Inter & Co. Inc. Q1 2025 Earnings Report

Inter & Co. Inc. EPS Results

• Actual EPS: $0.11
• Consensus EPS: $0.12
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Inter & Co. Inc. Revenue Results

• Actual Revenue: $323.40 million
• Expected Revenue: $1.89 billion
• Beat/Miss: Missed by -$1.56 billion
• YoY Revenue Growth: N/A

Inter & Co. Inc. Announcement Details

• Quarter: Q1 2025
• Date: 5/12/2025
• Time: Before Market Opens
• Conference Call Date: Monday, May 12, 2025
• Conference Call Time: 11:00AM ET

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

Inter & Co. Inc. Q1 2025 Earnings Call Transcript

Key Takeaways

• Inter reported a 12.9% ROE and record net income of BRL 287 million, while improving its efficiency ratio to 48.8%, marking 130 basis points of quarterly leverage.
• The bank added 1 million new active clients for the fifth consecutive quarter, achieving a 57% activation rate, and grew global account clients by 41% to 4.1 million, fueling engagement across seven verticals.
• Total loans expanded by 33% year-over-year—outpacing the market—with FGTS and home equity up 43-45% and the new private payroll product generating BRL 150 million in 10 days.
• Asset quality improved with NPL formation stable at 1.2%, cost of risk down to 4.6% (best since 2022), and coverage rising to 143%, while deposits grew 35% to BRL 59 billion and cost of funds fell to 63.8% of CDI.
• Fee revenues declined in Q1 due to seasonal TPV/GMV headwinds, capital gains lapping from Interpag and BRL 20 million of deferrals under regulation 966, with fee growth expected to rebound in Q2.

Presentation

[Operator]

Good afternoon, and thank you for standing by. Welcome to Interenco's First Quarter of twenty twenty five Earnings Conference Call. Today's speakers are Joao Witterminen, Interes Global CEO Alexandre Rito, Brazil's CEO Santiago Stel, Senior Vice President and CFO. 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.

[Operator]

After 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.

[Operator]

In this case, our operator will read your question out loud. Please note that there is an interpretation button on 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 measures for the company but are not financial measures as defined by IFRS. Reconciliations of the company's non IFRS financial information to the IFRS financial information are available in Enterinco's earnings release and earnings presentation appendix.

[Operator]

Today's discussion might include forward looking statements, which are not guarantees of future performance. Please refer to the forward looking statements disclosure in the company's earnings release and earnings presentation. Now I would like to yield the floor to Mr. Joao Wittermannen. Sir, the floor is yours.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Thank you, operator. Good morning, everyone. Today, I'm glad to share our strong financial and operational performance for this quarter and even more thrilled about the future we are building at Inter. We are uniquely positioned to thrive in a rapidly changing banking industry. The market is moving towards a model that fit us perfectly.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

I believe we are leaving a secular shift with huge opportunities that we are already capturing. Let me explain why I am so confident on that thesis. Back in 2016, Brazil had a highly concentrated banking industry. That service was expensive and services were costly for clients, with hidden fees and high charge for basic transactions. Since then, we saw a significant shift towards digitalization of banking services.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Over $20,000,000,000 were raised in the capital markets. The Central Bank of Brazil launched the Agenda BCE plus to promote financial inclusion and competition. Many niche players emerged, with us being one of the protagonists in this revolution. However, we took a different approach than most players. We choose to focus on sustainable products with a high level of diversification, both on fees and credit.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Although bankarization has made significant progress, mostly on transactional costs, it still relies on expensive unsecured credit, primarily through credit cards and personal loans. Since 2016, we have seen a threefold increase in this type of lending, placing Brazil within the countries with the highest credit costs. As I mentioned, we have taken a different route, which I have been vocal about for many years. We operate a mostly collateralized credit portfolio that promotes sustainability for both our clients and Inter. Beyond credit, we offer a wide range of services that contribute to a highly diversified revenue stream.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Our complete digital platform fosters client engagement, encouraging them to use Inter for their daily transactions, which results in a strong retail funding franchise. This is what I call enter by design. We see the market moving in a direction that aligns with our strategy. Some examples are mortgage, home equity, FGTS loans, along with the new private payroll loan and the upcoming SMEB digital receivables. We have a remarkable success in these recently launched products, with market shares growing towards our 80.2% fixed share.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

In the following slides, you'll notice a secular shift opportunity stamp, highlighting the potential in the markets that we are already well positioned. Shangy, please take over to elaborate on our business model.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Thank you, Joao. It's exciting to see what we're building and the market opportunities on this secular shift. Hello, everyone, and thank you for joining us today. The first quarter was once again exciting for all of our businesses and reinforced Inter as a unique growth story. As usual, I'll highlight the performance of our seven verticals, which represents Inter's large and complete set of products and solutions.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

For the fifth consecutive quarter, we added 1,000,000 new active clients, bringing us to a 57% activation rate. This is a result of our constant efforts to improve our onboarding process, including early activation strategies and also enhancements in hyper personalization. Last quarter, we personalized the homepage according to each client's interactions with Babi, our customer service bot, and that increased the conversion of those clients by 12%. On our business clients, we grew by 23% year over year, reaching 2,400,000 clients. These clients show high engagement and increased our APAC levels.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

When we look at our banking performance, we observe seasonality effects typical of the first quarter with lower liquidity and transactional volumes in the market. Therefore, TPV decreased when compared to the last quarter, but has increased by 33% in the yearly comparison, reaching BRL342 billion. Transactions made through PIX totaled BRL315 billion in the first quarter, achieving an 8.2% market share. TPV levels across cohorts are steadily increasing, with newer clients transacting more and faster than older clients. Now moving to credit.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

I'm pleased to report strong growth in our Consumer Finance two point zero portfolio, which includes PIX financing, buy now pay later and overdraft. In a yearly comparison, our portfolio grew by more than five times reaching BRL920 million. This quarter, we expanded our product offering by including the new private payroll. In only ten days, we added BRL150 million in new credit to our portfolio through a 100% digital underwriting process. This product offer a significant opportunity for us as it is a perfect fit for our business model, digital, low distribution costs, scalable and collateralized, with little to no overlap with other credit products we already offer to our clients.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Private payroll is also another secular shift opportunity, and we're seizing it. Also worth mentioning, our reshaping process on the credit card portfolio is underway, with the participation of installments in the total portfolio moving from 7% to 9%. Moving forward to the investments vertical, AUC increased 54% on a yearly basis, reaching $146,000,000,000 Our engaged base also maintained growth, reaching over 7,200,000 active clients. One highlight of this quarter is that we achieved nearly 4% market share of treasury direct balance, growing 80 bps in one year. Also great evolution in our third party fixed income distribution and on inter assets, assets under management, when we look at the yearly comparison.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Moving to Insurance. We had another record breaking quarter. We have been experiencing significant growth and penetration, which we can achieve with the right targeting, quality products and hyper personalization. We reached nearly 8,000,000 active contracts, growing 51% in just one quarter and sold an impressive 3,500,000 items. FGTS and Swartzynia, two low ticket but recurrent products, continue to be the highlights.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Shifting to our marketplace, we saw good numbers to start the year. GMV grew by almost 30% comparing to the first quarter of last year, reaching $300,000,000 This quarter, 8% of the Onus GMV was generated through our buy now, pay later operations. This unique combination enables us to leverage our fee revenues, while also generating interest income from higher margin unsecured credit operations. Our global front is growing at an accelerated pace, with clients increasing 41% in the year, totaling 4,100,000.0. Global AFC grew around 20% in the quarter, with a highlight in the deposit balance, which increased almost 30% in only one quarter.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Recently, we announced the launch of our investment accounts for Argentinians through a partnership with Bind, an Argentinian bank. Through this product, our clients will have access to a product very similar to our global account used by Brazilians. Finally, we surpassed 12,000,000 clients in loyalty, our last business vertical. With several ways for them to earn and redeem their points with InterSuper App, those clients become the most active within our platform. They tend to generate many times more ARPAK than regular clients and use 2.3 times more products.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

This quarter, we added one more airline to the burn portfolio and we'll keep evolving the offering. Last but not least, talking about market share on Page 23, we can see a great evolution for many products. We are effectively providing our clients with access to our extensive range of solutions and increasing our share of wallet. This evolution is happening both on credit and fee businesses. And we gained more than 40 bps of market share in seven of the 10 presented products.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

As we continue to expand our product offerings and enhance client engagement, I am confident that we will further solidify our position in the market. Now I'll pass the mic to Santi, who will cover the financial part.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Thank you, Shande. Hello, everyone. Starting with loans, we had another great quarter. Our total loans grew 33% over the last year, 3x more than the Brazilian market. Notably, our FGTS and home equity products have been once again the key highlights, growing 4345% year over year, respectively.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Both products have very attractive returns and have been instrumental in improving our credit portfolio profitability. Payroll and personal loans also had a great performance with a 7% growth this quarter, jumping from EUR 5,200,000,000.0 to 5,700,000,000.0, the highest growth in many years. As shown in this slide, we outpaced the market growth in most of our portfolios. FGTS and home equity grew about twice as fast as the market, continuing to gain both market share and prominence in our loan mix. Credit cards also grew nearly twice the market, all while maintaining our risk appetite and improving asset quality metrics.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

On mortgages, we continue to gain share with accretive returns and have been recently favored by competitors being less active as earmarked mortgage loans availability decreases. We are also seeing an increase in underwriting of payroll loans and had strong start in the private payroll market, reaching nearly EUR 200,000,000 portfolio in just ten days of originations. So overall, healthy growth trends across profitable and sustainable products. Moving to our asset quality page. Our metrics showed further improvement even though first quarters are typically more challenging given lower liquidity among individuals.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

The ninety day past due loans ratio demonstrated a strong performance, improving 10 basis points going back to twenty twenty two levels. The credit cards NPL, when analyzed across cohorts, continued to show strong performance, validating the improvements made in our underwriting models. And finally, NPL formation remained stable at 1.2%, a decrease of approximately 30 basis points over the last twelve months. Main improvements came from credit card portfolio, combined with strong performance in the collections front. On this page, we can see the evolution of our cost of risk metric.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

To keep improving our financial reporting KPIs, we included all the securities that generate provision expense in this ratio. This quarter, we reached a 4.6% cost of risk level, improving 20 basis points relative to our prior quarter and experiencing the best performance since 2022. Furthermore, our coverage ratio has increased from 136% to 143% due to significant organic improvements in our NPL levels, as seen on the prior page. We had another strong quarter of funding growth, increasing 35% on a year over year basis and surpassing BRL 59,000,000,000. This growth was primarily driven by time deposits, which is mainly explained by Selic increases and the success of My Peak Bank, our product through which clients can easily invest in fixed income.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

At the same time, the decrease in intracereral deposits was impacted by seasonal effects as it happened in prior first quarters. It is also important to mention that our active clients had an average of $1,930,000 in deposits, the second highest in our history. Lastly, our loans to deposit ratio decreased from 75% to 72%, marking the high growth in our funding franchise. The healthy growth and funding mix demonstrated on the prior page enabled us to have an industry leading indicator among Brazilian banks and fintechs. Our cost of funding stood at 63.8% of CDI this quarter, decreasing 1.9 percentage points year over year.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Jumping into our revenue page, we achieved a €3,200,000,000 in total gross revenue and €1,800,000,000 in net terms, a year over year growth of 3831%, respectively. The growth in fee was affected by seasonal factors, particularly due to decrease in TPV and GMV as well as changes in the resolution for 966s, which requires us to defer credit revenue fees through the life of the loans. On the NII front, the strong performance was primarily driven by improvements in our mix towards high ROE products, ongoing repricing and increased returns in our investment portfolio. As we are experiencing higher engagement, as presented by Xande, we observed acceleration in revenue in both new and older cohorts. We surpassed 116 gross ARPAK in mature cohorts, demonstrating the sustainability long term relationship we're building with our clients.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

The first quarter net ARPAK was impacted by fee revenue performance, as explained earlier. We expect ARPAK to resume growth in the second quarter as credit penetration continues to increase and the deferral impact begins to dissipate. On the other hand, our efforts to optimize operations and streamline expenses contributed to our CTS to decrease 6% in the quarter, achieving 13.1 per client. Now let's dive into our NIMs. It's important to highlight that we have updated the NIM methodology to better capture our financial performance by including cash and equivalents from compulsory notes in the Central Bank and excluding Intermanc on lending.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Both our NIM one point zero and NIM two point zero, which excludes the noninterest receivables, are consistently showing growth over the past four quarters, achieving record levels once again this quarter. As mentioned already, NII growth and by consequence, NIM expansion are the result of our disciplined capital allocation strategy, which has compounding results quarter after quarter. When we consider the risk adjusted NIM, which deducts cost of risk, the performance is even stronger, growing 20 bps quarter over quarter. Regarding expenses, we are able to decrease our overall expense base by BRL 10,000,000, demonstrating our commitment to cost control and operating leverage. We delivered this improvement while continuing to invest in technology, focusing on process optimization, automation and providing a seamless experience to our clients.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Keep increasing the gap between net revenue growth and expense growth is one of our key goals. For another quarter, we were successful in increasing revenue in a faster pace while maintaining our costs under control. As a result, our efficiency ratio once again decreased, reaching 48.8%, one hundred and thirty bps improvement relative to the prior quarter. Finally, I'd like to highlight another quarter of access in our journey towards our profitability goals. We reached 12.9% ROE, excluding minority interest and a record net income of BRL $287,000,000.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Our consistency of progress quarter by quarter is remarkable in our opinion, as you can see on this slide. As Joao and Shande mentioned, we're increasing our profitability by offering a sustainable menu of products, making these results of very high quality. Now I'll pass it back to Joao for his closing remarks. Thank you.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Thank you, Shankh. Thank you, Santi. As we approach the halfway mark for our six-thirty-thirty plan, I couldn't be prouder of the progress achieved so far. We ended the first quarter with 38,000,000 clients, a 48.8% efficiency ratio and a 12.9% ROE. As I always say, every new quarter is our best quarter ever.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

And it's not just about these numbers, it's about building the future. As I said, we're leading the market shift with our inter by design approach. Thanks to our sustainable win win model that benefits all stakeholders. A special thanks to our team for making this journey so amazing. Operator, you can now open for the Q and A session.

[Operator]

We will now begin the question and answer session. Please note that in the interest of time, we will allow each participant to ask one question with one follow-up for each question. Once again, for this Q and A session, we ask you to write down your question via the Q and A icon at the bottom of your screen. Your name will then be announced and you will be able to ask your question live. At this point, a request to activate your microphone will appear on your screen.

[Operator]

If you prefer not to open your microphone live, please write down no microphone at the end of your question and our operator will read your question out loud. Our first question comes from Mr. Pedro Leduc from Itau BBA. Mr. Leduc, we're now opening the audio so you can ask your question live. Please go ahead, sir.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Hi. Good morning, everybody. Thank you so much for the call and the question. Congrats on the quarter. Two quick ones, please.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Do have any first comments to make on the on the private payroll product? What have been the learnings so far? If there's some some sort of volumes that you can share from this, any impact on on this quarter whatsoever? And then second, on your NIM trajectory, we had a nice another advance this quarter. But if you can help us also understand the moving pieces here, if there's more pricing, if some of the treasury yields, what played against or in favor, essentially trying to guard if we can expect a continued expansion in in in names in the next few quarters as well. Thank you.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Hi, Pedro. Ron here. Thanks for the question. I'm gonna cover the first part, and then Santi will mention about the the the the second part of the question. So first of all, regarding the private payroll, as I mentioned on the call, we're very excited with the product.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

It's ear it's it's it's music for our ears because at the end of the day, what we call winter by design, it's all about that. A good product, a huge pent up demand where we can benefit from our fan funding franchise, our % distribution channel. So it's a very good news for us that we have this product up and running. But as always, at Inter, we like to proceed fast but with caution. So we could be growing we could be growing faster than where we are, but we also were trying to understand all the nuance of the product.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

But long story short, very good opportunity for Interfer us to capture a big market share on this product on the years to come. K? And Santi will comment now on the capital. Thank you.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

And and and no and no impacts in this first quarter, right, Sean, from the new product yet?

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

No. No no impact yet.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Thank you. Leduc, thank you for the questions. So on on NIMs, this is the result of our capital allocation strategy that we have been working with for for many years by now, and we think that the consistency of the results in the curve of NIM both before and after cost of risk speak for themselves. There are a few elements playing that we've covered in our calls that continue to be true today, which is one is the credit mix continues to improve. The credit mix even within the secured component, we have these products like HDDS and home equity.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

We have 30% or 40% marginal ROE. Then on the mix, also, we have the fixed financing, buy now, pay later and now the private payroll that Joe alluded to, also improving the yields as a consequence of mix change. And then the second element is within each of the specific portfolios, the interest rates are also going up, particularly on the loan portfolios. As you know, the payroll the mortgages, a lot of which were issued when the split was low. And now we are originating them at margin ROEs of around 20%, and therefore, the performance increases.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And the last point is on the yields of the investment portfolio. We've been also working on on improving those yields, which are now about 100% of CDI. That combined with the capital optimization at the holding level, which, as you know, we've been moving part of the excess capital from the opco to the holdco, and and therefore, having some benefits that are reflected not that are not reflected in the NIM. They are reflected in the effective tax rate, but we we can gross it up on the NIM. All that together is yielding these strong results.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

The good thing is that we are we have a lot more to continue improving on this front. The the majority is still to come, particularly from the the consequence of of mix improvements. The inter by design is is playing out pretty well. Private payroll is an example of that. We we started operating that product from the very beginning of the first day, and we're excited that that will will be another lever on the NIM expansion that we didn't have obviously planned when we when we presented the sixty thirty thirty nor when we did the budget for 2025.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And, hopefully, we'll we'll continue growing and improving our NIMs as a consequence of that new product too.

[Pedro Leduc, Equity Research Analyst at Itau BBA]

Amazing. Thank you so much.

[Operator]

Our next question comes from Mr. Gustavo Schroeden from Citi. Mr. Schroeden, we're now opening the audio so you can ask your question live. Please go ahead, sir.

[Gustavo Schroden, Equity Research Director at Citi]

Hi, good morning, everybody. Thanks for taking my question and congrats on the results. I have two questions as well. The first one is regarding the loan growth. Excluding the prepayment of receivables, loans grew like 20%, twenty one %.

[Gustavo Schroden, Equity Research Director at Citi]

So my question is, should we expect some acceleration in the second in the coming quarters? And how do you see the challenging environment regarding inflation and high interest rates? Should we expect the bank accelerating this loan growth? And also a few words about consumer loans, which reached the $20,000,000 What is the level should we expect that would reach in 2025? And my second question is regarding the margin per active customer as you showed in our Slide 31.

[Gustavo Schroden, Equity Research Director at Citi]

We saw an increase in gross ARPC and a decrease in cost to serve, but there was a negative impact on net ARPC. So could you explain what is this negative impact in the net ARPC? It was related to 04/1966 rule? Or I mean, what can explain this decrease in net ARPAK and as a result in margin per customer? Thank you.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Hi, Gustavo. Thanks for your question. This is Gianni speaking. So I'll start with the credit growth. So for this year, we're expecting growth in the range of 25% to 30% even excluding the anticipation of credit card receivables.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Credit lines like the private payroll that explored in the previous question is going to likely boost it because it's something totally new, and we see no room for cannibalization of the existing portfolio. So that's going to be on top of our normal growth. Micro improvements that we've been doing in all the credit modeling are going to help this growth also. And, and we'll keep executing smart strategies so that we can grow as we have been growing the last two years, right, without lowering the bar on credit quality. So this is this is very important for us, and we're excited, with the year to come.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

So far, no impacts on inflation and interest rates, which has a lot to do with the inter by design, right? Twothree of the portfolio collateralized, onethree not collateralized and very, diligent on all the modeling and policies on the noncollateralized part. This is part of the story. When we move to the to the consumer finance two point zero PX financing and things like that, we continue to be excited about it. The product is growing.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

So we had more than 30% growth quarter on quarter in the total portfolio. We're optimizing volume, as we go in a mix of volume and pricing to make sure that we bring the NII that we need to bring at the same time that we address clients. We see this potential for this portfolio to reach somewhere around 1,500,000,000.0, maybe we we will have to navigate through the year to see how it goes, but that's a number that we that we can name about 1.5 coming from this 09/20. And one next step that's gonna be interesting is we're gonna, we're gonna launch a a variation of a credit card, which we're gonna call intercards, where we're gonna be able to address clients, with a credit with a credit limit to be used in platform and on Pix Credit. It's gonna and with this product, we're gonna be able to address a client that has a a credit rating that's marginally lower than the ones that have a full credit card.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

And we're also, hoping to see good results from these this strategy, from this product. And to finish, our consumer finance two point zero portfolio, we haven't seen any delinquency variations from what we have been discussing in the prior calls, meaning that we have healthy delinquency on all of these products? Thank you.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

I think we saw the other part, which had to do with the margin margin proactive clients, which is another way to ask RPAC. So the the RPAC in this quarter, the net RPAC cost of funding decreased, and therefore, the margin per active client also did. This is a consequence of a few factors. On the one hand, fees were affected this quarter for seasonal and nonseasonal factors and therefore impacted revenue, our revenue per active client too. We added 1,000,000 new active clients this quarter, which is what we did in in most of the last quarter.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

So we maintain the capacity to attract and and retain the clients and that they look to the R Pack. The good thing is that when we see it on a cohort basis, we see very strong performance both before and after cost of funding on the cohorts, and that gives us confidence that the the trend is moving on the right direction. And lastly, there are two fronts of very strong improvement that we've had recently that are not measured in the ARPAK, but they should in a way, which is the cost of risk or delinquency levels and the efficiency that comes on the tax side that affects also ARPAK. So putting all that together, we're confident that the monetization of the clients, which is what what the ARPAK should answer, is moving in the right direction. And as long as we continue acting this level of clients and extracting value from them from a financial perspective, we are we're happy with the trends.

[Gustavo Schroden, Equity Research Director at Citi]

Okay. Thanks for thanks for this. Just a just a follow-up on this last one, Sanchi. So this this, let's say, small decrease in net ARPAC was related to fees. Is this correct to to to think this way?

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Yes. Because on the n I a NII side, the performance was was strong. Fees and if you want, I can tackle that one, which is the the underlying question. So fees decreased this quarter by approximately a hundred million reais from the fourth quarter level. The fourth quarter is always a very strong quarter, and we had around 40,000,000 lower fees coming from interchange of of cards and inter shop, which is normal because the fourth quarter is a lot stronger.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Then we had one off factors, which is partly from capital gains on on Interpad. And then the last is the four nine six six rule, which forced us to defer around 20,000,000 reais of fees associated with mortgages and and real estate loans throughout the life of the loan. So it's the 40 from from seasonal factors of interchange and interchange, 40 from Interpad, and then four nine six six, we deferred around 20,000,000 reais, which will come along the life of the of the contracts. But, initially, we have that that impact. So those three things together show that decrease of our own annual AIs versus the fourth quarter, which when when you then divide it by clients, no, it impacts the ARPAK.

[Gustavo Schroden, Equity Research Director at Citi]

Oh, super clear, guys. Thank you very much.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Good help.

[Operator]

Our next question comes from Mr. Mario Perry from Bank of America. Mr. Perry, we're now opening the audio so you can ask your question live. Please go ahead, sir.

[Operator]

My apologies. We are now receiving a question from Mr. Tito Labarta. Mr. Labarta, we're now opening the audio so you can ask your question live. Tito Labarta from Goldman Sachs.

[Tito Labarta, Vice President at Goldman Sachs]

Thank you. Hi, everyone. Good morning. Thanks for the call and taking my question. My question is on the efficiency ratio.

[Tito Labarta, Vice President at Goldman Sachs]

You kind of addressed it a little bit, Santi, discussing fees, but we did see some seasonality on fees, but also saw some good performance in expenses in terms of benefiting maybe from seasonality. Although on a year over year basis, expenses are growing a bit faster than revenue. So help us think about the outlook for expenses and how efficiency should continue to improve throughout the year to eventually reach that the 30% long term target? Thank you.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Hi, Dito. So on expenses, on efficiency in general, we are we had two factors that played out in the second half of last year, and that's the reason why we went from roughly 48 to to slightly above 50, which had to do, one, the consolidation of Interpag in the third quarter and also efficiency in the investment portfolio as we mentioned on in prior calls. So those two things together impacted at around 300 basis points the efficiency from the second quarter to the third quarter of last year, and we then run two quarters about 50. This quarter, we were able to to see more operational leverage as a consequence mainly on the expense front where we took the we're able to control expenses and take the overall number down nominally by 10,000,000 reais. Going forward, we think that the efficiency ratio improvements will come mainly as a consequence of top line growth being more than the growth in expenses.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

We always we have said, as Chandni mentioned at the beginning of this call, the loan book, we we are seeing it growing 25 to 30%. On top of that, we we will have margin ex or we hope to have margin expansion. Therefore, revenues should grow north of that loan growth level. And expenses will grow at a fraction of that. It's difficult to for us to anticipate exactly what level, but that delta in the growth ratios of both levels are the ones we're seeing To get to the 30% by 2027, end of '20 '20 '7, it's one and a half to two percentage points improvement per quarter.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

No? If you if you do that linearly, obviously, life is not linear, but if you if you do an approximation of that, it's in line with what we see. And, again, as I mentioned, it will be a consequence of more more more performance on the top line and on the expense front. And this quarter is a signal in that direction, a 30 bps improvement of operational levers.

[Tito Labarta, Vice President at Goldman Sachs]

Great. Thanks, Antti. That's helpful. Maybe just a quick follow-up on that. What are your main sort of expense drivers from here?

[Tito Labarta, Vice President at Goldman Sachs]

Like, I mean, you had Interpag last year. I mean, so personnel and marketing was down quite a bit on the quarter. You know, it seems like you should have a lot of operating leverage. And so just like where do you still need to invest? What what's still driving expenses higher?

[Tito Labarta, Vice President at Goldman Sachs]

You know? Because I would think it should be a little bit more steady regardless of what happens with revenues. You Just to put it into context.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

So for expense base, approximately one third is salaries and personnel. On that one, we have a lot of room for operational errors. With the remaining two thirds, a big component of that are technology driven expenses, like big suppliers from abroad, cloud computing, etcetera. There's we're working to have more operational leverage, but, initially, they're not so meaningful as they grow with the volume of the business and and and, therefore, the the variable expenses. But we're working very heavily on on improving the quality of the contracts that we have with the suppliers to effectively have operation there as as we move forward.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And then there are other expenses like branding and and fixed expenses that that are within the other two thirds that we can have as well operation there. So we're that's part of the work we're doing with the team. The the final lever that I would mention is AI. We already see AI playing both the cost front and the and the revenue side an important role, but it's yet at the very beginning. On the cost side, for example, the the customer service department and and the fraud are very two clear examples where we are, we think, on advanced level of development.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And then on the revenue side, the hyper personalization that we mentioned exactly a year ago when we did a tech day in New York. When you open the app, the app is highly personalized depending on the person and even depending on where the person is. You know? If it's in the airport, it gets a travel insurance offering or an FX offering. So we're having AI playing a role on the revenue side as well.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Long answer. But but, basically, we're actively driving the outcome to make the variables the the expense lines more fixed and less variable. And as we do that and we and we evolve, the operational leverage should be more meaningful.

[Tito Labarta, Vice President at Goldman Sachs]

Okay. No. That's super helpful, Santi. So onethree on the salary and personnel, there should be a lot of operating leverage. It's the other twothree where you're working to to see where you can improve.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Exactly. Thanks,

[Tito Labarta, Vice President at Goldman Sachs]

Thank you, Santi. Bye.

[Operator]

Our next question comes from Mr. Thiago Batista from UBS. Mr. Batista, we're now opening the audio so you can ask your question live. Please go ahead, sir.

[Thiago Batista, Executive Director at UBS Group]

Hello? Can you hear me?

[Operator]

Yes. We can hear you, sir. Go ahead.

[Thiago Batista, Executive Director at UBS Group]

Okay. Okay. Congratulations for the results, and thanks for the opportunity. I have two questions. The first one on the global account.

[Thiago Batista, Executive Director at UBS Group]

You guys are Intra achieved more than 4,000,000 clients. It's amazingly strong, especially, if you compare with your 22,000,000 of active clients as a whole. Can you share with us the profile of those clients and, your strategy, on on how to, looking forward, how do you believe global account will will will evolve? The second one on asset quality. The numbers of this quarter were most of them positive on asset quality.

[Thiago Batista, Executive Director at UBS Group]

We saw a small decline in NPL ratio. Cost of risk also declined. This level of an NPL of around 4% and cost of risk of 4.5, is this, the normalized level? Or we can see a further improvement, especially, as credit card, seems that, have improved a lot, at least, looking to the stage three. We saw almost a hundred bps, a q over q decline in stage three of credit card.

[Thiago Batista, Executive Director at UBS Group]

So this is the normal level, or we can see further improving going forward?

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Thiago, Jean Vizsaur speaking. I'm gonna cover the first one regarding the global account. So to be honest, I think that we haven't been able to explain exactly our view for the global account, and let me try to do that again. I'm very excited with that product. The reason why with the global account in place for Brazilians today and later on for other geographies, we can play a very good arbitrage.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

And what do I mean by that? We can bring the top clients from Brazil, Argentina now, for instance, we're going to launch in in the in the coming week, in the coming month, and price accordingly for U US Dollar based products such as remittance, debit card, credit card, shopping, loans, loyalty, everything that we have in our super app. So this this this this vision of getting the best clients, the premium clients from that regions, from that geographies, and pricing them very well, therefore, producing good returns for us on products that they cannot access, through their domestic, counters is the is the is the main, vision for the Globe account. And it's been it's playing really, really well in Brazil as you mentioned. So I'm very excited with that, with this this opportunity to connect, millions, I'd say, mid tens or maybe hundreds of millions of clients, later on on the future with this with this product profile.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

So they I agreed. They are very good clients. I would say that they are actually the best clients that have at Inter, better ARPAK, very good cost to serve them. So very excited with the success of the global account so far, but still, I think that a lot to come on that front. I'm really, really excited with this this vision that Inter had two years ago.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

And now Santi will cover about the the NPLs and and coverage ratio. Thank you, Thiago.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

So, Thiago, on on the asset quality front, we are very pleased with the performance that we had in the past few quarters. Also, we're pleased with the first quarter, which is a quarter which is typically tough, no, because individuals have less liquidity in their in their pocket. And despite that, we were able to improve the the NPL. But, ultimately, the level at which we will be running going forward will depend on the mix. No?

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And we're seeing now many products starting to to scale up more. Private payroll is one of them, which delinquency level is is something that is still we need a bit more more continuity in the product to to see where it stabilizes. And then we have the unsecured products that are growing that are yet exploring the portfolio by gaining some participation, like buy now, pay later and fixed financing. So when we combine that with the portfolio we're running for longer, you know, the the real estate and the equity and then pesos, then the mix will be the ultimate driver of of that level of of delinquency. But what we are trying to maximize, as I was mentioning before, is the evolution of the risk adjusted NIM.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Now, ultimately, what we, care the most on maximizing is is that variable. So for example, on on private payroll, the rates that we're originating and even if there is some rate compression with the with the delinquencies levels that are higher or much higher than the public level payroll ones, we would have an accretiveness or an improvement in the risk adjusted NIM. So it it's it's a mix. At the end of the day, it's a question of the mix evolution through time that will define what asset quality level we have in in the MPS side.

[Thiago Batista, Executive Director at UBS Group]

No. Thanks. Thanks, Jonas and Simon.

[Operator]

Our next question comes from mister Yuri Fernandes from JPMorgan. Mister Fernandes, we're now opening the audio so you can ask your question live. Please go ahead, sir.

[Yuri Fernandes, Executive Director at JP Morgan]

Yo. Hi, Good good afternoon. Good morning. I have also a question regarding asset quality, but now regarding stage two. When we we go to your stage two formation, it was it was great.

[Yuri Fernandes, Executive Director at JP Morgan]

But stage two went up a lot driven by credit cards, basically, and it was a migration from stage one into stage two. So if you can comment a little bit on this, is this regarding peaks? Is this mix? Is this the worsening asset quality ahead? Like, just trying to understand, why there was an increase in stage two, and not only an increase, but also the coverage of stage two, for credit cards went down when we do, like, loan loss reserves divided by by by your balance.

[Yuri Fernandes, Executive Director at JP Morgan]

Right? This used to be high and and went down this quarter. So I would like to understand, what happened here with stage two on credit cards. Thank you.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Hi, Yuri. Good morning. So on on stage two, it's just a consequence of the four six four nine six six requirement. So the there is a reassignment from stage one to stage two of loans that have a higher probability of default. And, therefore, we we we reassign them from stage one to stage two.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Nothing different in terms of performance or or delinquency of the credit card clients. If you look at the cohorts that we closed in the presentation, we see the new ones coming in at strong levels in line with the with the more recent quarters as well. But it's a it's a requirement that the model does, no, with a higher priority of default cohorts being moved to the stage two.

[Yuri Fernandes, Executive Director at JP Morgan]

Thank you, Santi. And just on this on the resolution of 4966, correct me if I'm wrong here, but I understood from the past that even you have two accountings, right, to have your account in Brazil and your account in under IFRS nine, you are trying to to keep both, but we don't need to have, like, different findings. Right? Like so we're implementing, some of the Brazilian IFRS into your international IFRS so it can have, like, more comparable. Is this the reason why we see fees in stage two now, like, impacted?

[Yuri Fernandes, Executive Director at JP Morgan]

Like, just trying to understand because some investors, they ask us why you are being impacted by the Brazilian accounting changes, and sometimes I I'm not that sure, about the the reason why your accounting change.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Yes. So we are, we've been reporting in IFRS since 2022. What the four nine six six, does, it's that converts the local accounting towards IFRS, but it has certain minimums that are more rigid or different than the IFRS. And we need to comply with those as we're as Banco Inter SA is a Brazilian bank that needs to comply with it. So the impacts that we saw are primarily what we mentioned in the fees, the deferability of them.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

So in the stage two formation that that we just spoke about. And then on the right, which was a big debate that that we we spoke and we did so with many, we kept the three hundred and sixty day period for the the write off, but there was also a debate if if that would change it from or not. For comparison purposes, we decided to to keep it as it was since it was when the the four nine six six and both IFRS nine norms.

[Yuri Fernandes, Executive Director at JP Morgan]

No. No. Thank you, Sam. So we may say that maybe you are a little bit more conservative, and congrats about keeping the write offs and change. That's good for us here on when we analyze it.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

Yes. We believe it's more it's more conservative, and and the comparison versus prior peers makes it easy. And therefore, the the model ability of Inter, it's it's cleaner for investors and analysts. Thank you. You.

[Operator]

Our next question comes from Mr. Marco Mizrahi from Bradesco BDI. Mr. Marco Mizrahi, we are now opening the audio so you can ask your question live. Please go ahead, sir.

[Marcelo Mizrahi, Equity Research at Bradesco BBI]

Hi. My name is Marcelo Mizrahi from Radisco BBE. But to BBIs, we're talking about, our questions. So most of the questions was already answered. So but question is regarding the interest earning assets or the interest earning portfolio of the credit card.

[Marcelo Mizrahi, Equity Research at Bradesco BBI]

We saw very good numbers, so better a higher interest earning assets, of course, thanks to the seasonality. But looking forward, my my question is if this interest earning assets compared to the two portfolio, in your view, guys, you'll be the same? Or do you so or you believe that the recurrent level is a little bit lower than the level that it was in this quarter. And it's important to look for that during the the strategy. So looking for the strategy that the bank is is is on the credit card, focus on the on the client.

[Marcelo Mizrahi, Equity Research at Bradesco BBI]

So if you guys believe that this this level is is, is recurrent. Thank you.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Hi, Marcelo. This is Shange speaking. Thank you for for your question. So, the dynamic that we saw on the credit card portfolio is exactly what we wanted. So we want to increase the percentage of installments in comparison to the to the revolving credit.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

And that increases interest earning, and it's a win win because in one sense, we help clients get out of the problems that they may have in credit. And in the other hand, we increased our our interest income, which is important for the business as well. Another point that's important is we lower the rates that customers pay in comparison to revolving. So revolving, you're talking like rates that can top above 15% a month, and then we reduce this client to rates that could be starting at 6%. So really helping clients, improve their indebtedness if that's what's happening.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

The goal is to keep increasing this part of the portfolio that has installments, and we have a hope a a long pipeline of products that we're launching in order to help clients. So just to give you an example, last month, we launched a product called installments on the total debt. As you know, in Brazil, we have the installments without interest that people can can pay when they go to the retail and make their purchases. So we're helping people with this product by organizing the number of installments they're gonna have and the size of the installments. So we've been having good adoption there.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

So and, again, it's all about the strategy. We set the strategy, to move our interest earning from around 20, which is where we were, to around 25, 20 6, and we're gonna fulfill these steps as we move along bringing more interest for income and ideally less delinquency helping customers on a sustainable product. Thanks, Marcelo.

[Marcelo Mizrahi, Equity Research at Bradesco BBI]

Thank you.

[Operator]

Our next question comes from Ms. Neha Agawala from HSBC. Ms. Agawala, we're now opening the audio so you can ask your question live. Please go ahead, ma'am.

[Neha Agarwala, Analyst at HSBC]

Hi. Thank you for taking my question. Just a few quick follow ups. You mentioned you're launching a different credit card to increase the offering of Pix installments and BNPL. Did I hear that correctly?

[Neha Agarwala, Analyst at HSBC]

Did I understand that correctly? And and why a different credit card? Why not with the current credit card, you would expand the offering there? And then I'll ask a a follow-up that I have.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Hi, Neha. Jean Victor speaking. You know already that, I love to to say that we are really building this consumer finance two point zero for our clients and for Inter in a sense. And this card, which you call e intercard, is a is a % digital, let's say, credit card scheme, network, I would say, in a sense, is to help us to foster more engagement with clients, through our BINOPELEER at Intoshopp, through the PIX credit and other products that we're bringing to our ecosystem. With that in place, we can disintermediate interchange fees that the networks charge, the MDR.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

So there's a lot of of technology behind that. And, again, the only reason why we can do that is because we have the clients buying products and buying credit, I would say, in our platform, in a true, direct to consumer approach. And we're gonna call it Intercard, and we believe that with that new pace, we'll be able to to bring more activity, more engagement from millions of clients that use our platform today for fixed finance, not the letter, shopping, and so on. So that's the idea behind that. We're very excited with this product.

[Neha Agarwala, Analyst at HSBC]

Okay. So this is essentially like a preapproved line of credit in the form of a digital credit card. Right?

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Exactly. That that's that's that's the the the main the main idea behind the the the launch of this product.

[Neha Agarwala, Analyst at HSBC]

Okay. So part of the risk will also be offset by the lower expenses of operating the credit card in which you would have to incur the other fees that happens. And I also saw that 8% of the GMV on the platform was in the NPL this quarter. That's a it's a great number, and I think there's a lot of potential there. Could could you talk a bit more about that?

[Neha Agarwala, Analyst at HSBC]

Like, are you offering BNPL? How are you choosing the customers within the in the shop platform whom you're offering BNPL? What kind of rates you are charging? What kind of customer performance asset quality performance you're seeing for for those clients? And is that inducing more customers to come and shop on the InterShopper platform or not? Thank you so much.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

Neha, the good thing about, having, our clients buying within our platforms that we can control everything. We can control very actively, the open to buy that they have, the rates that they're gonna charge, the products that we want to offer them to buy depending on the take rate that we have. So at the end of the day, the by now, Pelere, we see as a very, I'd say, win win situation for our clients, for us and for ourselves. I have always been vocal about this consumer finance 2.2 where we take out the intermediaries, then we share the economics of scale with the client, and then we keep going on and we'll make this flywheel so clients are returning more to the platform. And regarding, which clients we offer that, it's it depends on a lot of things.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

We can offer clients, that had cannot have a a a credit card limit approved yet or clients that they have a specific credit card limit approved, but they want to buy a larger item on our shopping, and this item might have a juice take rate for us. So that's the kind of data, that's the kind of inputs that we bring to the model, to our proprietary underwriting model, and you can do that in real time. That's the benefit of combining data and combining the platform through Into Shop.

[Operator]

Our next question comes from Mr. Antonio Rouette from Bank of America. Mr. Rouette, we're now opening the audio so you can ask your question live. Please go ahead, sir.

[Antonio Ruette, Analyst at Bank of America]

Hi, everyone. Thank you for your time. So, I would like to to dive a bit deeper on NIMs again. So, if you could explore a little more, the increase and expect your expectations for increase in terms of mix because they have now different trends in terms of payroll, credit cards, financing, and also the use of excess liquidity. So how, in short, how do you expect mix going forward?

[Antonio Ruette, Analyst at Bank of America]

And also, what to expect in terms of repricing and use of excess liquidity? Thank you.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And they'll hear you and taking that one. So on on NIM, there are three driving factors that that I mentioned. So one is mix. The other one is increasing the yields of the within the products, and the last one is increasing the yield of the investment portfolio. So in mix, we continue to see higher than average growth in the FGTS and home equity.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And now including within the unsecured, we're we're seeing also private payroll. Within the unsecured, the ones that are gaining share are fixed financing and and buy now pay later. And the trend should be roughly in line with what we've seen. Maybe the the toughest one to model is private payroll, but as Chandan mentioned, we we we're seeing strong start there with that product. Within rates, the the ones that are still with opportunity to continue seeing increasing the yields are on the mortgages and public payroll that are running at rates that are lower.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

And then on top of that, on credit cards, there's a dynamic of what we call the reprofiling of cards that Chande alluded to in the prior question, which we're trying to improve the monetization to the installments. And then the investment portfolio, we did a strong improvement in in the average yields that that we have, surpassing the 100%. And we're also optimizing the holding cost structure, and the majority of that benefit is in the effective tax rate. So it doesn't necessarily affect on the NIM, but it's part of the capital allocation strategy. And all of that altogether is what we've been seeing is that the risk adjusted NIM, which, as I mentioned before, is the one we're trying to maximize, has been growing at an average of around 20 basis points per quarter.

[Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co]

We think that that should continue to be the case in the coming quarters with this strategy continue to to play out as we have been executing it.

[Antonio Ruette, Analyst at Bank of America]

Okay. Thank you.

[Operator]

Our next question comes from Mr. Daniel Vaz from Safra. We're now opening the audio, so you can ask your question live, sir. Please go ahead.

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

Yeah. Hi. Hi. Jean, Shan, and Santi. Happy to join for the first time after the initiation of Courage.

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

I think most of the the questions have been answered, but I'm trying to focus on the credit penetration. You improved meaningfully in the the first quarter. So, could you elaborate on what's driving that increase? I know it's, penetrating more crediting, but is it more, about activating your existing client base, some specific products, or are new clients already joining with credit lines offered, like, upfront or any account changes that we should be aware of? Thank you.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

Hi, Daniel. Thank you for your question. So this has a lot to do with the overall strategy and also this, what Raul mentioned earlier in the call about the secular shift that we're observing on and the inter by design. So with products such as private payroll coming in, the expansion of FGTS loans and everything that we're doing credit cards, we've been able to bring a lot more people to the base and increase credit penetration. From a trend perspective, we'll have to work quarter after quarter and see where we get.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

But the the effort that we do internally is to keep boosting credit penetration, which has a lot to do with what we've been building building. Right? As most people know, when we onboard clients, just a small percentage of them get an automatic credit card limit, for instance. But clients build behavior. And following this behavior, we we give them a credit card limit, and we start engaging them with this credit product so that they can learn and we can grow.

[Alexandre Riccio de Oliveira, CEO at Banco Inter]

So I'd say it's it's this growth is by design, and we can expect to see more and more credit penetration within the client base as we move forward. Thank you. Thank you, Daniel.

[Thiago Batista, Executive Director at UBS Group]

Thank you and congrats.

[Operator]

This concludes our question and answer session. I would like to yield the floor back over to Mr. Joao Wittermannen for his closing remarks.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

So, everyone, thanks again for listening to our earnings call. And just to summarize, everything that we discussed here today, it's all about our inter by design, how we envision ten years ago to build this, what I call, unique platform in a win win situation with the clients, reducing the debt the debt service, being, digital first, having this consumer finance two point zero in place in order to optimize everything, having this collateralized portfolio with many products also still to come such as the digital receivables on the SME. So, the the best funding class, really a % digital, retail oriented. So we're really happy that Inter is well positioned. We prepare ourselves to be, here today, sharing not only the results for the quarter, but already thinking about what's ahead of us, and we're very optimistic about the future.

[João Vitor N. Menin T. de Souza, Global CEO at Inter & Co]

And, therefore, I'd like to thank for, all the shareholders that have been supporting us since we launched our digital, free checking account in Brazil. And also, of course, last but not least, our more than 4,000 employees at Inkur that works every day harder and harder to take us to the next step. Thank you very much to all of them, and see you soon on our next earnings call. Thank you very much. Have a good day. Bye

Participants

Analysts

• João Vitor N. Menin T. de Souza, Global CEO at Inter & Co
• Alexandre Riccio de Oliveira, CEO at Banco Inter
• Santiago Stel, Senior VP of Finance and Risks & CFO at Inter & Co
• Pedro Leduc, Equity Research Analyst at Itau BBA
• Gustavo Schroden, Equity Research Director at Citi
• Tito Labarta, Vice President at Goldman Sachs
• Thiago Batista, Executive Director at UBS Group
• Yuri Fernandes, Executive Director at JP Morgan
• Marcelo Mizrahi, Equity Research at Bradesco BBI
• Neha Agarwala, Analyst at HSBC
• Antonio Ruette, Analyst at Bank of America
• Daniel Vaz, Lead Analyst - Equity Research at Safra National Bank