Inter & Company Balances Fast Growth And Risk

Inter & Company Incorporation Class A ((INTR)) has held its Q1 earnings call. Read on for the main highlights of the call.

Inter & Company delivered a confident earnings call that balanced strong growth with a candid view of short‑term risks. Management highlighted record profitability, expanding margins and rapid loan growth, while acknowledging rising non‑performing loans and a higher cost of risk as the private payroll book seasons. The tone remained upbeat, stressing structural advantages and manageable asset‑quality pressures.

Large and Growing Client Base

Inter’s client base rose to 44 million, reflecting one of the strongest quarterly additions since 2024 and an activation rate near 60%. Management stressed that this expansion is being achieved with deliberately low customer acquisition costs, supporting a scalable, capital‑light growth model.

Massive TPV and Payment Volume Growth

The bank reported a BRL 1.7 trillion run rate in total payment volume from cards and PIX, up 25% year on year. Inter now handles about 8.5% of all PIX transactions in Brazil, underscoring its relevance in the country’s fast‑growing real‑time payments ecosystem.

Strong Loan Portfolio Scaling

The gross loan book surpassed BRL 50 billion, rising 33% versus a year earlier and 3% versus the prior quarter. Excluding the shorter‑duration SME portfolio, loan growth reached 37% year on year, highlighting broad‑based credit expansion.

High Growth Across Key Credit Products

Mortgages expanded 42% year on year, home equity loans 43% and payroll and personal loans 38%, with credit cards up 27%. Management emphasized that three major products are growing close to 40%, helping diversify risk while supporting revenue growth.

Notable Private Payroll Momentum

The private payroll portfolio reached BRL 2.5 billion with 600,000 active clients, helped by strong origination, including around 30% sourced via WhatsApp. The product is currently generating an estimated 30% return on equity, with cohorts typically breaking even in about six months.

Robust Funding and Deposits

Total funding climbed to BRL 74 billion, a 25% year‑on‑year increase, while the loan‑to‑deposit ratio rose by four percentage points. Deposits per active client stayed above BRL 2,000, and the My Piggy Bank savings product surpassed five million clients, supporting stable, low‑cost funding.

Revenue and Margin Expansion

Gross revenue exceeded BRL 4.3 billion, up 37% year on year, while net revenue reached BRL 2.4 billion, up 33%. Net interest margin stood at 9.54%, the bank’s second‑best level on record and 70 basis points higher than a year earlier.

Growing Monetization per Client

Net ARPAC advanced to BRL 34, an increase of 9% year on year, while margin per active client rose 15% to BRL 21. Management noted that mature clients now generate more than BRL 130 in gross ARPAC, underscoring the long‑term value of the franchise.

Improving Efficiency and Profitability

The efficiency ratio improved to a record low of 43.8%, a 170‑basis‑point gain versus the prior quarter, as revenue grew faster than costs. Net income reached BRL 395 million, implying an annualized run rate near BRL 1.6 billion and record returns with ROE of 15.5% and ROA of 1.59%.

Product and Tech Innovation with AI

Inter introduced Seven, a multi‑agent transactional AI platform that can provide investment suggestions, initiate PIX transfers via text, manage installments and even handle gift card purchases. Management said AI is being embedded broadly across the bank to speed product rollout and deepen client engagement.

Asset Quality Deterioration and NPL Increase

Non‑performing loans rose from 4.7% to 5.1% over the quarter, reflecting macroeconomic pressures, typical first‑quarter seasonality and the impact of early‑stage private payroll loans. Management framed the deterioration as expected for a rapidly scaling book and pointed to operational and collateral enhancements in progress.

Higher Cost of Risk Expectations

The bank now expects cost of risk to be closer to 6% for the year, up from its prior 5% to 5.5% range, mainly due to accelerated private payroll origination and credit card reshaping. Executives argued that the higher risk cost is a deliberate trade‑off to support profitable growth, given the strong returns on new cohorts.

Private Payroll Early‑Stage Credit Drag

The new private payroll book has temporarily increased provisions and skewed the delinquency mix higher, with current delinquency still above single‑digit levels. Management expects these metrics to converge toward high‑ or mid‑single‑digit delinquency as cohorts season and operational improvements take effect.

Fee Growth Lags Interest Income

Net fee income rose 18% year on year, lagging the 38% growth in net interest income and the broader expansion of the franchise. Some transactional fee lines, such as interchange, have grown more modestly, and the bank signaled plans to step up monetization without undermining client loyalty.

Efficiency Still Behind Top Peers

Despite record improvements, the current efficiency ratio of 43.8% remains well above the company’s 30% target and significantly higher than some leading digital peers. Management acknowledged the gap but highlighted that operating expenses grew about 20% year on year versus 33% for revenue, showing positive operating leverage.

Personnel and Administrative Expense Pressure

Personnel and administrative expenses climbed around 20% and 17% year on year, respectively, even as headcount stayed near 4,000. Inter attributed the increase to hiring more senior professionals and investing in new capabilities to support long‑term growth and product innovation.

Seasonality and Short‑Term Funding Effects

First‑quarter seasonality, particularly the post‑13th salary drop in lower‑cost deposits, weighed on funding mix and kept NIM roughly flat quarter on quarter. Management stressed that this effect is temporary and consistent with a longer‑term trend of structural margin expansion.

Regulatory Changes on Payroll Loans

Recent adjustments and caps in payroll loan regulation are expected to have only a limited effect on Inter’s underwriting volumes, estimated at less than 5%. However, the bank anticipates more competitive pricing dynamics in the product, requiring careful risk‑return management.

Integration and Growth Pause in Some Acquisitions

Modernization efforts at Inter Pag, formerly Granito, are expected to constrain growth for a few quarters as integration work proceeds. Cross‑selling credit to SME clients remains in its early stages, with credit penetration around 3%, leaving room for future expansion once platforms are fully aligned.

Market Reaction and Share Price Pressure

The company’s stock fell about 12% on the day of the results, reflecting investor focus on higher cost of risk and NPL trends. Management acknowledged the short‑term pressure but underscored confidence in the bank’s strategy and promised more detail at its upcoming investor event.

Forward‑Looking Guidance and Outlook

Management reiterated a path of gradual NIM expansion of roughly 10 to 20 basis points per quarter from the current 9.54% level, with near‑term quarters closer to 10 basis points. They expect loan growth to remain robust around 30% year on year, continued ARPAC gains, improving efficiency and stable funding costs, aiming to translate these trends into sustained profitability.

Inter & Company’s earnings call painted a picture of a digital bank in high‑growth mode, delivering record revenues and returns while absorbing the growing pains of a young payroll portfolio. For investors, the story hinges on whether management can maintain its margin expansion and credit discipline long enough to close the efficiency gap with top peers and convert scale into durable shareholder value.