Inter &INTR

Key highlights

• Profit and revenue growth: Net income reached a record R$425 million, growing 26% from a year ago as the company improved its efficiency and expanded its lending. Total revenue grew 26% to R$2.7 billion, driven by a 30% jump in interest income from a larger loan portfolio.
• Loan portfolio expansion: The total loan portfolio grew 25% to R$58.1 billion, which is nearly three times the growth rate of the broader Brazilian market. This expansion was led by private payroll loans, which surged 147% over the last year to R$3.1 billion.
• Credit quality shift: The share of loans more than 90 days late rose to 5.3% from 4.8% a year ago, primarily due to the rapid growth in payroll loans and credit cards. However, early-stage delinquency, meaning loans between 15 and 90 days late, fell to 4.2% from 4.5% in the previous quarter, which suggests that the total delinquency rate may be nearing its peak.
• Efficiency gains from AI: The company improved its efficiency ratio, which measures how much it costs to generate revenue, to 41.9% compared to 47.7% a year ago. Management noted that AI now handles 85% of client requests, helping keep the monthly cost to serve each active client stable at R$13.3.
• Funding costs rising: The cost of funding, which is the interest the bank pays to get the money it lends out, rose to 70% of the CDI rate, a Brazilian benchmark for interbank lending, up from 68% in the prior quarter. This increase was caused by a change in the mix of deposits and a higher number of business days during the period.
• Improving profitability outlook: Management expects the gap between revenue and expenses to keep widening, which should drive further expansion in profit margins. The company aims to continue this trend through its 60/30/30 plan, which targets a 30% return on equity, a measure of how efficiently the bank uses shareholder money to generate profit.

Our take: This was a strong quarter that showed the bank can grow much faster than its peers while still getting more efficient. The record R$425 million profit and rising engagement prove the digital model is working, even as funding costs rose. While the slight uptick in late payments needs monitoring, the falling early-stage delinquency suggests credit risks are under control, strengthening the long term case for the stock.