Business Context and Reporting Period
Company: Inter & Co, Inc. (a foreign private issuer headquartered in Brazil, operating primarily through Banco Inter S.A.)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Nine-month period ended September 30, 2023 (unaudited interim financial statements).
Filing Date: January 16, 2024.
Key Financial Metrics
Revenue and Profitability (Nine Months Ended Sept 30, 2023):
- Net Revenues: R$3,439.6 million (up 34.3% YoY).
- Net Interest Income: R$1,135.6 million (up 106.4% YoY).
- Net Result from Services and Commissions: R$829.0 million (up 38.3% YoY).
- Profit for the Period: R$192.5 million (vs. a loss of R$42.9 million in the prior period).
- Profit Before Tax: R$231.5 million (vs. a loss of R$158.3 million in the prior period).
Balance Sheet and Liquidity (As of Sept 30, 2023):
- Cash and Cash Equivalents: R$4,297.1 million.
- High Quality Liquid Assets (HQLA): R$16,174.0 million.
- Gross Loan Portfolio (Non-GAAP): R$28,258.7 million.
- Funding (Non-GAAP): R$39,571.6 million.
- Capital Adequacy Ratio: 23.7% (down 0.4 percentage points from Dec 31, 2022).
Key Non-GAAP Ratios (Nine Months Ended Sept 30, 2023):
- Efficiency Ratio: 52.4% (for the three-month period ended Sept 30, 2023).
- Annualized Cost of Risk: 6.0% (for the three-month period ended Sept 30, 2023).
- Annualized Net Interest Margin (NIM): 7.8% (for the three-month period ended Sept 30, 2023).
Material Changes vs. Prior Period
- Turnaround to Profitability: The company shifted from a net loss of R$42.9 million in the nine months ended Sept 30, 2022, to a net profit of R$192.5 million in the same period in 2023.
- Interest Income Surge: Driven by a 34.9% growth in credit card portfolios, a 31.7% growth in personal loans, and higher SELIC rates (average 13.4% in 2023 vs. 12.1% in 2022).
- Impairment Losses: Increased 41.4% to R$1,157.1 million due to loan portfolio expansion and higher default rates linked to the macroeconomic environment. Credit cards accounted for 69.8% of total provisions.
- Client Growth: Active clients increased by 33.6% compared to the prior year, driving service fee revenue.
- Expense Management: Personnel expenses rose 15.3% due to profit-sharing bonuses, while other administrative expenses increased 3.6% due to IT costs and inflation, partially offset by cost-cutting measures.
Guidance, Outlook, and Risks
Preliminary Estimates for Q4 and Full Year 2023:
- Active Clients (Dec 31, 2023): Expected between 16.3 million and 16.5 million (29.3%–31.1% growth YoY).
- Q4 Profit Before Tax: Estimated R$195 million to R$205 million.
- Q4 Net Profit: Estimated R$150 million to R$155 million.
- Full Year Gross Loan Portfolio: Estimated R$30.5 billion to R$31.5 billion.
- Full Year ROAE: Estimated between 8.0% and 8.3%.
Recent Developments and Risks:
- Cybersecurity: An immaterial security event occurred in mid-2023 at subsidiary Inter&Co Payments affecting <0.15% of clients; remediated with no business interruption. A putative class action lawsuit was filed in Jan 2024 regarding text message compliance.
- Regulatory Changes: Brazil approved a broad consumption tax reform in Dec 2023. Future changes to dividend taxation (potential 15% rate) and abolition of interest on equity are under discussion.
- International Expansion: Inter&Co Securities LLC began operations in the US; studying automated international investment portfolios.
- Corporate Actions: A previously authorized reverse stock split was deferred in Sept 2023. Board composition was updated with new independent directors.
Investor Verification Checklist
- Impairment Trends: Verify if the 41.4% increase in impairment losses stabilizes as the loan portfolio matures and macroeconomic conditions evolve.
- Cost of Risk: Monitor the Annualized Cost of Risk (6.0% in Q3) against the growth in the credit card portfolio, which carries higher risk.
- Regulatory Impact: Assess the potential financial impact of the new Brazilian consumption tax reform and proposed dividend tax changes.
- Legal Contingencies: Track the status of the Telephone Consumer Protection Act (TCPA) class action lawsuit filed in January 2024.
- Guidance Accuracy: Compare the preliminary Q4 2023 estimates (profit R$150-155M) against actual results when finalized.