Inter & Co, Inc. — FY2023 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2023; filed April 30, 2024. This is an annual report, not a standalone Q4 filing. Financial statements are audited and prepared under IFRS as issued by the IASB, with amounts primarily in Brazilian reais (R$).
Business context
Inter is a Brazil-focused digital financial-services group operating Banco Inter and a “Financial Super App” spanning banking and payments, credit, e-commerce, investments, insurance, global services and loyalty. It reported approximately 30.4 million total clients and 16.4 million active clients at year-end. The controlling shareholder holds all Class B shares, with 10 votes per share, and approximately 78% of voting power.
Key financial and operating metrics
| Metric | FY2023 | FY2022 | Change / context |
|---|---|---|---|
| Revenue | R$4,752.6 million | R$3,562.7 million | Up 33.4% |
| Net interest income and securities/derivatives income | R$3,208.1 million | R$2,335.4 million | Up 37.4% |
| Profit / (loss) for the year | R$352.3 million | (R$14.1 million) | Returned to profitability |
| Net interest margin (non-GAAP) | 7.4% | 6.7% | Improved |
| Cost of risk (non-GAAP) | 5.5% | 5.2% | Increased |
| Net loans to customers | R$27,900.5 million | R$21,379.9 million | Up about 30% |
| Gross loan portfolio (non-GAAP) | R$31,020.8 million | R$24,544.0 million | Up 26% |
| Expected credit-loss allowance | R$1,883.8 million | R$1,318.4 million | Allowance / customer loan portfolio rose to 6.3% from 5.8% |
| Cash and cash equivalents | R$4,259.4 million | R$1,331.6 million | Year-end balances |
| Operating cash flow | R$7,544.1 million | R$2,103.4 million | Cash flow benefited from deposit and funding growth |
| Investing cash flow | (R$4,666.4 million) | (R$50.8 million) | Includes substantial net purchases of financial assets |
| Funding (non-GAAP) | R$43,513.0 million | R$32,516.8 million | Up about 34% |
| Capital adequacy ratio | 23.0% | 24.1% | Above the stated 10.5% regulatory minimum |
| Total assets / total liabilities / equity | R$60,351.8 million / R$52,755.1 million / R$7,596.7 million | R$46,343.1 million / R$39,254.0 million / R$7,089.1 million | Year-end IFRS balances |
Interest income rose 62.3% to R$4,549.8 million, while interest expense rose 46.4% to R$2,887.6 million, reflecting loan growth and a sharp increase in time deposits. Net service and commission revenue increased 34.8% to R$1,304.4 million. Impairment losses on financial assets increased 42.3% to R$1,541.6 million. Administrative expenses declined 2.2% to R$1,461.3 million; personnel expenses rose 7.8% to R$790.7 million.
Credit quality indicators were mixed: loans over 90 days past due were 4.6% of gross loans versus 4.1% a year earlier; loans 15–90 days past due were 4.0% versus 4.1%. Management reported a 132% allowance coverage ratio for loans over 90 days past due. The net charge-off ratio was 0.4% in 2023 versus 0.6% in 2022.
Inter Shop GMV decreased to R$3.5 billion from R$4.0 billion. Assets under custody at Inter Invest grew 38% to approximately R$92 billion; active investment clients reached 4.7 million. Inter Insurance revenue grew 32%, and Global Accounts increased 94% to approximately 2.2 million.
Material changes versus FY2022
- The company moved from a small net loss to R$352.3 million in net profit, as revenue and net interest income grew faster than operating expenses, although credit impairment charges rose materially.
- Customer liabilities increased to R$32.7 billion from R$23.6 billion. Within these, time deposits rose to R$28.2 billion from R$10.5 billion, while demand deposits fell to R$2.6 billion from R$11.6 billion. The filing attributes the shift partly to the “Conta com Pontos” product.
- Funding costs and credit risks remained sensitive to Brazil’s interest-rate and macroeconomic environment. The filing reports cost of risk of 5.5% versus 5.2% and gives inconsistent cost-of-funding figures: 7.6% in its reconciliation table and 7.9% in narrative discussion.
- Capital adequacy declined to 23.0% from 24.1%, primarily as the loan portfolio expanded. The filing also describes a much larger decline from 2021 following capital changes related to the 2022 corporate reorganization.
- The company acquired U.S. mortgage businesses in January 2023 and continued expanding its international operations. It also reported R$183 million of 2023 investment in technology, product development and related initiatives.
Outlook, risks and unusual items
- Outlook: The filing provides no specific numerical earnings or revenue guidance. Management expects to invest in the app and customer experience, new products, Inter Shop, international expansion, cybersecurity, controls and automation. It states that cash, cash equivalents and expected operating cash flows should cover ordinary working-capital needs, capital expenditure and the business plan for at least 12 months.
- Credit and market exposure: Growth in unsecured credit-card and personal-loan portfolios, rising defaults, provision estimation, interest-rate and maturity mismatches, funding costs, foreign exchange and Brazilian macroeconomic volatility could adversely affect results.
- Internal controls: Management concluded disclosure controls and internal control over financial reporting were ineffective at year-end due to material weaknesses involving the control environment, risk assessment, information and communication, monitoring, IT controls and manual controls. The auditor issued an adverse opinion on internal control effectiveness. The financial-statement audit opinion was unqualified, and management reported no resulting material misstatement. Remediation is planned for 2024–2025.
- Legal matters: Provisions for probable labor and civil losses totaled R$39.4 million. Separate possible-loss tax contingencies included R$33.4 million relating to IRPJ/CSLL and R$65.0 million relating to COFINS. Approximately 17,800 civil cases sought about R$1 billion in aggregate damages; the company had provisioned R$33.4 million for civil cases. U.S. litigation includes a trade-secret dispute and a putative TCPA class action; the latter’s total claimed amount was unspecified.
- Other items after year-end: A January–February 2024 follow-on offering raised approximately US$162 million gross. In April 2024, the company declared and paid a US$0.03-per-share cash dividend. These are subsequent events, not FY2023 operating results.
- Shareholder structure: The dual-class structure concentrates voting control with the controlling shareholder. The company also highlights risks from competition, cybersecurity and privacy, regulation, taxes, Brazil’s economy, and international expansion.
Most important facts for investors to verify
- Review the audited IFRS statements and notes, particularly loan growth, expected credit losses, delinquency trends and the assumptions underlying the credit-loss models; expected credit losses were a critical audit matter.
- Confirm the cost-of-funding measure and definition: the filing gives 7.6% in one table and 7.9% in narrative discussion.
- Track remediation and independent-auditor testing of the material weaknesses in financial-reporting controls during 2024–2025.
- Assess whether deposit growth and the shift toward time deposits remain sustainable and how funding costs affect margins and liquidity.
- Monitor performance and goodwill assumptions for U.S. businesses, alongside the outcomes and potential exposure from disclosed litigation and tax contingencies.
- Distinguish reported IFRS metrics from management-defined non-GAAP measures, which the company says are not standardized or substitutes for IFRS measures.