NASDAQ:INTR Inter & Co, Inc. Q4 2023 Earnings Report $6.56 +0.07 (+1.08%) Closing price 05/2/2025 04:00 PM EasternExtended Trading$6.56 +0.01 (+0.08%) As of 05/2/2025 07:48 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Inter & Co, Inc. EPS ResultsActual EPS$0.07Consensus EPS $0.07Beat/MissMet ExpectationsOne Year Ago EPSN/AInter & Co, Inc. Revenue ResultsActual Revenue$265.06 millionExpected Revenue$269.81 millionBeat/MissMissed by -$4.75 millionYoY Revenue GrowthN/AInter & Co, Inc. Announcement DetailsQuarterQ4 2023Date2/7/2024TimeN/AConference Call DateThursday, February 8, 2024Conference Call Time11:00AM ETUpcoming EarningsInter & Co, Inc.'s Q1 2025 earnings is scheduled for Thursday, May 8, 2025, with a conference call scheduled at 1:00 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Inter & Co, Inc. Q4 2023 Earnings Call TranscriptProvided by QuartrFebruary 8, 2024 ShareLink copied to clipboard.There are 13 speakers on the call. Operator00:00:01Good afternoon, and thank you for standing by. Welcome to Interimco's 4th Quarter Earnings Conference Call. Today's speakers are Joao Victor Menin, Inter's CEO Alexandre Riccio, Senior Vice President of Retail Banking and Santiago Stel, Senior Vice President of Finance and Risks. Please be advised that today's conference is being recorded and a replay will be available at the company's IR website. At this time, all participants are in listen only mode. Operator00:00:30After the prepared remarks, there will be a question and answer session. For this session, we ask you to write down your question via the Q and A icon on your screen. Your name will then be announced and you will be able to ask your question live. At that point, a request to activate your microphone will appear on your screen. If you do not want to open your microphone live, Please write down no microphone at the end of your question. Operator00:00:56In this case, our operator will read your question for you. Please note that there is an interpretation button at the bottom of your screen where you can choose the language you want to hear, English or Portuguese. Throughout this conference call, we will be presenting non IFRS financial information. These are important financial As financial information to the IFRS financial information are available in Interimco earnings release and earnings presentation appendix. Today's discussion might include forward looking statements, which are not guarantees of future performance. Operator00:01:41Please refer to the forward looking statements disclosure in Company's earnings release and earnings presentation. Now I would like to yield the floor to Mr. Joao Witter Menon. Sir, the floor is yours. Speaker 100:01:54Thank you, operator. Good morning, everyone. I will start with a quick overview of our strategy Today, I will pass this to Sanjay and Santi to cover the operating and financial performance of Interimco. As in prior calls, I will close with some final remarks and then open it for the Q and A session. At our Investor Day held in Belo a year ago, we introduced our 5 year business plan known as the sixty-thirty-thirty. Speaker 100:02:27This North Star means that Interimco's goal for 2027 is to achieve 60,000,000 clients, 30% efficiency ratio and 10% ROE. When we announced it, it was received as a highly ambitious plan. I'm glad to say that the 1st year of our plan was a resounding success, much better than many in Aside from being an important direction to the market, the point of the plan was to engage and drive our organization In sum, as Armstrong family sat, a small step for men, one giant leap for mankind. We're both humble and proud of our progress. This is a first step toward profitability. Speaker 100:03:21But more importantly, it validates how sustainable our business model is. To illustrate there the progress in year 1, As you can see, we achieved 30,000,000 clients right on track, an efficiency ratio of 51%, Significantly ahead of schedule and ROE of 9%, also ahead of the plan. As you can see, Our metrics are stronger than expected, demonstrating our strong execution towards the plan. We have been able to combine growth, operational leverage and profitability, while staying true to our core principle of always putting the clients first by innovating and bringing new solutions in our financial supercap. Products that are organized across 7 verticals. Speaker 100:04:34These are banking, credit, insurance, investments, shopping, global and loyalty. This powerful engine that is our financial super app is continuously evolving and improving day by day. Our wide set of products and services complement each other, creating a flywheel that brings together a complete When I say clients connect to our solutions, I really mean For instance, we see strong acceleration in the adoption of new products. Today, We have more than 12 products with more than 1,000,000 active clients. At this pace, it is highly likely that by the end of this year, We will have a new product that we didn't even launch yet and with more than 1,000,000 active clients by year end. Speaker 100:05:35This is what happened this year, for example, with Interlooping and Milcroquin. This is the consequence of having what we believe is the best super app in the Americas. With over 30,000,000 clients, More than 4,000,000 individual daily logins per day and a run rate TPV of over 1,000,000,000,000 heads. With all that said, I have no reason to doubt that the only possible direction in our profitability and growth We have reached unsurpassed the inflection point. And in 2023, We presented 4 consecutive quarters of consistent growth in net income, EBT, ROE and many other matters. Speaker 100:06:30We are on the right track towards our long term plans And we are thrilled to announce that we are on track to deliver even better Tier 2 of our sixty-thirty-thirty plan. Now, Sanje will walk you through our business updates. Thank you very much. Sanje, please go on. Speaker 200:06:52Thank you, Joao. Good afternoon, everyone, and thank you for joining us today. I would like to discuss Four topics as we go along the presentation: 1st, clients and engagement second, the performance of the different business verticals 3rd, our innovation capabilities and 4th, our potential for further growth. Before going through the numbers, I'd like to quickly reflect on what we said a little over a year ago in our 633 Investor Day. At the event, we said our mission to deliver the city delivery was relatively simple, But not easy and that the most uncertain part of building Interimco was already delivered from 2018 through 2022. Speaker 200:07:54Moving to the results, when we look at clients, besides surpassing the impressive mark of We're happy to announce a 125 bps improvement in our activation rate, which now stands at 54%, the highest level in 8 quarters. Our efforts to boost activation include, but are not limited to, improving onboarding, personalizing the Super App, streamlining customer lifecycle strategy and offering high engaging new products such as Loop along with overall UX fine tuning. This combined with the lowest CAC Since 2020 brings us confidence in the future And in our ability to keep the fly moving with low CAC and high engagement, building stronger relationships for a seamless and complete experience. Moving to Page 13, we start talking about business looking at day to day bank. It makes us proud to see the robustness of our transactional business and that despite the materiality achieved, We see accelerated growth. Speaker 200:09:09The 4th quarter was of strong acceleration in RTBV, surpassing BRL250 1,000,000,000. We see a consistent growth in peaks, which grew 45% in 2023 and an important 36% growth in the credit card volume, continuing our focus on gaining Credit share against debit in cards. When we look at the full year, we achieved amazing BRL 851,000,000,000 in PPV with over BRL 1,000,000,000,000 PPV at the 4th quarter run rate. On a cohort basis, as presented in the right chart, we see another quarter of improvements on both new New cohorts performance shows the consistency of our client growth strategy I'd like to finish saying that the key cohort performance On top of the older cohorts that keep accelerating engagements puts us in a confident position for future revenue growth and margin expansion. The current clients alone can keep us growing for many years to come. Speaker 200:10:28Moving to Page 14, 3 verticals that are a great representation of the powerful numbers of financial super app ecosystem can generate. On e commerce, we reached 3,000,000 clients and surpassed 10,000,000 transactions in the quarter, another record. We also surpassed BRL1 1,000,000 of GMV And I'll pay later partnerships with our bank. Now we have nearly 150 merchants with which we offer these new payment methods. This is likely the agent that will feel the beginning of personal loans in turn. Speaker 200:11:17On insurance, we also had another great quarter, reaching more than 388,000 sales and 1,700,000 active clients. Combining this, We reached a record breaking net revenue in this vertical of BRL47 1,000,000. A successful product to highlight is Consortium, which grew 21% on a yearly basis, surpassing 38,000 sales. Finally, on investments, our cutting edge product offering resulted in an impressive 66% year over year client growth, the highest adoption amongst our verticals being on day to day bank. With increasing clients, our AUC reached BRL92 1,000,000,000 With $9,000,000,000 being third party fixed income products distributed within our Super App. Speaker 200:12:11We also innovated On Global, As we move to Page 15, we see another quarter of strong success and some early signals 2,000,000 clients and more than $360,000,000 in the UC and deposits, A 4x growth compared to 2022. The clients that are active in our global products have better profiles, We're more engaged and adopt 3 times more products than the average clients. To continue having this great success, Our branding strategy included some investments in the U. S. We became in 2023 The official financial institution of Orlando City and Orlando Pride U. Speaker 200:13:23S. Soccer teams We believe being in Orlando and connecting through soccer will not only bring awareness, but also creating an emotional connection between Inter and the Brazilian and Latin community living and traveling to Orlando. It is worth mentioning that per year more than 900,000 Brazilians visit Florida and that more than 400,000 Brazilians Jumping to our segments vertical, loyalty, we achieved 5,400,000 active clients in their 4th quarter, adding 1,500,000 in these last 3 months. And as we observe With our global clients, Loop clients also create better profiles, spending on average 60% more Positive engagement trends have been observed in gamification initiatives as well. As we move along, we're adding other ways to earn and earn points with one of the less additions being allowing our clients to convert their points into U. Speaker 200:14:36S. Dollars in their global accounts. This week, we We made available an option to pay with points for products in our marketplace. As you can see, our loop It allows us to unlock value from all the other verticals in our financial supernatant. Very excited to see the results of it. Speaker 200:15:00Moving to Page 17, we see that 2023 demonstrated our unique capability to combine innovation in a year focused on efficiency. We launched many products such as fixed credit, to optimize our clients' lives. As Santi will show you the financial performance section, we didn't stop innovating while continuing on the path to deliver operational leverage. We're confident that our value proposition is best in class and that our next moves will keep us in the frontier We need to keep delivering. Finally, and before I pass the word to Santi, I'd like to say that the best of all is we're still in the early stages in every market we operate. Speaker 200:16:03On one hand, We were able to achieve material market share in multiple segments. In the other, there is a lot of room to grow in every one of these markets. We remain confident that we're well positioned to reach our long term North Star and continue to drive growth and profitability in the years to come As we increasingly deepen our relationships with our clients, the team is ready and our financial super app is adaptable and capable to navigate into those challenges. Now I'll pass the word to Santi to present our financial performance. Speaker 300:16:43Thank you, Sandeep. Hello, everyone. Now let me move you through our Financial Performance section. Jumping into Page 20, here we can see strong acceleration on the credit side. We are growing our portfolio 2 consecutive quarters at 5% grew 7% 10% in the 3rd and 4th quarter respectively, therefore entering 2024 with strong momentum. Speaker 300:17:07The gross margin portfolio reached an impressive R31 1,000,000,000 mark, which is a result of growing 4 times more than the Brazilian market average. Therefore, Moving to interest rates on the top of the page, you can see personal, NGTS and real estate rates growing sequentially, while SME, Here we go a bit deeper on growth by loan growth. As you can see in the chart, we remain disciplined on growing the most profitable lines Our best credit products, FCGS and Home Equity presented the highest growth levels in significant scale within our portfolio. For credit cards, our successful approach of advertising credit limits to existing and strong performing clients to increase by nearly 40% of the portfolio while improving asset quality trends. Finally, on real estate and payroll, With balanced growth with rising, we ensure that profitability continues to improve. Speaker 300:18:18Jumping on to Page 22, We had a great quarter for asset quality with all the metrics improving this quarter. Starting with a 15 to 90 day NPL ratio, We saw an improvement of 30 basis points quarter over quarter. We also improved the 90 day NPL metric to add the NPL as the 3 formation metrics, Thank you, my cohorts, who continue to see strong performance and net quality in recent quarter cohorts. Jumping on to Page 23, We can see significant decrease of cost of risk from our service performance. This dynamic was driven by underwriting and protection processes producing cohorts with stronger performance. Speaker 300:19:22Overall, as a quality front, we see the strong work down on data underwriting and risk management is paying off, enabling us to start 2024 with a positive trend. On page 24, we can see once again our leading franchise, which has almost $15,000,000 clients trusting us with our deposits. Moreover, our transactional deposits represent 33% of our total funding, which is one of the best mixes of funding with 3 year financial entities. Funding accelerated 10% this quarter, reaching almost 44,000,000 KIs. At the product level, Finally, we experienced the average deposit balance per active client, Reaching 2,000 EIS with a 6% growth versus the prior quarter. Speaker 300:20:21On Page 25, we can see our cost of Funding continues to be one of our key competitive advantages. This quarter, we reported 59.2% of CDI cost, Once again, below the 60% mark that we aspire to have. In terms of the all in cost, the improvement was 100 bps going down from 8 We should continue to benefit from this dynamic with the structure of our balance sheet that makes Interimco very sensitive. In terms of revenues, we had a great year. We see record breaking numbers in all the quarters. Speaker 300:21:28Moving to the Unit Economics page on Page 27. This combined with a stable cost to serve, has to keep enhancing our gross margin per active client, which reached Sandeep on sale DIs on a debt basis, which is our 2nd best quarter ever. Finally, in terms of active class brand jewelry, which is a good measure for our workforce productivity, we are closing the year On Page 28, we present our NIM Evolution net of cost of risk. We do this because it helps Capturing a full picture of our repricing and risk management practices. In the Q4, risk adjusted NIM Reached the highest level in the year, the 2nd highest level since 2020. Speaker 300:22:31This strong expansion is a consequence of: 1, Improvement on repricing of legacy real estate and payroll loans 2, change in the loan mix towards the most profitable 3, lowering cost of funding 4, efficiency in the reserve requirements as a result of our new equity program. For 2024, we see a continuation of this dynamic plus the scale of new current branches such as fixed credit and buy now, pay later. Going on Page 29, we see the expenses that have been pretty severe. With most of the breakdown items remaining roughly in line with prior periods, we achieved a 1% reduction in the overall impact of the prior year. Moving on to Page 30. Speaker 300:23:31Here we can see our efforts on the operational levers in more detail. In the next chart, it's clear that in the Q4 of 2023, we were able to further increase the gap between the growth in net revenues, growth on expenses. On the center, we had another impressive quarter of improvement in our efficiency ratio, leading us to end 2023 in a record low level 51.4 percent. On the right side, we can also see the efficiency ratio net of cost of risk, which similar to the risk adjusted NIM On Page 31, as you can see in the chart, our net fees continue to cover a percentage of our SG and A base, which is currently at 70%. The last but certainly not least, we couldn't be prouder of what we achieved in terms of profitability. Speaker 300:24:49We delivered a record ROE of 8.5 percent, including our best ever net income of €160,000,000, Which on an annual basis translates to a $640,000,000 impact by net income. Speaker 100:25:02On Speaker 300:25:02a pretax basis, we reached $208,000,000 Speaker 100:25:23Thank you, Sanjay. Thank you, Sharanjit. So since we launched our digital bank Back in 2016, we have been focused on creating a unique platform that attracted tens of millions of clients, For the past 2 years, we entered what we call the compounding phase. This is nothing else than While we are starting to see the benefits of our digital banking model, these benefits are: scalability, Strong weight on fee income, strong NIM risk adjusted margins, best in class fund mix and also highly diversified revenue base. We think that this year, this competitive advantage become fairly visible and allowed us to deliver even more than what we expected for our year 1 on the 6thirtythirty plan. Speaker 100:26:34We are highly proud of what we achieved this year, both from our business and financial performance and Could not be more excited for what's coming in 2024 and beyond. Thank you for joining our call today. Speaker 400:26:57We will now begin the question and answer session. Please note that in the interest of time, we will allow each participant Our first question comes from Mr. Thiago Batista from UBS. Hello, are you hear me? Loud and clear, sir. Speaker 300:28:16Yes. Okay. Okay. Speaker 500:28:18Thank you, guys. Thanks for the opportunity. I have one question about the peaks finance. I know that this product is still in a kind of early stage on Inter. But Can you comment your initial impression and how relevant this product can achieve? Speaker 100:28:42Yes, Jean Victor speaking. Thank you for the question. Actually, we are very excited with its credit. Just to put things on a context, we have 8% of the market share in PIX in Brazil. Everyone knows that. Speaker 100:28:57But most importantly, The UX UI for its credit is amazing. So most likely, we believe that we can Outpaced this market share for this product in Brazil going forward. 100% of our credit of our clients Use our app to transact. This is a good advantage for us. And last but not least, the economics for fixed credits Our mix, they are better than the current credit card scheme in Brazil. Speaker 100:29:29So we don't have the interchange, we don't have the MDR for the merchants. So it's a win win situation. I do believe that it's going to be a very profitable product for us going forward. We're very excited. The first readings on the delinquency are good, similar to the credit card. Speaker 100:29:47The rates are better. It's a way more efficient product. So I really think it's going to be a game changer for the payment industry in Brazil, mostly for the digital banks. Speaker 500:30:00Very clear, Jean. Thanks and congrats for the results. Speaker 100:30:06Thank you, Chop. Speaker 400:30:12Our next question comes from Mr. Tito Labarta from Goldman Sachs. Speaker 600:30:31Hi, good morning. Thank you for the call and taking my question. My question is that there were some margin pressure in the quarter, I think related to renegotiations and discounts that you did that Also help the cost of risk. Should we expect more of this going forward? How should we think about both I guess both the margin and the cost of risk Going forward from here. Speaker 600:30:53Thank you. Speaker 700:30:58Thank you, Tito Santeo for taking the question. So what we continue doing this Q4 was what we did in the Q3, which was to be a bit more Proactive towards renegotiating the non delinquent loans, and we did that Additional $30,000,000 we have an impact of additional $30,000,000 from the NII into the cost of risk. Remember that we had a similar impact In the Q3, no, related to the Q2, so it was $30,000,000 in the Q3 and now $30,000,000 plus $30,000,000 meaning $60,000,000 versus the Q2 now in the Q4. That impact drove cost of risk lower and it also impacted NIM, which is the reason why we incorporate this new metric, which we Well, the risk adjusted NIM that captures both variables together and we think is the proper way to see that we recorded a 5.0% Risk adjusted NIM, the highest in the year and the 2nd highest in the last 4 years. Going forward, We expect the level that we reach now to continue. Speaker 700:32:05We don't think we have more incremental changes in the levels, but we would expect to keep it As a percentage of the portfolio roughly at this size, we also incorporated new disclosure regarding the Stocks of the renegotiated portfolio, which is a feedback that we got from investors and research analysts and that's providing the press release For people to go a bit deeper on how that compares already to the market. Speaker 600:32:36Great. Thanks, Santiago. Maybe just one follow-up, we did see some improvements on the funding costs in the quarter. Is there room to improve that more from here? Speaker 700:32:46So in the Q4, there is seasonality, to be honest, so we took the level below 60%, But around 60% is the level that we want to operate at. As we always say, the structure of our funding base or our funding franchise, It is a key competitive advantage. We will try to defend that as much as we can. We do think that the worst moment of stress with the Selic being at almost 14%, Which could have had a shift towards the higher yielding deposits didn't happen. We continue having a Strong funding mix and a 60% cost of funding with Celix going down. Speaker 700:33:25We think we'll be in a downhill or in a with tailwind Speaker 400:33:43Our next question comes from Mr. Mario Pierre Re from Bank of America. Mr. Pierre Re, we are now opening the audio, so you can ask your question live. Please go ahead, sir. Speaker 800:33:57Hey, guys. Congratulations on the quarter. Quick question on efficiency. As you show, right, you have made Significant improvements to your efficiency ratio. A lot of that because you were able To keep your costs flat, especially personnel expenses. Speaker 800:34:19So going forward, how should we See, clearly, your target is for efficiency to continue to improve. But I wanted to understand from your perspective, is this improvement coming from revenue generation? Or can you do more to reduce your cost structure? Do you have any initiatives that should reduce costs? [SPEAKER JOSE RAFAEL FERNANDEZ:] Or we're just talking about maintaining costs relatively growing in line of inflation, but revenue generation coming through. Speaker 800:34:46Thank you. Speaker 700:34:50Hi, Mario. I'll start taking that one. So what we saw throughout 2023 was at the beginning, We had certain low hanging fruit, so to speak, which we went very aggressive towards capitalizing them. If we look at the graph of the index of expenses and revenues in the second half, both grew, But the growth on the revenue side was materially steeper than the growth on the expense side. That is what we expect to see In 2024, we will invest more to continue growing, but the growth will be at a much lower rate, half or less than half the growth in revenue. Speaker 700:35:31And for that, we have a fixed side and a variable side. The fixed side is mainly the personnel expenses. That is a number that we will also grow At the inflation plus a few percentage points, but not too far from that. And then on the variable side, those are expenses that are more tied to the volume growth and those We grow at a higher level, but the growth, the improvement in efficiency will mainly be driven by revenues Growing significantly higher than the expense growth. Speaker 800:36:02Okay. That's clear. And Santin, just to Like you showed that slide that you are almost halfway, to your target for efficiency. You know, and this was like a 5 year target. I do you think you are ahead of schedule on efficiency or was that the Speaker 700:36:28We're definitely ahead is the way we are ahead The most, we went a lot more aggressive on expenses and to be more specific, we have a project, This is a project AO, Corrugia in Portuguese. We launched this project at the end of April, and that was a Corrugia 1.0, Meeting every Friday morning, the senior leadership of Inter attacking all of the main line items in the We had our first meeting of Corrugia 2.0 of 2024, the 1st Friday of the year. So we are starting A lot earlier, obviously now it will be tough for not to deliver incremental improvements, but the focus is there because we want to continue being above the level. We We're not going to have 20 percentage points improvement like we had this year, but we think that the concept of the digital bank Like we have, has a strong competitive advantage from the cost side and that is something we want to continue delivering as we go along. So this is a We expect to continue excelling. Speaker 800:37:36Great. Thank you very much. Speaker 300:37:42Thank you. Speaker 400:37:48Our next question comes from Mr. Yuri Fernandes from JPMorgan. Mr. Fernandes, you have the floor now. We're opening the audio, so you can ask your question live. Speaker 900:38:00And thank you. Hi, Santi, Azuel and Chaudhry. I have one regarding recoveries, loan loss recoveries. It was a good quarter. We tracked this and it was R80 $1,000,000. Speaker 900:38:12It used to be tracking around R40 So just asking what happened there, like if this level is sustainable, if there was any kind of one time recovery, Because it was a good quarter for this line. Thank you very much. Speaker 700:38:29Hi, Yuri. Yes, so recoveries typically the 4th quarter has better performance as there is More money in people's pockets and we see that on the funding side as well as we mentioned earlier. So there is a bit of seasonality, but we are a lot more effective on the work being led by the underwriting team and recovery team, Mauro Angel has been Spectacular. We expect to continue improving that metric, but the growth in the 4th quarter did had Some seasonality. So we have to compare the quarters versus the prior quarter of the prior year in order to make it apples to apples. Speaker 700:39:11But we think this is a front where there's a lot to continue evolving. Speaker 900:39:16Thank you, Santi. If I may Different topic, but quickly one on the marketplace on Intershop. The net take rate was slightly down. Should we see this recovery Ahead is this like promotions, Black Friday, Christmas and should we see the net take rate moving up back again or what is the message [SPEAKER JEAN Speaker 1000:39:37FRANCOIS VAN BOXMEER:] Speaker 1100:39:38Jurij, Jean Vitor speaking here. Just to complement Santo on the previous question and then I'm going to answer about the Please. I think that most of the analysts remember that I have always talking about 3 key elements for the credit card. [SPEAKER JOSE MARIA ALVAREZ PALLETE:] So good underwriting, good productgood UX, good UI and good collection. And the renegotiation is a very important part of a good collection. Speaker 1100:40:03We're doing that seamless for the client through our app in a very wise way. And therefore, we have been improving [SPEAKER PIERRE YVES LESAICHERRE:] The flow, the type that we make the collections, it's a win win situation. It's very important. Going to the marketplace, Now we also I mentioned in the past that we're always trying to do the best balancing, trying to find a sweet spot Between growth and profitability. And the good news are, we have been able to shift from one to the other quite easily. Speaker 1100:40:37Every Single week, I have a meeting with Rodrigo. Rodrigo, both all of you know Rodrigo, the CEO of the marketplace. And then we can decide, We have a strong time of the year coming in. So should we put the take rate the cash back, sorry, [SPEAKER CHRISTOPHER MANDEVILLE:] Less competitive. Should we be more competitive because it's a low season? Speaker 1100:40:57So, we use that quite often to adjust growth versus profitability. Having said that, I believe that I don't see a major change on the trends going forward for 2024. But [SPEAKER PIERRE ANDRE DE CHALENDAR:] If you have a good recovery on the retail in Brazil, we can't improve the growth, [SPEAKER PIERRE ANDRE DE CHALENDAR:] I mean, Speaker 100:41:19the GMV, but also the Speaker 1100:41:19net take rate going forward. So pretty much stable for 2024. That's what we foresee for the Speaker 900:41:30That's super clear, Jean. Thank you and congrats for the results. Speaker 400:41:40Our next question comes from Ms. Neha Agarwal from HSBC. Ms. Agarwal, we're now opening the audio, so you can ask your question live. Please go ahead. Speaker 1000:41:53Hi, congratulations on the results and thank you for taking my questions. A quick one on the revenue So you mentioned the cost to income improvement will be driven more by revenue growth. What are the main levers in your view that is going to drive revenue growth For 2024, what kind of loan growth could we expect for this year which will further translate into stronger interest income and fee income growth? And probably you can touch upon the BNP product that you mentioned on your platform, maybe that could be one of those new levers on the revenue side. And the second question very quickly, what kind of ROE should we expect for trade 2024? Speaker 1000:42:34Something like a 12%, 13%, 14% Seems reasonable. Any color on that, if not a number would be very helpful. Thank you so much. Speaker 200:42:46Thanks, Neha. This is Alexandre speaking. Speaker 800:42:48I'll start with Speaker 200:42:49the BNPL and then I'll go through the growth part. So the BNPL is a new payment method that we incorporated into our marketplace. We see it as the Consumer Finance 2.0, so bringing more of the pool of revenues of the system into Inter and we see that Yes, super positive. We're fine tuning the model as we grow and believe this could be in the ballpark of 2,250,000,000 By the end of the year, the context of the partnerships is a driver to reduce risk. So in the end of the day, we get take rates that range from 20% to 30% from our partners and that helps Financing the delinquency that we may get in the model and with the clients. Speaker 200:43:39The nice thing about the BNPL Is that given the take rates from the partnerships, we can open it for a wider range of customers. So Several million customers that don't have a credit card can buy with the buy now pay later within the app. We're excited and it is one of the drivers of margin expansion as we drive through 2024. When you think about growth? Speaker 1000:44:08Can I pause over there and just ask Something very Speaker 100:44:11quickly? Speaker 1000:44:11So, Ed, it seems like for the BNPL product, you'll do part on your own balance sheet and part with the partners, Which allows you to get a fee income from the partners. Could you talk a little bit about what kind of proportions we can expect 10% on balance sheet, 90% with partners or more like fifty-fifty? And what kind of partners are we talking about? If you can name some, that would be helpful. Speaker 200:44:33Yes. So So Neha, in terms of balance sheet, it all goes to our balance sheet. So in practice, what happens is, for example, let's say somebody is buying a phone From Samsung for R1,000, instead of disbursing R1,000 Because Samsung is providing the stake rate of 25, 250 highs. So We have a collection balance of $1,000 but a disbursement of only $750,000 That's the mechanics of how it works. And we'll keep on expanding the partnerships so that the product can grow. Speaker 1000:45:24Okay. So essentially, just the take rate, you're not the loan will still be everything will be in your balance sheet? Speaker 200:45:31Everything in our balance sheet, correct. Moving yes. And on the growth aspect, we expect to grow beyond 30% this year. We're excited like the last the Q4 was positive at around a 10% growth. So we're excited about 2024. Speaker 200:45:50The core portfolios will keep on growing. So home equity, FTTS, we're excited about those and Good start of the year so far. And it's also nice to mention the expansion on the non collateralized, right? Jean talked a bit about the fixed Credit and we launched them last year, so overdraft, buy now pay later, which we've discussed, Peaks Credit, as Ron discussed, we also have bill pay using the credit card limit and we're also allowing Customers to put cash in their accounts using their credit card limits. We have a potential of a 1,000,000,000 portfolio By the end of the year in these lines and they're definitely going to be a margin expansion product for us. Speaker 200:46:41So we're excited about it. Thank you, Nya. Speaker 1000:46:48Super helpful. Thank you. Anything on the ROE front? Speaker 700:46:57I can take that one, Nijia. Hi. So, on ROE and net income, we don't provide guidance. But what we said last year on the Investor Day was that we agreed with a sell side consensus Of 5% for 2023, and we deliver that. What we can say now, like exactly a year after, Is that the flow or the curve of build up both in net income and ROE that we saw throughout the year should continue Into 2024, we can't get too much specific on that because they will become guidance and we don't intend to provide. Speaker 700:47:37But we see a continuation of the trend That we've had last year coming into what is year 2 of the sixty-thirty-thirty. Speaker 1000:47:47Perfect. Thank you so much. Speaker 400:47:58Our next question comes from Mr. Pedro LeDuc from Itau BBA. Sir, We have apparently lost connection with Mr. Leduc, Mr. Pedro Leduc. Speaker 400:48:43Apparently, is no longer in the room. So we're moving on to the next question coming from Mr. Brian Flores from Citi. Mr. Flores, we're opening the audio now, so you can ask your question live. Speaker 400:48:59Please go ahead, sir. Speaker 1200:49:01Hi, thank you. Thank you for the opportunity. Just a couple of follow ups on the answers that you provided. You mentioned you were excited about FTTS loans. So the contribution to gross loans is around 6%. Speaker 1200:49:13This has been increasing steadily. So just wanted To get a sense on how are you thinking about this segment, any insights on the dynamics of the segment and how should we think about the contribution going forward? So I think this is my first question. The second one, Santiago, you mentioned that in terms of the strategic plans, you Intent to defend your deposit base. Can you share with us like what are any ideas on how to do this would be really helpful? Speaker 1200:49:45Thank you. Speaker 200:49:48Brian, this is Alex speaking. May I ask you to repeat the question, please? We had a technical problem and couldn't hear you. Speaker 1200:49:56Sure. No problem. The first one was on FGTS loans. The contribution is around 6% has been steadily Helping in terms of the total portfolio, so just wanted to think to get a sense on how are you thinking about this segment? Any insights on the dynamics would be really helpful. Speaker 1200:50:16And then the second one was on how are you planning to defend your deposit base? Speaker 200:50:23Great. Thank you. So starting with the FTTS, it's a product that we like a lot, 100% digital underwriting, Good margin, high engaging product and we've been able to do continuous improvement also operationally to make it easier for customers To obtain their loans, we have a lot of returning customers. Having said that, we expect to keep on growing. It's at 6% of The portfolio as you mentioned, and we believe it could get to around 10% by the end of 2024 As we move forward, so we are excited about it. Speaker 200:51:04From deposit In terms of defending the deposit, it's all about defending the transactional business, right? So we've been consistent on keeping peaks Around the 8% market share, we're going to work heavily to increase this market share as we move towards 2024. And with the transactional business, we're going to be indirectly defending the deposit franchise, right? That is one of the strengths of Inter, The massive transactional platform we've been able to bring in, along with also the investment platform, it's super nice. But that's the defense. Speaker 200:51:45The defense is to keep growing on the transactional business. Thanks, Brian. Speaker 1200:51:51Perfect. Thank you. Speaker 400:52:11The conference is now concluded. Inter IR area is at your disposal to answer Any additional questions? But first, I'd like to yield the floor to Mr. Joao Witter Menin for his closing remarks. Sir, the floor is yours. Speaker 100:52:29Thank you very much. So first of all, Speaker 1100:52:32I would like to thank our employees For the great year we had on 2023, we work a lot. We work hard and we work with the right Strategy with the right focus, with the right North Star, which is our 6thirty-thirty plan. And I really feel that It's no longer different on 2024. I see a red for the 1st month, our team engaged, motivated To also deliver another positive year on our 6thirty-thirty plan. We were chatting this morning about the priorities for the year. Speaker 1100:53:08And I would like Say that I have 2 priorities for 2024. The first one, to make sure that we also deliver another year ahead of the budget Of the six-thirty-thirty plan. And the second, guys, to make sure that I'm going to stick with the first one. So [SPEAKER PIERRE YVES LESAICHERRE:] That's about that. Be focused, engaged, motivated, and I'm sure that we can keep delivering good results, both [SPEAKER PIERRE YVES LESAICHERRE:] On a profitability basis, but also very important on a growth perspective as well. Speaker 1100:53:41We are still a growth company. But Combining these two elements, we could deliver it on 2023 and we will deliver it on 2024 again. I'm sure about that. Thank you, all the employees. Thank you, all the shareholders that support us for a while, that will keep supporting us. Speaker 1100:53:57See you soon. Thank you very much. Have a good day. Speaker 400:54:04The conference is now concluded. Inter IR Area is at your disposalRead morePowered by Conference Call Audio Live Call not available Earnings Conference CallInter & Co, Inc. Q4 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) Inter & Co, Inc. Earnings HeadlinesBullish Two Hundred Day Moving Average Cross - INTRApril 24, 2025 | nasdaq.comInter & Co’s Banco Inter Rating Reaffirmed by S&PApril 23, 2025 | tipranks.comShocking AI play that’s beats Nvidia by a country mileYou’ve seen the headlines about Nvidia. Now Tim Sykes is sounding the alarm — because what CEO Jensen Huang is about to announce could change the AI market once again. Experts already predict the total addressable market could climb past $20 trillion. But Sykes believes most investors have missed what’s coming next. He’s tracking a new shift — and says the biggest gains are still ahead.May 5, 2025 | Timothy Sykes (Ad)Inter & Co, Inc. Schedules 2025 AGM with Key ResolutionsApril 9, 2025 | tipranks.comInter&Co price target lowered to $4 from $4.50 at Morgan StanleyMarch 18, 2025 | markets.businessinsider.comWhy Investors Are Sleeping On Inter's Long-Term PotentialFebruary 25, 2025 | seekingalpha.comSee More Inter & Co, Inc. Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Inter & Co, Inc.? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Inter & Co, Inc. and other key companies, straight to your email. Email Address About Inter & Co, Inc.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.View Inter & Co, Inc. 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There are 13 speakers on the call. Operator00:00:01Good afternoon, and thank you for standing by. Welcome to Interimco's 4th Quarter Earnings Conference Call. Today's speakers are Joao Victor Menin, Inter's CEO Alexandre Riccio, Senior Vice President of Retail Banking and Santiago Stel, Senior Vice President of Finance and Risks. Please be advised that today's conference is being recorded and a replay will be available at the company's IR website. At this time, all participants are in listen only mode. Operator00:00:30After the prepared remarks, there will be a question and answer session. For this session, we ask you to write down your question via the Q and A icon on your screen. Your name will then be announced and you will be able to ask your question live. At that point, a request to activate your microphone will appear on your screen. If you do not want to open your microphone live, Please write down no microphone at the end of your question. Operator00:00:56In this case, our operator will read your question for you. Please note that there is an interpretation button at the bottom of your screen where you can choose the language you want to hear, English or Portuguese. Throughout this conference call, we will be presenting non IFRS financial information. These are important financial As financial information to the IFRS financial information are available in Interimco earnings release and earnings presentation appendix. Today's discussion might include forward looking statements, which are not guarantees of future performance. Operator00:01:41Please refer to the forward looking statements disclosure in Company's earnings release and earnings presentation. Now I would like to yield the floor to Mr. Joao Witter Menon. Sir, the floor is yours. Speaker 100:01:54Thank you, operator. Good morning, everyone. I will start with a quick overview of our strategy Today, I will pass this to Sanjay and Santi to cover the operating and financial performance of Interimco. As in prior calls, I will close with some final remarks and then open it for the Q and A session. At our Investor Day held in Belo a year ago, we introduced our 5 year business plan known as the sixty-thirty-thirty. Speaker 100:02:27This North Star means that Interimco's goal for 2027 is to achieve 60,000,000 clients, 30% efficiency ratio and 10% ROE. When we announced it, it was received as a highly ambitious plan. I'm glad to say that the 1st year of our plan was a resounding success, much better than many in Aside from being an important direction to the market, the point of the plan was to engage and drive our organization In sum, as Armstrong family sat, a small step for men, one giant leap for mankind. We're both humble and proud of our progress. This is a first step toward profitability. Speaker 100:03:21But more importantly, it validates how sustainable our business model is. To illustrate there the progress in year 1, As you can see, we achieved 30,000,000 clients right on track, an efficiency ratio of 51%, Significantly ahead of schedule and ROE of 9%, also ahead of the plan. As you can see, Our metrics are stronger than expected, demonstrating our strong execution towards the plan. We have been able to combine growth, operational leverage and profitability, while staying true to our core principle of always putting the clients first by innovating and bringing new solutions in our financial supercap. Products that are organized across 7 verticals. Speaker 100:04:34These are banking, credit, insurance, investments, shopping, global and loyalty. This powerful engine that is our financial super app is continuously evolving and improving day by day. Our wide set of products and services complement each other, creating a flywheel that brings together a complete When I say clients connect to our solutions, I really mean For instance, we see strong acceleration in the adoption of new products. Today, We have more than 12 products with more than 1,000,000 active clients. At this pace, it is highly likely that by the end of this year, We will have a new product that we didn't even launch yet and with more than 1,000,000 active clients by year end. Speaker 100:05:35This is what happened this year, for example, with Interlooping and Milcroquin. This is the consequence of having what we believe is the best super app in the Americas. With over 30,000,000 clients, More than 4,000,000 individual daily logins per day and a run rate TPV of over 1,000,000,000,000 heads. With all that said, I have no reason to doubt that the only possible direction in our profitability and growth We have reached unsurpassed the inflection point. And in 2023, We presented 4 consecutive quarters of consistent growth in net income, EBT, ROE and many other matters. Speaker 100:06:30We are on the right track towards our long term plans And we are thrilled to announce that we are on track to deliver even better Tier 2 of our sixty-thirty-thirty plan. Now, Sanje will walk you through our business updates. Thank you very much. Sanje, please go on. Speaker 200:06:52Thank you, Joao. Good afternoon, everyone, and thank you for joining us today. I would like to discuss Four topics as we go along the presentation: 1st, clients and engagement second, the performance of the different business verticals 3rd, our innovation capabilities and 4th, our potential for further growth. Before going through the numbers, I'd like to quickly reflect on what we said a little over a year ago in our 633 Investor Day. At the event, we said our mission to deliver the city delivery was relatively simple, But not easy and that the most uncertain part of building Interimco was already delivered from 2018 through 2022. Speaker 200:07:54Moving to the results, when we look at clients, besides surpassing the impressive mark of We're happy to announce a 125 bps improvement in our activation rate, which now stands at 54%, the highest level in 8 quarters. Our efforts to boost activation include, but are not limited to, improving onboarding, personalizing the Super App, streamlining customer lifecycle strategy and offering high engaging new products such as Loop along with overall UX fine tuning. This combined with the lowest CAC Since 2020 brings us confidence in the future And in our ability to keep the fly moving with low CAC and high engagement, building stronger relationships for a seamless and complete experience. Moving to Page 13, we start talking about business looking at day to day bank. It makes us proud to see the robustness of our transactional business and that despite the materiality achieved, We see accelerated growth. Speaker 200:09:09The 4th quarter was of strong acceleration in RTBV, surpassing BRL250 1,000,000,000. We see a consistent growth in peaks, which grew 45% in 2023 and an important 36% growth in the credit card volume, continuing our focus on gaining Credit share against debit in cards. When we look at the full year, we achieved amazing BRL 851,000,000,000 in PPV with over BRL 1,000,000,000,000 PPV at the 4th quarter run rate. On a cohort basis, as presented in the right chart, we see another quarter of improvements on both new New cohorts performance shows the consistency of our client growth strategy I'd like to finish saying that the key cohort performance On top of the older cohorts that keep accelerating engagements puts us in a confident position for future revenue growth and margin expansion. The current clients alone can keep us growing for many years to come. Speaker 200:10:28Moving to Page 14, 3 verticals that are a great representation of the powerful numbers of financial super app ecosystem can generate. On e commerce, we reached 3,000,000 clients and surpassed 10,000,000 transactions in the quarter, another record. We also surpassed BRL1 1,000,000 of GMV And I'll pay later partnerships with our bank. Now we have nearly 150 merchants with which we offer these new payment methods. This is likely the agent that will feel the beginning of personal loans in turn. Speaker 200:11:17On insurance, we also had another great quarter, reaching more than 388,000 sales and 1,700,000 active clients. Combining this, We reached a record breaking net revenue in this vertical of BRL47 1,000,000. A successful product to highlight is Consortium, which grew 21% on a yearly basis, surpassing 38,000 sales. Finally, on investments, our cutting edge product offering resulted in an impressive 66% year over year client growth, the highest adoption amongst our verticals being on day to day bank. With increasing clients, our AUC reached BRL92 1,000,000,000 With $9,000,000,000 being third party fixed income products distributed within our Super App. Speaker 200:12:11We also innovated On Global, As we move to Page 15, we see another quarter of strong success and some early signals 2,000,000 clients and more than $360,000,000 in the UC and deposits, A 4x growth compared to 2022. The clients that are active in our global products have better profiles, We're more engaged and adopt 3 times more products than the average clients. To continue having this great success, Our branding strategy included some investments in the U. S. We became in 2023 The official financial institution of Orlando City and Orlando Pride U. Speaker 200:13:23S. Soccer teams We believe being in Orlando and connecting through soccer will not only bring awareness, but also creating an emotional connection between Inter and the Brazilian and Latin community living and traveling to Orlando. It is worth mentioning that per year more than 900,000 Brazilians visit Florida and that more than 400,000 Brazilians Jumping to our segments vertical, loyalty, we achieved 5,400,000 active clients in their 4th quarter, adding 1,500,000 in these last 3 months. And as we observe With our global clients, Loop clients also create better profiles, spending on average 60% more Positive engagement trends have been observed in gamification initiatives as well. As we move along, we're adding other ways to earn and earn points with one of the less additions being allowing our clients to convert their points into U. Speaker 200:14:36S. Dollars in their global accounts. This week, we We made available an option to pay with points for products in our marketplace. As you can see, our loop It allows us to unlock value from all the other verticals in our financial supernatant. Very excited to see the results of it. Speaker 200:15:00Moving to Page 17, we see that 2023 demonstrated our unique capability to combine innovation in a year focused on efficiency. We launched many products such as fixed credit, to optimize our clients' lives. As Santi will show you the financial performance section, we didn't stop innovating while continuing on the path to deliver operational leverage. We're confident that our value proposition is best in class and that our next moves will keep us in the frontier We need to keep delivering. Finally, and before I pass the word to Santi, I'd like to say that the best of all is we're still in the early stages in every market we operate. Speaker 200:16:03On one hand, We were able to achieve material market share in multiple segments. In the other, there is a lot of room to grow in every one of these markets. We remain confident that we're well positioned to reach our long term North Star and continue to drive growth and profitability in the years to come As we increasingly deepen our relationships with our clients, the team is ready and our financial super app is adaptable and capable to navigate into those challenges. Now I'll pass the word to Santi to present our financial performance. Speaker 300:16:43Thank you, Sandeep. Hello, everyone. Now let me move you through our Financial Performance section. Jumping into Page 20, here we can see strong acceleration on the credit side. We are growing our portfolio 2 consecutive quarters at 5% grew 7% 10% in the 3rd and 4th quarter respectively, therefore entering 2024 with strong momentum. Speaker 300:17:07The gross margin portfolio reached an impressive R31 1,000,000,000 mark, which is a result of growing 4 times more than the Brazilian market average. Therefore, Moving to interest rates on the top of the page, you can see personal, NGTS and real estate rates growing sequentially, while SME, Here we go a bit deeper on growth by loan growth. As you can see in the chart, we remain disciplined on growing the most profitable lines Our best credit products, FCGS and Home Equity presented the highest growth levels in significant scale within our portfolio. For credit cards, our successful approach of advertising credit limits to existing and strong performing clients to increase by nearly 40% of the portfolio while improving asset quality trends. Finally, on real estate and payroll, With balanced growth with rising, we ensure that profitability continues to improve. Speaker 300:18:18Jumping on to Page 22, We had a great quarter for asset quality with all the metrics improving this quarter. Starting with a 15 to 90 day NPL ratio, We saw an improvement of 30 basis points quarter over quarter. We also improved the 90 day NPL metric to add the NPL as the 3 formation metrics, Thank you, my cohorts, who continue to see strong performance and net quality in recent quarter cohorts. Jumping on to Page 23, We can see significant decrease of cost of risk from our service performance. This dynamic was driven by underwriting and protection processes producing cohorts with stronger performance. Speaker 300:19:22Overall, as a quality front, we see the strong work down on data underwriting and risk management is paying off, enabling us to start 2024 with a positive trend. On page 24, we can see once again our leading franchise, which has almost $15,000,000 clients trusting us with our deposits. Moreover, our transactional deposits represent 33% of our total funding, which is one of the best mixes of funding with 3 year financial entities. Funding accelerated 10% this quarter, reaching almost 44,000,000 KIs. At the product level, Finally, we experienced the average deposit balance per active client, Reaching 2,000 EIS with a 6% growth versus the prior quarter. Speaker 300:20:21On Page 25, we can see our cost of Funding continues to be one of our key competitive advantages. This quarter, we reported 59.2% of CDI cost, Once again, below the 60% mark that we aspire to have. In terms of the all in cost, the improvement was 100 bps going down from 8 We should continue to benefit from this dynamic with the structure of our balance sheet that makes Interimco very sensitive. In terms of revenues, we had a great year. We see record breaking numbers in all the quarters. Speaker 300:21:28Moving to the Unit Economics page on Page 27. This combined with a stable cost to serve, has to keep enhancing our gross margin per active client, which reached Sandeep on sale DIs on a debt basis, which is our 2nd best quarter ever. Finally, in terms of active class brand jewelry, which is a good measure for our workforce productivity, we are closing the year On Page 28, we present our NIM Evolution net of cost of risk. We do this because it helps Capturing a full picture of our repricing and risk management practices. In the Q4, risk adjusted NIM Reached the highest level in the year, the 2nd highest level since 2020. Speaker 300:22:31This strong expansion is a consequence of: 1, Improvement on repricing of legacy real estate and payroll loans 2, change in the loan mix towards the most profitable 3, lowering cost of funding 4, efficiency in the reserve requirements as a result of our new equity program. For 2024, we see a continuation of this dynamic plus the scale of new current branches such as fixed credit and buy now, pay later. Going on Page 29, we see the expenses that have been pretty severe. With most of the breakdown items remaining roughly in line with prior periods, we achieved a 1% reduction in the overall impact of the prior year. Moving on to Page 30. Speaker 300:23:31Here we can see our efforts on the operational levers in more detail. In the next chart, it's clear that in the Q4 of 2023, we were able to further increase the gap between the growth in net revenues, growth on expenses. On the center, we had another impressive quarter of improvement in our efficiency ratio, leading us to end 2023 in a record low level 51.4 percent. On the right side, we can also see the efficiency ratio net of cost of risk, which similar to the risk adjusted NIM On Page 31, as you can see in the chart, our net fees continue to cover a percentage of our SG and A base, which is currently at 70%. The last but certainly not least, we couldn't be prouder of what we achieved in terms of profitability. Speaker 300:24:49We delivered a record ROE of 8.5 percent, including our best ever net income of €160,000,000, Which on an annual basis translates to a $640,000,000 impact by net income. Speaker 100:25:02On Speaker 300:25:02a pretax basis, we reached $208,000,000 Speaker 100:25:23Thank you, Sanjay. Thank you, Sharanjit. So since we launched our digital bank Back in 2016, we have been focused on creating a unique platform that attracted tens of millions of clients, For the past 2 years, we entered what we call the compounding phase. This is nothing else than While we are starting to see the benefits of our digital banking model, these benefits are: scalability, Strong weight on fee income, strong NIM risk adjusted margins, best in class fund mix and also highly diversified revenue base. We think that this year, this competitive advantage become fairly visible and allowed us to deliver even more than what we expected for our year 1 on the 6thirtythirty plan. Speaker 100:26:34We are highly proud of what we achieved this year, both from our business and financial performance and Could not be more excited for what's coming in 2024 and beyond. Thank you for joining our call today. Speaker 400:26:57We will now begin the question and answer session. Please note that in the interest of time, we will allow each participant Our first question comes from Mr. Thiago Batista from UBS. Hello, are you hear me? Loud and clear, sir. Speaker 300:28:16Yes. Okay. Okay. Speaker 500:28:18Thank you, guys. Thanks for the opportunity. I have one question about the peaks finance. I know that this product is still in a kind of early stage on Inter. But Can you comment your initial impression and how relevant this product can achieve? Speaker 100:28:42Yes, Jean Victor speaking. Thank you for the question. Actually, we are very excited with its credit. Just to put things on a context, we have 8% of the market share in PIX in Brazil. Everyone knows that. Speaker 100:28:57But most importantly, The UX UI for its credit is amazing. So most likely, we believe that we can Outpaced this market share for this product in Brazil going forward. 100% of our credit of our clients Use our app to transact. This is a good advantage for us. And last but not least, the economics for fixed credits Our mix, they are better than the current credit card scheme in Brazil. Speaker 100:29:29So we don't have the interchange, we don't have the MDR for the merchants. So it's a win win situation. I do believe that it's going to be a very profitable product for us going forward. We're very excited. The first readings on the delinquency are good, similar to the credit card. Speaker 100:29:47The rates are better. It's a way more efficient product. So I really think it's going to be a game changer for the payment industry in Brazil, mostly for the digital banks. Speaker 500:30:00Very clear, Jean. Thanks and congrats for the results. Speaker 100:30:06Thank you, Chop. Speaker 400:30:12Our next question comes from Mr. Tito Labarta from Goldman Sachs. Speaker 600:30:31Hi, good morning. Thank you for the call and taking my question. My question is that there were some margin pressure in the quarter, I think related to renegotiations and discounts that you did that Also help the cost of risk. Should we expect more of this going forward? How should we think about both I guess both the margin and the cost of risk Going forward from here. Speaker 600:30:53Thank you. Speaker 700:30:58Thank you, Tito Santeo for taking the question. So what we continue doing this Q4 was what we did in the Q3, which was to be a bit more Proactive towards renegotiating the non delinquent loans, and we did that Additional $30,000,000 we have an impact of additional $30,000,000 from the NII into the cost of risk. Remember that we had a similar impact In the Q3, no, related to the Q2, so it was $30,000,000 in the Q3 and now $30,000,000 plus $30,000,000 meaning $60,000,000 versus the Q2 now in the Q4. That impact drove cost of risk lower and it also impacted NIM, which is the reason why we incorporate this new metric, which we Well, the risk adjusted NIM that captures both variables together and we think is the proper way to see that we recorded a 5.0% Risk adjusted NIM, the highest in the year and the 2nd highest in the last 4 years. Going forward, We expect the level that we reach now to continue. Speaker 700:32:05We don't think we have more incremental changes in the levels, but we would expect to keep it As a percentage of the portfolio roughly at this size, we also incorporated new disclosure regarding the Stocks of the renegotiated portfolio, which is a feedback that we got from investors and research analysts and that's providing the press release For people to go a bit deeper on how that compares already to the market. Speaker 600:32:36Great. Thanks, Santiago. Maybe just one follow-up, we did see some improvements on the funding costs in the quarter. Is there room to improve that more from here? Speaker 700:32:46So in the Q4, there is seasonality, to be honest, so we took the level below 60%, But around 60% is the level that we want to operate at. As we always say, the structure of our funding base or our funding franchise, It is a key competitive advantage. We will try to defend that as much as we can. We do think that the worst moment of stress with the Selic being at almost 14%, Which could have had a shift towards the higher yielding deposits didn't happen. We continue having a Strong funding mix and a 60% cost of funding with Celix going down. Speaker 700:33:25We think we'll be in a downhill or in a with tailwind Speaker 400:33:43Our next question comes from Mr. Mario Pierre Re from Bank of America. Mr. Pierre Re, we are now opening the audio, so you can ask your question live. Please go ahead, sir. Speaker 800:33:57Hey, guys. Congratulations on the quarter. Quick question on efficiency. As you show, right, you have made Significant improvements to your efficiency ratio. A lot of that because you were able To keep your costs flat, especially personnel expenses. Speaker 800:34:19So going forward, how should we See, clearly, your target is for efficiency to continue to improve. But I wanted to understand from your perspective, is this improvement coming from revenue generation? Or can you do more to reduce your cost structure? Do you have any initiatives that should reduce costs? [SPEAKER JOSE RAFAEL FERNANDEZ:] Or we're just talking about maintaining costs relatively growing in line of inflation, but revenue generation coming through. Speaker 800:34:46Thank you. Speaker 700:34:50Hi, Mario. I'll start taking that one. So what we saw throughout 2023 was at the beginning, We had certain low hanging fruit, so to speak, which we went very aggressive towards capitalizing them. If we look at the graph of the index of expenses and revenues in the second half, both grew, But the growth on the revenue side was materially steeper than the growth on the expense side. That is what we expect to see In 2024, we will invest more to continue growing, but the growth will be at a much lower rate, half or less than half the growth in revenue. Speaker 700:35:31And for that, we have a fixed side and a variable side. The fixed side is mainly the personnel expenses. That is a number that we will also grow At the inflation plus a few percentage points, but not too far from that. And then on the variable side, those are expenses that are more tied to the volume growth and those We grow at a higher level, but the growth, the improvement in efficiency will mainly be driven by revenues Growing significantly higher than the expense growth. Speaker 800:36:02Okay. That's clear. And Santin, just to Like you showed that slide that you are almost halfway, to your target for efficiency. You know, and this was like a 5 year target. I do you think you are ahead of schedule on efficiency or was that the Speaker 700:36:28We're definitely ahead is the way we are ahead The most, we went a lot more aggressive on expenses and to be more specific, we have a project, This is a project AO, Corrugia in Portuguese. We launched this project at the end of April, and that was a Corrugia 1.0, Meeting every Friday morning, the senior leadership of Inter attacking all of the main line items in the We had our first meeting of Corrugia 2.0 of 2024, the 1st Friday of the year. So we are starting A lot earlier, obviously now it will be tough for not to deliver incremental improvements, but the focus is there because we want to continue being above the level. We We're not going to have 20 percentage points improvement like we had this year, but we think that the concept of the digital bank Like we have, has a strong competitive advantage from the cost side and that is something we want to continue delivering as we go along. So this is a We expect to continue excelling. Speaker 800:37:36Great. Thank you very much. Speaker 300:37:42Thank you. Speaker 400:37:48Our next question comes from Mr. Yuri Fernandes from JPMorgan. Mr. Fernandes, you have the floor now. We're opening the audio, so you can ask your question live. Speaker 900:38:00And thank you. Hi, Santi, Azuel and Chaudhry. I have one regarding recoveries, loan loss recoveries. It was a good quarter. We tracked this and it was R80 $1,000,000. Speaker 900:38:12It used to be tracking around R40 So just asking what happened there, like if this level is sustainable, if there was any kind of one time recovery, Because it was a good quarter for this line. Thank you very much. Speaker 700:38:29Hi, Yuri. Yes, so recoveries typically the 4th quarter has better performance as there is More money in people's pockets and we see that on the funding side as well as we mentioned earlier. So there is a bit of seasonality, but we are a lot more effective on the work being led by the underwriting team and recovery team, Mauro Angel has been Spectacular. We expect to continue improving that metric, but the growth in the 4th quarter did had Some seasonality. So we have to compare the quarters versus the prior quarter of the prior year in order to make it apples to apples. Speaker 700:39:11But we think this is a front where there's a lot to continue evolving. Speaker 900:39:16Thank you, Santi. If I may Different topic, but quickly one on the marketplace on Intershop. The net take rate was slightly down. Should we see this recovery Ahead is this like promotions, Black Friday, Christmas and should we see the net take rate moving up back again or what is the message [SPEAKER JEAN Speaker 1000:39:37FRANCOIS VAN BOXMEER:] Speaker 1100:39:38Jurij, Jean Vitor speaking here. Just to complement Santo on the previous question and then I'm going to answer about the Please. I think that most of the analysts remember that I have always talking about 3 key elements for the credit card. [SPEAKER JOSE MARIA ALVAREZ PALLETE:] So good underwriting, good productgood UX, good UI and good collection. And the renegotiation is a very important part of a good collection. Speaker 1100:40:03We're doing that seamless for the client through our app in a very wise way. And therefore, we have been improving [SPEAKER PIERRE YVES LESAICHERRE:] The flow, the type that we make the collections, it's a win win situation. It's very important. Going to the marketplace, Now we also I mentioned in the past that we're always trying to do the best balancing, trying to find a sweet spot Between growth and profitability. And the good news are, we have been able to shift from one to the other quite easily. Speaker 1100:40:37Every Single week, I have a meeting with Rodrigo. Rodrigo, both all of you know Rodrigo, the CEO of the marketplace. And then we can decide, We have a strong time of the year coming in. So should we put the take rate the cash back, sorry, [SPEAKER CHRISTOPHER MANDEVILLE:] Less competitive. Should we be more competitive because it's a low season? Speaker 1100:40:57So, we use that quite often to adjust growth versus profitability. Having said that, I believe that I don't see a major change on the trends going forward for 2024. But [SPEAKER PIERRE ANDRE DE CHALENDAR:] If you have a good recovery on the retail in Brazil, we can't improve the growth, [SPEAKER PIERRE ANDRE DE CHALENDAR:] I mean, Speaker 100:41:19the GMV, but also the Speaker 1100:41:19net take rate going forward. So pretty much stable for 2024. That's what we foresee for the Speaker 900:41:30That's super clear, Jean. Thank you and congrats for the results. Speaker 400:41:40Our next question comes from Ms. Neha Agarwal from HSBC. Ms. Agarwal, we're now opening the audio, so you can ask your question live. Please go ahead. Speaker 1000:41:53Hi, congratulations on the results and thank you for taking my questions. A quick one on the revenue So you mentioned the cost to income improvement will be driven more by revenue growth. What are the main levers in your view that is going to drive revenue growth For 2024, what kind of loan growth could we expect for this year which will further translate into stronger interest income and fee income growth? And probably you can touch upon the BNP product that you mentioned on your platform, maybe that could be one of those new levers on the revenue side. And the second question very quickly, what kind of ROE should we expect for trade 2024? Speaker 1000:42:34Something like a 12%, 13%, 14% Seems reasonable. Any color on that, if not a number would be very helpful. Thank you so much. Speaker 200:42:46Thanks, Neha. This is Alexandre speaking. Speaker 800:42:48I'll start with Speaker 200:42:49the BNPL and then I'll go through the growth part. So the BNPL is a new payment method that we incorporated into our marketplace. We see it as the Consumer Finance 2.0, so bringing more of the pool of revenues of the system into Inter and we see that Yes, super positive. We're fine tuning the model as we grow and believe this could be in the ballpark of 2,250,000,000 By the end of the year, the context of the partnerships is a driver to reduce risk. So in the end of the day, we get take rates that range from 20% to 30% from our partners and that helps Financing the delinquency that we may get in the model and with the clients. Speaker 200:43:39The nice thing about the BNPL Is that given the take rates from the partnerships, we can open it for a wider range of customers. So Several million customers that don't have a credit card can buy with the buy now pay later within the app. We're excited and it is one of the drivers of margin expansion as we drive through 2024. When you think about growth? Speaker 1000:44:08Can I pause over there and just ask Something very Speaker 100:44:11quickly? Speaker 1000:44:11So, Ed, it seems like for the BNPL product, you'll do part on your own balance sheet and part with the partners, Which allows you to get a fee income from the partners. Could you talk a little bit about what kind of proportions we can expect 10% on balance sheet, 90% with partners or more like fifty-fifty? And what kind of partners are we talking about? If you can name some, that would be helpful. Speaker 200:44:33Yes. So So Neha, in terms of balance sheet, it all goes to our balance sheet. So in practice, what happens is, for example, let's say somebody is buying a phone From Samsung for R1,000, instead of disbursing R1,000 Because Samsung is providing the stake rate of 25, 250 highs. So We have a collection balance of $1,000 but a disbursement of only $750,000 That's the mechanics of how it works. And we'll keep on expanding the partnerships so that the product can grow. Speaker 1000:45:24Okay. So essentially, just the take rate, you're not the loan will still be everything will be in your balance sheet? Speaker 200:45:31Everything in our balance sheet, correct. Moving yes. And on the growth aspect, we expect to grow beyond 30% this year. We're excited like the last the Q4 was positive at around a 10% growth. So we're excited about 2024. Speaker 200:45:50The core portfolios will keep on growing. So home equity, FTTS, we're excited about those and Good start of the year so far. And it's also nice to mention the expansion on the non collateralized, right? Jean talked a bit about the fixed Credit and we launched them last year, so overdraft, buy now pay later, which we've discussed, Peaks Credit, as Ron discussed, we also have bill pay using the credit card limit and we're also allowing Customers to put cash in their accounts using their credit card limits. We have a potential of a 1,000,000,000 portfolio By the end of the year in these lines and they're definitely going to be a margin expansion product for us. Speaker 200:46:41So we're excited about it. Thank you, Nya. Speaker 1000:46:48Super helpful. Thank you. Anything on the ROE front? Speaker 700:46:57I can take that one, Nijia. Hi. So, on ROE and net income, we don't provide guidance. But what we said last year on the Investor Day was that we agreed with a sell side consensus Of 5% for 2023, and we deliver that. What we can say now, like exactly a year after, Is that the flow or the curve of build up both in net income and ROE that we saw throughout the year should continue Into 2024, we can't get too much specific on that because they will become guidance and we don't intend to provide. Speaker 700:47:37But we see a continuation of the trend That we've had last year coming into what is year 2 of the sixty-thirty-thirty. Speaker 1000:47:47Perfect. Thank you so much. Speaker 400:47:58Our next question comes from Mr. Pedro LeDuc from Itau BBA. Sir, We have apparently lost connection with Mr. Leduc, Mr. Pedro Leduc. Speaker 400:48:43Apparently, is no longer in the room. So we're moving on to the next question coming from Mr. Brian Flores from Citi. Mr. Flores, we're opening the audio now, so you can ask your question live. Speaker 400:48:59Please go ahead, sir. Speaker 1200:49:01Hi, thank you. Thank you for the opportunity. Just a couple of follow ups on the answers that you provided. You mentioned you were excited about FTTS loans. So the contribution to gross loans is around 6%. Speaker 1200:49:13This has been increasing steadily. So just wanted To get a sense on how are you thinking about this segment, any insights on the dynamics of the segment and how should we think about the contribution going forward? So I think this is my first question. The second one, Santiago, you mentioned that in terms of the strategic plans, you Intent to defend your deposit base. Can you share with us like what are any ideas on how to do this would be really helpful? Speaker 1200:49:45Thank you. Speaker 200:49:48Brian, this is Alex speaking. May I ask you to repeat the question, please? We had a technical problem and couldn't hear you. Speaker 1200:49:56Sure. No problem. The first one was on FGTS loans. The contribution is around 6% has been steadily Helping in terms of the total portfolio, so just wanted to think to get a sense on how are you thinking about this segment? Any insights on the dynamics would be really helpful. Speaker 1200:50:16And then the second one was on how are you planning to defend your deposit base? Speaker 200:50:23Great. Thank you. So starting with the FTTS, it's a product that we like a lot, 100% digital underwriting, Good margin, high engaging product and we've been able to do continuous improvement also operationally to make it easier for customers To obtain their loans, we have a lot of returning customers. Having said that, we expect to keep on growing. It's at 6% of The portfolio as you mentioned, and we believe it could get to around 10% by the end of 2024 As we move forward, so we are excited about it. Speaker 200:51:04From deposit In terms of defending the deposit, it's all about defending the transactional business, right? So we've been consistent on keeping peaks Around the 8% market share, we're going to work heavily to increase this market share as we move towards 2024. And with the transactional business, we're going to be indirectly defending the deposit franchise, right? That is one of the strengths of Inter, The massive transactional platform we've been able to bring in, along with also the investment platform, it's super nice. But that's the defense. Speaker 200:51:45The defense is to keep growing on the transactional business. Thanks, Brian. Speaker 1200:51:51Perfect. Thank you. Speaker 400:52:11The conference is now concluded. Inter IR area is at your disposal to answer Any additional questions? But first, I'd like to yield the floor to Mr. Joao Witter Menin for his closing remarks. Sir, the floor is yours. Speaker 100:52:29Thank you very much. So first of all, Speaker 1100:52:32I would like to thank our employees For the great year we had on 2023, we work a lot. We work hard and we work with the right Strategy with the right focus, with the right North Star, which is our 6thirty-thirty plan. And I really feel that It's no longer different on 2024. I see a red for the 1st month, our team engaged, motivated To also deliver another positive year on our 6thirty-thirty plan. We were chatting this morning about the priorities for the year. Speaker 1100:53:08And I would like Say that I have 2 priorities for 2024. The first one, to make sure that we also deliver another year ahead of the budget Of the six-thirty-thirty plan. And the second, guys, to make sure that I'm going to stick with the first one. So [SPEAKER PIERRE YVES LESAICHERRE:] That's about that. Be focused, engaged, motivated, and I'm sure that we can keep delivering good results, both [SPEAKER PIERRE YVES LESAICHERRE:] On a profitability basis, but also very important on a growth perspective as well. Speaker 1100:53:41We are still a growth company. But Combining these two elements, we could deliver it on 2023 and we will deliver it on 2024 again. I'm sure about that. Thank you, all the employees. Thank you, all the shareholders that support us for a while, that will keep supporting us. Speaker 1100:53:57See you soon. Thank you very much. Have a good day. Speaker 400:54:04The conference is now concluded. Inter IR Area is at your disposalRead morePowered by