comprehensive guide to help you through the operational process. We want to reinforce that this movement benefits everyone, both shareholders and the company, as having shares traded in a single market creates value for all parties involved. Now let's open for questions. Our first question comes from Eduardo Rosman. Rosman, please go ahead.

[Eduardo Rosman, Analyst at BTG Pactual]

Hi. Can you hear me now?

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Yes.

[Eduardo Rosman, Analyst at BTG Pactual]

Hi. Congrats on the numbers and on the execution.

[Eduardo Rosman, Analyst at BTG Pactual]

My question, I think it's on the private payroll product. It would be great to hear an update from you on your expectations for the product and how can think Inters great UX and hyper personalization offering can help boost the product success with clients. Thanks.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Hi, Rosman. This is Chandi speaking. Thank you for your question. So first, I'd like to say that we're very constructive with the product. So we've said before that it was like almost a product that's like made for Inter in the Inter by design that we've been talking about.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

So we were very happy with the launch. The early days were great and the first quarter was even better. So we should pass the €1,000,000,000 portfolio soon here in the next days. We've been increasing in app sales. So it's around getting close to 40% already.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

The other part comes from the government app. And it is a digital only product for us, which also fits all the digital strategy that Inter has. And the potential pinpoint with the product that is delinquency is coming better than our expectations. So as we have discussed before, we started the product pricing it in the conservative side with the expectation that delinquency could be in the range of 15%. But the early signs that we see as the collection progresses is that it's going to be in the single digit side.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

So, much better than what we forecasted in the beginning. But again, this is a story to be written. We've been saying that, let's say, the first twelve months is going to be at least what we need to stabilize and have a good view. But the first readings are very good. The base scenario, given the what we see in terms of delinquency is that the product will run with an ROE beyond 30%.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Finally, as we go to the UX and hyper personalization, the first goal that we have is to keep bringing underwriting volume to the app. So having Inter's app as the primary channel for underwriting is an important goal for us. We're working on it. And how do we do this? You touched the hyper personalization and it's a good point there.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

It's about feeding the product not only for people that push like the credit button that are looking for credit, but also finding situations where we can solve the customer's problem with the credit and it's where we're going. So finding the right journeys to offer the product and solve the clients' problems, we will see a lot of that in the upcoming months. Thank you.

[Eduardo Rosman, Analyst at BTG Pactual]

Great. Shange, just a follow-up here. Given that the product is digital first and everyone is kind of starting from the state from the same kind of lane, let's say, starting points, it's fair to say that you expect to have a substantially higher market share in this product than you have, for instance, on the public sector payroll?

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Yes. We expect to get like in the older growth products, as you mentioned, so like in PIX, we started with a high market share. Even FGPS, since it was a new product despite starting 4% market share And that's what we're seeing in the private payroll. So we do expect to have a market share that's going to go say beyond 5%, given that we're starting together and we do have appetite for the product and it's additional product. And Joao will complement me here.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

So, Rosmar, Joao speaking. Thank you for your question, for your comments. One thing to highlight, we have on the numbers that were released, we have the portability threat in place. So for the incumbent banks migrating their former contracts to the new one. If you exclude that, we are already running at between 1520% market share.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

So this is very good. So we believe that we have all the tools to get big market share of this product. And last but not least, we're very excited with that. I'd like to say that the private payroll, which has been a common topic on all the conference, all the earnings calls, I mean, it's a perfect product for our venture. I'd to say that it's a combination of yes.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Yes, it's 100% digital. Yes, it does have a good capital allocation. As Shangji mentioned, percent treasury. Yes, it does have a significant pent up demand in Brazil. We're talking about maybe hundreds of billions of shares of portfolio on all three, I don't know.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Yes, it does have a very good win win situation with the client, which is very important for us. That's our mindset. It's good for the client, good debt services, good for our conference, good for our balance sheet, good for our long lasting relationship with the client. So that said, I mean, we're very happy with that product. And not only that, we believe that some other private payroll like products will emerge such as duplicates Trutaral, which we also want to get there at first due to this approach and get a significant market share on the market. We're very happy and thank you for the question.

[Eduardo Rosman, Analyst at BTG Pactual]

Great. Thanks a lot guys.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Our next question comes from Tito Labarte. Tito, please go ahead.

[Tito Labarta, Vice President at Goldman Sachs]

Hello? Can you hear me now?

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Yes.

[Tito Labarta, Vice President at Goldman Sachs]

Okay. Great. I couldn't get the mute button there. Okay. Thanks.

[Tito Labarta, Vice President at Goldman Sachs]

Good morning. Thank you for the call and taking my questions. Congratulations on the strong results. I guess my question, asset quality seems to be holding up fairly well. Your provisions kind of did go up a bit, cost of risk a bit higher as you're growing, I guess, in riskier products, particularly maybe with the growth in the private payroll as well.

[Tito Labarta, Vice President at Goldman Sachs]

So just how do think about those two lines in terms of the outlook for credit quality for the rest of the year, given you kind of have to factor in a higher SILIQ and maybe economy is slowing a little bit? And then your outlook for provisioning levels as well as you continue to grow at a very healthy pace and you're growing in somewhat higher risk segments. Just help us how you're thinking about those two lines? You.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Good morning, Tito. This is Santiago. I'll take that one. So starting right by the engine and exceptional or the engine by design, that's how we prepare to navigate the asset quality cycles, for a diversified loan portfolio, which is skewed towards securitized products and with sustainable borrowing cost for the clients, which we think is the way to have a healthy long term relationship. And as we mentioned, we are solving to increase risk adjusted NIM.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We're not solving to increase NIM alone or to minimize cost of risk. So we see that as the variable that we are aiming to optimize. We did report the lowest ninety day NPL since 2022. We think that this is a result of all of the great work done by our credit underwriting collections and risk teams, and and that is paying off as we continue to improve quarter over quarter. We are taking, as you mentioned, more marginal risk on on certain lines.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Private payroll is an example. We're super happy with the performance that we'll have in the risk adjusted NIM and the ROEs, as Chandni mentioned, significantly above 30% level. We are reshaping the credit card portfolio. Might Now Pay Later is another product that we're trying to lever on the success of the Intershop platform. So all this together is resulting in an increase in the credit penetration of our active clients, which is something that we're increasingly more focused on.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We want to monetize our client increasingly more, and the R Pack has a high sensitivity to this credit penetration. All of this to say, to answer your question, Dito, the 5% to 5.25% number that we have been mentioning in the prior quarters, we continue to think that's the case. We have been surprised on having many quarters better than that. So the reality has shown us a bit better performance than what our models were predicting. We would like to continue to be positively surprised going forward, but our base case continue to be in the 5% to 5.25% cost of risk basis.

[Tito Labarta, Vice President at Goldman Sachs]

Great. That's helpful, Santiago. So I guess, high level, maybe because of the growth that you're having growing in higher risk segments, the cost of risk could be a little bit higher, just maybe getting close to that 5.25%, not sure the exact number, but but compensated with better margins overall. But in general, maybe cost of risk can still trend up a little bit more from here given the risk and the growth that you have?

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

The 5% to 500 already contemplates the mix at which we are originating today. So we are continuing to do a lot of FTS as well. Mortgages, we're accelerating. As Shanda mentioned that in his part, we're seizing the attractive opportunity. Home equity continues to be a product with a lot of success.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

So we're also growing on the other lines, right? So when we put all of it together and we add the improvements that we're doing in the credit and collections fronts as well, we see the 5% to 5.25 continuing to be the base case with some potential to be surprised as we have in the prior quarters.

[Tito Labarta, Vice President at Goldman Sachs]

Okay. And on the asset quality front, it sounds like you feel fairly comfortable with asset quality given the NPLs that you're delivering?

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We are. Have been, as I mentioned, seeing that improvement. It's the lowest level we have since 2022. And as we continue to navigate these new products, private payroll, as I mentioned, we see that turning towards the single digit. We need more time to see where it actually ends up.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

But again, the the goal is to continue to improve the risk adjusted NIM, and that's what we're trying to aim for. And and we see that on page 27 moving consistently in the right direction.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Our next question comes from Yuri Fernandes. Yuri, please go ahead.

[Yuri Fernandes, Executive Director at JP Morgan]

Thank you, Rafa, and congrats to Santiago, Alexandre for a good quarter. I would like to ask you about margins on your NIM statement, especially on a byproduct when we try to look after the hedges. We see a pretty good improvement on personal loans and real estate. I think like the personal loan yields, they moved to 23% from 19.5% in the first Q. So if you can explain a little bit what drove this improvement, if this is seasonal, if it is sustainable, if it is driven by, I don't know, your peak finance product, this mix.

[Yuri Fernandes, Executive Director at JP Morgan]

So just trying to understand and in addition to the yields, if you can comment a little bit on the margins. It has been a pretty good run. Margins continue to go up even with a small increase in the funding costs that is still very low, right? But if you can also comment a little bit on your new trajectory, I think that's interesting. You.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Yuri, here is me again. So yes, we're very happy with the way the interest rates on the product level evolve. When we look at the all in loans rate, we grew from 20.3 to 22.5%. So a pretty nice growth, twice more than what we had in the prior quarters. The driver at the product level, the main one was personal on the personal lines, which is digital private payroll.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

That loan balance now surpassing BRL130 million. It has it pushes the interest rate of that product up. Then on mortgages or real estate, we have been accelerating that loan growth. As mentioned, the competitive dynamic is favorable for us to attack that segment. And the newer loans are timing on interest rates.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

So the front book is significantly more accretive to NIM than the back book. So the repricing is accelerating there and performing very well. Then on the SMEs, as we mentioned also in the intro, we are prioritizing performance over size. No? The the size is an output, and we want to continue to foster these lines like Pernapi and FJEPAK, which are lines that have a very strong profitability profiles.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

So when we put all that together, we see this this improvement. And other lines that we're not mentioning because we were already performing well within from before, like FGTS, which has a 1.8% rate or home equity, which has inflation plus 10% plus 15%, are also pushing the NIM up. So we're seeing the model working. This ROE driven underwriting framework is working across the firm in a very positive way and the results compound. And also, we seize the opportunity that come to us.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Joao mentioned that private payroll was something we did not have factored in our budget for 2025, and we did it at the end of the prior year. And we're able to start offering that product since the very first day that it was available.

[Yuri Fernandes, Executive Director at JP Morgan]

No. Super clear. So basically, repricing and mix, right, those two things combined. If I may, just a follow-up, Santiago. You mentioned like in presentations about the change in the nature of the credit card offering.

[Yuri Fernandes, Executive Director at JP Morgan]

If you can simplify a little bit more, what are those changes, if this is loyalty, new product, it's finance, whatever. Just trying to understand what you mean by that. And congrats on card TPV. I think like the growth on volumes were strong. So just want to understand what is different on the credit card product here for you? Thank you.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Yuri, this is Sean speaking. So on the credit card product, there is a lot going on. We are working to grow that portfolio and there are a few things that we're doing there. One, which is one of our key goals is to do the reshaping. The reshaping to clarify means increasing the interest earning portfolio.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

And this increase comes in mainly two ways. One is increasing fixed finance and we keep on working to increase this volume. And the second one is helping customers solving their problems when they have delinquency, which means offering them more products of installments. So in the second quarter, we saw an improvement in this reshaping initiative. As you see, we went from 78.5 in transactors to 78.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

So we did see this improvement. We launched a new product in about May, which is a full balance installment renegotiation. With that launch, we held a little bit on the fixed financing for this the forty five days in the tail of the quarter. And overall did see a growth in the installment portion as you can also see on Page 14 with the 1,200,000,000 portfolio. So we'll keep doing that.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

We'll keep stimulating growth in the installment portion in the interest earning portfolio. And one last piece that I'd like to mention in terms of the growth of the portfolio is the product we talked about in the last quarter call, which is Intercard, which is a credit card limit that works exclusively to fixed financing or boleto or for just to pay. So it's only it's a credit card that's always, interest earning. That's the new one. We have a few clients with already this feature enabled and we'll see how it evolves here in the next few months. Thank you.

[Yuri Fernandes, Executive Director at JP Morgan]

Thank you, Andres. Thank you.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Our next question comes from Gustavo Schroede. Gustavo, please go ahead.

[Gustavo Schroden, Equity Research Director at Citi]

Hi, good morning. Can you hear me?

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Yes, we can.

[Gustavo Schroden, Equity Research Director at Citi]

Okay. So good morning everybody. Congrats on the results. Strong evolution indeed. So my question is regarding the 06/3030 plan.

[Gustavo Schroden, Equity Research Director at Citi]

Right? So we are doing some math here, taking into consideration the current current run rate you you you have presented. And in a simple math here, we we we estimate an ROE by the end of this year around 16 to 17%, efficiency ratio around 45%, and the number of customers around forty, forty two million customers by the end of this year. For the next year, assuming the same run rate, ROE would be around 22%, 23% and efficiency ratio around 40% and the 50,000,000 clients by the 2026. I know that you don't give official guidance, but my point here is that would you be able to elaborate on these numbers that I just mentioned if those numbers, they they make sense?

[Gustavo Schroden, Equity Research Director at Citi]

And how do you see the evolution of of these KPIs, let's say, you know, to achieve these six thirty thirty plan by the 2027? Thank you.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Sure. And thank you for your question. Jerome speaking here. First of all, I mean, we're very proud of the six-thirty-thirty plan, which was unveiled two point five years ago. As we just mentioned, it's not a guidance, but we're really focused on delivering the three KPIs of it, number of clients, efficiency and also ROE.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

In a five year period, a lot of things change. We have some headwinds, some tailwinds. For instance, we didn't expect that the macro will be like that today, but also we didn't expect that we would have the private payroll kicking in. We didn't expect that, for instance, we might have the duplicates to start next year as the central bank is advocating for. So it's a lot of of of uncertainties, of course, for a five year plan.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

But the good news is, as I told in my closing remarks, we see that the network effect of our platform is starting to kick in. So we have more profitability to invest more, grow more, more clients, more dilution of expense. So I'm really not only committed, but I'm really excited and I really think that we can achieve that. Okay, you might go a few months, a few quarters ahead, it doesn't matter. At the end of the day, we're not running the company only to get, to this metrics.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

We're running the company to have the best capital allocation ever, the best customer centric approach ever. And the good news is we have the tools, we have the clients, portfolio, we have the data, we have all the regulation behind us to get there. So excited, I believe it's feasible that you get there and I think that your numbers are pretty much in line of what you have in house. Thank you for the question.

[Gustavo Schroden, Equity Research Director at Citi]

Thank you. Thank you, John.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Our next question comes from Pedro Ledouc. Pedro, please go ahead.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Hello, everybody. Thank you very much for the call. Thank you for question. Also, congratulations on the journey here. First question, just a quick follow-up on fixed financing.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Now you mentioned it as a driver for the non transaction portfolio to be gaining share. Can you elaborate a little bit more for us to get a sense of, for example, how many clients of yours already have it, maybe how representative is already being in the non transactor card portfolio? And then tied to that, the second question on general credit appetite. On one side, we have macro indicators turning a bit worse. On the other, you have very good credit harvest coming through that you're showing.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

How are you weighing these factors when thinking about growth plans for the second half as we try to also get a glimpse for next year, especially compared to when the year started? How are you feeling on the credit appetite looking ahead? Thank you.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Nadeus. Thanks for your question. This is Jean speaking. So I'll take the first part. So the way we're approaching the PIX Finance is not to get the clients and expect them to have full usage of their credit card limit on PIX Finance.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

It's a product that adds up in the mix that they use. So they will do normal purchases as a transactor and then they use part of their limits to fix financing. This is the way this behavior is happening, say two or three users a month, recurrently. And delinquency levels are also following almost a normal path. So, marginally higher than the normal the client that doesn't use fixed credit, but nothing that, so good behavior overall, good trends that are aligned with what we presented in NPLs overall.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

So that's kind of the way we approach it. Obviously, we stimulate usage of fixed credits and we'll keep stimulating the usage of it. But it's a product to help clients in situations where they don't have cash to pay with a debit card and they will use this product. Yes, I think this is it. Santi?

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Hey, Luke. Good morning. So on on great appetite, it's as high as it's ever been for us. You saw the loan growth this quarter was one of the highest we've had in a in a quarter. We want to put our balance sheet to work.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We have a blessed funding franchise, which is something that we want to increasingly deploy towards our clients through an increase in the credit penetration. We're seeing very positive signs of that credit penetration on the active clients. It is also a moving target as we continue to add €1,000,000 or in this case, 1.1 new active clients per quarter. So we are strong there. The fact that we have a diversified portfolio, which is skewed to products that have collateral makes us less we we change less our perspective to the macro.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Right? Because the the home equity of GTS, the private payroll, they don't change, you know, if if the economy will grow a bit more or a bit less. Now the the dynamic is the same. We are aggressors in the market. We want to take, as we mentioned in many calls before, our mark our market shares towards the peaks market share, which is 8%.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We're ready that in common equity, what's foreign change in EBITDA is going quarter by quarter, and we expect to have the same dynamic in in many of the other products. So our risk appetite is, as mentioned, as as high as ever. We think that this is an opportunity for us to accelerate our business plan in the credit size, and it's one we are intentionally attacking with the with the tools that we have.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Amazing. Thank you Santiago, Sanjay.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Our next question comes from Daniel Vass. Daniel, please go ahead.

[Daniel Vaz, Lead Analyst - Equity Research at Safra National Bank]

Hi, everyone. Congrats on the results and good morning. I wanna touch base on your renegotiated portfolio just to understand how do you classify in the stages. Right? So do you classify it as normally as a stage two or as a stage three?

[Daniel Vaz, Lead Analyst - Equity Research at Safra National Bank]

Because we have been seeing we have been seeing a a rising trend on the renegotiated portfolios. And when we listen to to incumbents, and I I don't wanna treat you as an incumbent here, but they are are being more restrictive in terms of renegotiating clients, and now they're accelerating some write offs. So wanna hear you about your renegotiation strategy and how do you classify between the stages here just to understand how how it can evolve for the next twelve months? Yes.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Sandel here taking that one again. So it depends on the case of the negotiations. We have some that are in stage one, in stage one, stage three. The ones that grew this quarter were within stage one, which were real estate contracts that were written to this quarter, which means that the client was performing, but the the contract was amended for certain conditions. That was the delta of this particular quarter.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

In those cases, those were still within stage one. And then the others depend on the on the case of a loan, Some are in stage two, stage three and in other stage one.

[Daniel Vaz, Lead Analyst - Equity Research at Safra National Bank]

So basically these clients are not defaulting on credit card lines. You're pretty much focusing on adjusting some conditions on the mortgage portfolio. Is that correct?

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Yes, it's correct. It's commercial renegotiations. Most of them are on the real estate fund, by the way, the ones that we have collateral, and it's a longer term agreement, and they are within stage one.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Our next question comes from Mario Pieri. Mario, please go ahead.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

Congratulations on the results. Thank you for taking my question. I wanted to go back on the private payroll product, Shangyi. You talked about this product having a 30% ROE and you're very excited about it, which we agree, right? We see this as a tremendous opportunity.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

However, talking to the other banks, they have been quite reluctant so far to really grow into this product, citing that they don't feel like the guarantees are good enough or they're still seeing a lot of operational risks. And we even heard some news outlets in Brazil talking about the NPL of the product being around 10%. So can discuss why are you more positive right now at the beginning than the other players? And you show that you already have 10% market share, but at a time when the other players are quite cautious as they come back to the market, do you think you're going to be able to retain this 10% market share or do you think this could put some pressure on the prices that you're offering right now? So basically, I'm just trying to get a little bit more why are you so comfortable with the products and the other players are not at the beginning?

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

And then I have another question on efficiency. Thank you.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Mario, Jean here. Thank you for your question. I'm going to start and then Shange can complement. I have been in the industry for a while since 02/2002, since 2004 working at Inter. And I see the same pattern when the payroll started back in 02/2002.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Back then everyone said, this is not a good product, there's a lot of risks. And what we realized later on was the guys that had the consumer finance portfolio, they were reluctant to jump in because there was a normal cannibalization on that product. Of course, were some issues back then and throughout the time the government were in the and all the institutions were able to fix it. And long story short, this is an excellent product today in the market. We're talking about 700,000,000,000 plus credit portfolio, good service debt for the the population Brazil and very good business also for the banks.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

I see the same pattern here today. Of course, the product has some issues that we have been seeing already that they are fixing it. We're constructive is a big portfolio and we also see the same pattern. Big banks, common banks, banks that have a lot of consumer finance portfolio were reluctant to jump into the product because they might cannibalize their revenues, their fees. So, we disagree with that.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

We are very constructive as you say, and we're not alone to be honest. We have a lot of other players jumping into the product. So that's how I see the trend. The same thing that happened to the private payroll back then and what we saw in 2005 and between 2010, big banks buying out the banks that were doing very well on the payroll portfolio. So I think that we're going to see the same picture ahead. Sanchez will comment on the details of that.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Mario, just a few points to finish this answer. So one, Jean talked about it, which is why are we so engaged and excited and why are others sometimes not? Cannibalization risks. So we don't have a portfolio to be cannibalized, whether it's personal loans or private, payroll loans. We don't have a portfolio to be cannibalized and that is the situation with many players of the industry.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

That's the first point. Second one is about delinquency and operational risks. They exist, we're aware of them, but we price for them. Taking a little bit of what Santi mentioned in the, I think the last question, we were very disciplined in pricing and being detailed about all the risks that we assess. And in this particular product being conservative And so we're comfortable that our pricing is right and we will deliver the ROEs, that we are modeling given this pricing.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

And finally, to your point on price reduction, we do believe that this will happen because delinquency levels are going to be better than originally forecasted. But this is good news, right? We're talking about a portfolio that can be much bigger than originally planned. We've been talking about 100,000,000,000 to €250,000,000,000 Where can this go? If this is a product that's going to be priced at say 2.5 on average rather than what we're seeing today, which is close to 3.7%.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

So, again, exciting times to come and we will be vigilant and work hard here to have the lowest delinquency levels possible and the highest origination volumes possible also. Thank you.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

That's very clear, Shangji. And on these originations that you're making, are these like new originations or do you think these are people replacing their existing private payroll loan with your private payroll loan?

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

The absolute majority new originations. New originations. Okay, thank you.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

And then my follow-up question also on efficiency. Joao, right, you've made a lot of progress since the day that you announced your sixty-thirty-thirty plan. Efficiency ratio has improved quite a bit, but it has stagnated over the last year. It's primarily not because of revenues, but primarily because of expenses went up. You did have an acquisition and that impacted.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

However, should we would have expected there to have been more operating leverage in the business? How do you think we should see this efficiency ratio evolving? I think Sheldon asked that question. He gave you some numbers, but do you think efficiency gains now are driven by revenue generation or an increased focus on nominal expense growth? Thank you.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

Mario, I will take this one. So it's a great point. So we want to see compounding results, and that's what we have been seeing. We do not control all of the variables at the exact same time. Life is not linear, like we like to say, but we do see a trend of improvement across the metrics, efficiency ratio being one of them.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We, in fact, mentioned or added this quarter a new methodology for the efficiency ratio in addition to the prior one, which is cleaner, given that it takes out the IOF or JCP tax from that. And you can see the evolution there very clearly with a regular level of 47.1%. What we are doing structurally is to continue to switch our contracts with our largest vendors from a variable dynamic to a fixed dynamic. So many of these contracts are associated with number of clients or volumes, and that gives us less room for operational leverage. To the extent that we can change those contracts to something that is less variable and more fixed, then the revenues will outpace the growth of the expenses.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

But with no doubt, expenses will grow. We expect to have revenues growing significantly higher than expenses. This is a good quarter to see that playing out, 5% expense growth and 8% revenue growth. So that is the dynamic that we expect playing out. In terms of the shape or the angle of the slope of the curve of the efficiency ratio going forward, it's very hard for us to predict, but we do want to see quarter over quarter improvements.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

We haven't seen that. And the Interpact transaction of last year made that analysis a bit more blurred because it was a company that we acquired with 100% efficiency ratio. Therefore, it increased the number up. And now as we're delivering the efficiencies that we have planned there, many of which are on the expense side, in our accounts as well. That number has continued to improve versus the prior level that we have prior to Interpac transaction.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

So all of this to say, it's a variable that we do expect continuous improving in the coming quarters. And we will continue to see how that plays out as we solve the more structural contracts that we have with with our clients, which, as you know, represent more than the ones that we have a more short term control. Where we have a a bigger short term control on number of employees, which we were able to to increase from the levels that we had at the end of last year and and other fixed expenses like rental and a few other things. On the on the big vendor contracts is where we are doing the majority of the work, and that's what will change in the coming quarters versus what we had in the past few years.

[Mario Pierry, Managing Director at Bank of America Merrill Lynch]

Santi, that's clear. But what percentage of your costs today are fixed versus variable? And some of these contracts are you trying to renegotiate? Are these like technology that you could develop yourself rather than relying on third parties?

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

So on the expense breakdown, have around onethree, which is personal and twothree, which is administrative. In those twothree that is administrative, we have around 75% that are with these technology providers. So it's a big part of the administrative. Within those, we are working to make them less variable and more sticky and therefore to have more operational leverage. These contracts are multiyear contracts, so it doesn't happen overnight.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

But we have been seeing increasing level of success. And it's not only on the top three or four names that you may imagine, but also in the longer list. We're working the 100 top providers who are using the power of control McKinsey approach to revise them thoroughly every single week. And we see that will continue to play out. But again, the revenues will grow.

[Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co]

This is a high growth company. And by doing that, the difference of the revenue growth versus expense growth, which is the one that will result in the operational leverage continuing to play out. Thank you very much.

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

Our last question comes from Neha. Neha, please go ahead.

[Neha Agarwala, SVP at HSBC]

Hi. Congratulations on the results. Just two quick questions. Again, on the private payroll side, I think one of the questions that the industry has is how effective will the collateral be? Do we have any more color on collateral in case of delinquencies which will arise in the future institution to say?

[Neha Agarwala, SVP at HSBC]

And my second question is on expected loan growth for the year. You mentioned that the private payroll, which has been doing so well, was not budgeted initially. What kind of loan growth should we expect for this year and for next year in view of this new product and also in view of the macro, which is ever evolving? Thank you so much.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Hi, Neha. This is John speaking. Thank you for your question. So I'll start with the collateral for the private payroll. We expect it's going to be a very good collateral to be exercised.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Should be it's already, as I mentioned, pointing towards somewhere in the single digits as a long term delinquency. Why is that? Because companies are learning and engaging more and more with the paying process And this third round of payments is much better than the first round and it should keep improving as we move forward. On top of that, we have a piece of a part of the FGTS balance of these customers that will be used to pay for some of the debt. That's not yet happening.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

It's going to be a piece for another improvement round on this whole private payroll process. And also you have the client itself, right? So if the company didn't collect, didn't pay as they should, the client is still liable. And what we're seeing in the early days is a good behavior on these clients as we approach them to do the collection process. So good collateral, but also other means of payment with the final one that I almost forgot to say, which is as customers switch jobs, the liability or the collateral follows them almost like lifetime.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

And, with automatic recollection, this is being fine tuned by the government now, but everything points towards like an automatic reestablishment of the collateral as clients change jobs. So again, should be exciting. We're going to have to learn. We'll keep working on it, but it seems to be good. Moving to loan growth.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

So we had a strong quarter, percent growth quarter on quarter. The core portfolio grew 31% year over year. And what we're seeing also given that we have new products such as the private payroll is to be on the high end of the range we've been talking about. We've been talking about the range of 25% to 30% growth for the loan portfolio. We believe we're going to be on the high range.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

Where is the main drive and why this confidence, right? Why we grow 30% in a year despite macro 15% a week? Because we have good products as drivers of this growth that are aligned to this type of environment. So private payroll loans is the new kid on the block that we can keep on growing. Mortgages are behaving very well and we've been able to price them properly home equity also FGPS.

[Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co]

And given the size of the client base and the opportunity, we'll keep pushing to grow also the unsecured lending, fixed financing and these other lines to get us there to the 30% overall growth. Thank you. Thank you, Neha.

[Neha Agarwala, SVP at HSBC]

Super helpful. Thank you so much, Abhijani. And

[Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co]

this concludes our Q and A session. I'll pass the word to Jean for his final thoughts.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

Thank you, Rafael. Thank you everyone for being with us today. It's been a long journey so far. As I told you on my final remarks, I believe you are on our early days for the business, for the network effect that it's kicking in. We have an amazing team committed to deliver the best we can for our clients, for our shareholders, for the regulators, for the country, for the industry.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

So I'm really happy with this earnings call with this earning results, not only because of the number, but what we have been able to accomplish in a short period of time. And as I told you, I see a bright future for this company, a bright future for this project. I'm really proud to be a part of it. Again, thank you shareholders, employees for helping us to make this dream come true. Thank you very much.

[João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co]

See you on our next earnings call. Have a good day.

Participants

Analysts

• Rafaela de Oliveira Vitória, Chief Investor Relations Officer at Inter & Co
• João Vitor Nazareth Teixeira de Souza, Global CEO at Inter & Co
• Alexandre Riccio de Oliveira, SVP - Retail Banking at Inter & Co
• Santiago Horacio Stel, SVP - Finance, Risks & CFO at Inter & Co
• Eduardo Rosman, Analyst at BTG Pactual
• Tito Labarta, Vice President at Goldman Sachs
• Yuri Fernandes, Executive Director at JP Morgan
• Gustavo Schroden, Equity Research Director at Citi
• Pedro Leduc, Equity Research Analyst at Itau BBA
• Daniel Vaz, Lead Analyst - Equity Research at Safra National Bank
• Mario Pierry, Managing Director at Bank of America Merrill Lynch
• Neha Agarwala, SVP at HSBC