Executive Summary / Key Takeaways

• The "Inter by Design" Super-App Flywheel Is Working: Inter's integrated ecosystem of banking, credit, investments, insurance, shopping, and global accounts creates powerful network effects where 41 million clients drive 30% loan growth, 35% funding franchise expansion, and record 14.2% ROE, demonstrating that growth and profitability can compound simultaneously.

• Private Payroll Loans Represent a Breakthrough Inflection: The BRL 1.3 billion private payroll portfolio, growing 38% YoY with expected ROE "significantly higher than 30%," validates Inter's digital distribution model and positions the company to capture a massive TAM that incumbent banks are reluctant to pursue due to cannibalization fears.

• Macro Headwinds Create Strategic Opportunity: While Brazil's elevated Selic rate pressures overall credit growth and ROE timelines, Inter's low market share (single digits in most segments), collateralized portfolio (two-thirds secured), and industry-leading cost of funding (68.2% of CDI) allow it to cherry-pick high-quality growth while competitors retreat.

• Valuation Hinges on Execution, Not Concept: Trading at 15.5x earnings with a 13.8% ROE, Inter's valuation appears reasonable for a 30% growth story, but the investment thesis depends on management's ability to scale private payroll from 300,000 to millions of clients without compromising its 5.35% cost of risk or 45.2% efficiency ratio.

Setting the Scene: Brazil's Digital Banking Sweet Spot

Inter & Co, founded in 1994 and headquartered in Belo Horizonte, Brazil, has spent three decades evolving from a traditional financial institution into what management calls "the fastest-growing large financial institution in Brazil among those with over 20 million clients." The company makes money through a "financial Super App" that integrates seven verticals—Banking, Credit, Investments, Insurance, Shopping, Global Account, and Loop loyalty—creating multiple monetization touchpoints from a single client relationship.

This super-app model sits in a strategic sweet spot between two flawed competitors. Traditional incumbents like Itaú (ITUB) and Bradesco (BBD) have massive scale but suffer from high cost structures and legacy technology that prevent them from profitably serving emerging segments. Pure-play fintechs like Nu Holdings (NU) have digital distribution but lack Inter's full banking license, diversified funding franchise, and ability to cross-sell high-margin products. Inter combines the best of both: digital-native user experience (85 NPS, 4.9 App Store rating) with a complete financial services license and a cost of funding that reached 68.2% of CDI in Q3 2025, the best level reported year-to-date.

The industry structure favors Inter's approach. Brazil's digital banking market is growing at 7-8% CAGR, but the real opportunity lies in the convergence of credit, payments, and commerce. Inter processes 20,000 financial transactions per minute, holds 8.4% of PIX market share, and has built a BRL 68 billion funding franchise that grew 35% YoY. This scale creates a data moat: with 380 AI initiatives live, Inter can hyper-personalize offers, predict credit risk more accurately, and convert shopping behavior into lending opportunities at near-zero marginal cost.

History with Purpose: From Digital Account to Ecosystem Engine

Inter's history explains why it can execute the super-app strategy while others struggle. In 2015, the company launched Brazil's first digital account, a move celebrated as a ten-year anniversary in 2025. This early-mover advantage gave Inter a decade to refine its technology, build trust, and accumulate data before competitors recognized the opportunity. By 2016, management made a critical strategic choice: avoid the "monoliner" trap of focusing solely on payments or credit, and instead build a diversified credit portfolio platform committed to sustainable credit options and diversified fee sources.

This foundational decision to balance secured and unsecured lending created the portfolio resilience that protects Inter today. The 2015 digital account launch provided the client acquisition engine, while the 2016 credit diversification strategy ensured the company could weather Brazil's volatile economic cycles. The 2022-2023 formalization of the "60-30-30 plan"—targeting 60 million clients, 30% efficiency ratio, and 30% ROE—gave investors a clear roadmap, while the July 2024 integration of Inter Pag, despite its 100% standalone efficiency ratio, demonstrated management's willingness to absorb short-term pain for long-term synergy gains.

The BRL 30 million purchase price allocation finalized in Q4 2024 was merely accounting; the real value was adding Inter Pag's capabilities to accelerate revenue growth and optimize costs across the ecosystem. This pattern—making bold, counter-cyclical investments while maintaining disciplined underwriting—recurs throughout Inter's history and explains why the company reached 41 million clients by Q3 2025 with a 58% activation rate, the highest since Q4 2021.

Technology and Strategic Differentiation: The AI-Powered Flywheel

Inter's 380 AI initiatives, up from 80 at the 2024 Tech Day, represent more than innovation theater—they are the operational backbone of the super-app flywheel. These AI systems drive hyper-personalization, enabling Inter to offer the right product to the right client at the right moment, converting engagement into revenue at scale. In Q3 2025, daily logins exceeded 20 million, financial transactions surpassed 850 million in a single month, and the company processed BRL 412 billion in TPV, up 30% YoY. This engagement creates a data feedback loop: more transactions generate more data, which improves AI models, which enhances personalization, which drives more engagement.

The strategic differentiation manifests in three ways. First, Inter's "no hidden fees" banking platform achieves a Net Promoter Score of 85, placing it in the excellence zone and driving principality—clients use Inter as their primary bank, evidenced by 8.4% PIX market share and average deposits per active client surpassing BRL 2,000 for the first time. Second, the integrated ecosystem converts commerce into finance: Inter Shop's 7.6% net take rate and 9.3% BNPL conversion rate generate fee revenue while creating qualified leads for high-margin unsecured credit. Third, the Loop loyalty program's 13.6 million clients transact 3x more than non-members, creating a self-reinforcing cycle where engagement drives profitability, which funds investment in client acquisition.

The "Inter by Design" philosophy—customer centricity, true innovation, operational excellence, and winning mentality—translates into tangible economic benefits. The cost to serve per active client is BRL 13.1, while gross margin per active client reached a record BRL 20.2 in Q3 2025. This 7.1 BRL spread, combined with 30% YoY client growth, demonstrates that Inter can scale profitably. The AI-powered Inter Shop Concierge, launched in Q3 2024, and the "My Credit" hub, which helps clients build credit limits transparently, are not just features—they are monetization engines that increase ARPAC while improving client financial health.

Financial Performance & Segment Dynamics: Evidence of Execution

Q3 2025's record net income of BRL 336 million and ROE of 14.2% are not isolated achievements—they are the culmination of strategic choices made years earlier. Net revenue grew 29% YoY to BRL 2.1 billion, driven by a 39% increase in Net Interest Income, while the efficiency ratio improved 190 basis points to 45.2%. These figures demonstrate the super-app flywheel is accelerating: revenue growth outpaces expense growth, creating operating leverage that should continue as the platform matures.

The credit segment tells the most compelling story. Loan book growth accelerated to 30% YoY and 9% QoQ, reaching BRL 41 billion, with a disciplined mix of two-thirds secured and one-third unsecured. Secured lending provides downside protection in Brazil's volatile macro environment, while unsecured lending drives NIM expansion. The private payroll portfolio exemplifies this strategy: BRL 1.3 billion, serving over 300,000 clients, growing 38% YoY in a market that grew only 22%. Management expects this product to deliver ROE "significantly higher than 30%" with interest rates in the high-3% per month range, making it among the most profitable products in the portfolio.

The cost of risk increased to 5.35% in Q3 2025, but this is not a sign of deterioration—it is the expected upfront provisioning for a new, high-growth portfolio. Santiago Stel explained the sequence: "cost of risk picks up first since we have the expected credit loss model, and we have to provision upfront. And then as the quarters go by, delinquency starts passing the ninety-day mark, and then the NPL follows." This is Inter managing risk by design, not by accident. The coverage ratio increased accordingly, and management expects cost of risk to stabilize around 5.5% as the private payroll portfolio matures and NPLs converge toward high single-digit levels.

Credit card reshaping demonstrates Inter's ability to engineer profitability. The interest-earning portfolio (IEP) increased to 23% of the credit card portfolio, up from 20% last year, through initiatives like PIX financing, monthly limit reassessments, and installment plans. This converts low-margin transactors into high-margin revolvers, increasing NIM without adding risk. Consumer Finance 2.0 (PIX financing, BNPL, Overdraft) grew 52% QoQ to BRL 503 million in Q3 2024, with BNPL delinquency lower than traditional credit cards and a 20-25% down payment providing loss protection.

The investment vertical, with BRL 68 billion in funding franchise assets growing 35% YoY, provides the low-cost funding that enables Inter's credit strategy. Average deposits per active client surpassed BRL 2,000 for the first time, indicating trust and principality. "My Piggy Bank," with over 425,000 clients creating 529,000 savings goals in less than a month, is not just a feature—it is a liability-gathering tool that reduces funding costs and provides data for credit underwriting.

Competitive Context: The Sweet Spot Between Incumbents and Fintechs

Inter occupies a unique position in Brazil's financial services landscape. Unlike incumbents burdened by legacy costs, Inter's digital-native architecture delivers a cost-to-serve of BRL 13.1 per active client. Unlike fintechs lacking full banking licenses, Inter's regulatory approval allows it to gather BRL 68 billion in deposits and hold a BRL 41 billion loan book. This positioning is reflected in market share data: Inter is the second-largest home equity underwriter with 8.9% portfolio share, holds 8.4% of FX transactions, and captures 8.4% of PIX transactions—significant positions in large markets, yet still with ample room to grow.

The competitive dynamics favor Inter's strategy. João Vitor Menin explicitly stated that large banks are "reluctant to jump into the private payroll product because they might cannibalize their revenues, their fees." This mirrors the pattern from 2002-2010 when incumbents avoided payroll loans, allowing specialists to build dominant positions that were eventually acquired. Inter's advantage is having no legacy consumer finance portfolio to cannibalize, enabling aggressive pricing that delivers modeled ROEs while incumbents hesitate. Alexandre Riccio noted that Inter's "right to win" comes from its large client base, strengthening brand, and products that are "Inter by design"—meaning they fit seamlessly into the super-app ecosystem.

Quantitative comparisons highlight Inter's growth premium. While the overall market for payroll and personal loans grew 22%, Inter achieved 38% growth. Home equity grew 33% versus 21% market growth. Credit cards grew 20% while maintaining disciplined underwriting. This outperformance stems from Inter's ability to cross-sell to its 41 million clients at near-zero marginal cost, a capability that pure-play competitors like StoneCo (STNE) or PagSeguro (PAGS) cannot replicate. Their narrower focus on payments or SMB lending limits their addressable market and increases client acquisition costs.

Inter's NPS of 85 and app store ratings of 4.9 (Apple) and 4.8 (Play Store) provide a qualitative edge in client retention and word-of-mouth growth. The 58% activation rate, trending toward 60%, indicates that more than half of registered clients are actively using the platform—a critical metric that drives monetization. Loop loyalty members transact 3x more than non-members and generate 2x higher ARPAC, creating a self-reinforcing cycle that competitors cannot easily replicate without a comparable integrated ecosystem.

Outlook and Guidance: The Path to 30% ROE

Management's 60-30-30 plan—60 million clients, 30% efficiency ratio, 30% ROE—serves as the North Star, but the timeline has shifted due to macro headwinds. The Selic rate, identified as "the biggest headwind to achieving the 30% ROE target by 2027," slows growth in rate-sensitive segments like payroll. However, management remains "really excited" about the path, citing tailwinds that didn't exist when the plan was unveiled: private payroll loans, the upcoming factoring clearing house for SMEs, and continued credit portfolio expansion.

The private payroll product is the key variable. With a TAM estimated between BRL 100-200 billion initially, and potentially "hundreds of billions" in total, Inter is targeting a market where it already has 15-20% underwriting market share on a flow basis, despite holding only 2.1% of the static portfolio. This demonstrates Inter's ability to originate high-quality loans faster than incumbents, building a portfolio that should deliver 30%+ ROE once it seasons. The product's digital nature—originating without human intervention, similar to FGTS loans—provides a cost advantage that compounds over time.

Santiago Stel expects "a continuation in the trend of the risk-adjusted NIM in line with what we have seen in the prior quarters" for at least the next four quarters, driven by portfolio repricing (one-third of portfolios still have upside), favorable mix shift toward high-ROE products, and improved investment yields. This NIM expansion, combined with the efficiency ratio improving to 45.2%, suggests operating leverage is accelerating. The base case for cost of risk remains 5-5.25%, with potential for positive surprises as the private payroll portfolio performs better than initial 15% delinquency forecasts.

Loan growth guidance of 25-30% appears achievable at the high end, supported by private payroll, mortgages (growing 37% YoY despite high rates), and home equity (33% YoY growth). The factoring clearing house launching in early 2026 could accelerate SME lending, where Inter currently prioritizes profitability over growth. The consumer finance 2.0 portfolio is expected to approach BRL 700 million by year-end, providing additional high-margin unsecured exposure with lower delinquency than traditional credit cards.

The activation rate trending toward 60% and average deposits per client surpassing BRL 2,000 indicate deepening client relationships that support cross-sell. Management's focus on "converging contracts with major vendors to reduce cost per transaction" and investing in AI for process automation should drive further efficiency gains, potentially reaching the 30% target faster than the 2027 timeline.

Risks and Asymmetries: What Could Break the Thesis

The most material risk is execution failure on private payroll scaling. While early cohorts show single-digit delinquency, the portfolio is only six months old, and management admits NPLs "should start to catch up a bit" as it seasons. If delinquency exceeds the high single-digit target or operational issues emerge with employer HR integrations, the expected 30%+ ROE may not materialize, and the BRL 1.3 billion portfolio could become a capital drag.

Macro risk is significant but manageable. The Selic rate directly impacts credit demand and NIM, and a prolonged high-rate environment could delay the 30% ROE target beyond 2027. However, Inter's collateralized portfolio (two-thirds secured) and low funding cost provide resilience that unsecured lenders lack. The company's guidance acknowledges this headwind but emphasizes that new products like private payroll are "aligned to this type of environment," suggesting structural hedging.

Competitive risk is rising. Nu Holdings' 127 million customers dwarf Inter's 41 million, and its lower cost structure could pressure pricing. XP Inc. (XP)'s investment platform has deeper analytics, and PagSeguro's payment focus could limit Inter's SMB expansion. However, Inter's integrated model creates switching costs that pure-play competitors cannot replicate. The risk is not existential but could compress growth rates if incumbents accelerate digital transformation.

Regulatory risk is ever-present in Brazilian financial services. Changes to payroll lending regulations, PIX fee structures, or capital requirements could impact profitability. Management's comment that "the regulation behind us" supports the 60-30-30 plan suggests confidence, but regulatory tailwinds can quickly become headwinds.

The asymmetry lies in the factoring clearing house and SME opportunity. If the early 2026 launch unlocks the BRL 250-300 billion SME lending market as management expects, Inter could add another high-growth, high-ROE vertical. Conversely, if implementation is delayed or uptake is slow, the growth narrative loses a key pillar.

Valuation Context: Reasonable Multiple for a Compounding Story

At $8.08 per share, Inter trades at 15.5x trailing earnings and 2.46x sales, with an enterprise value of $7.18 billion representing 4.96x revenue. These multiples appear reasonable for a company growing revenue 29% YoY and earnings 39% YoY, especially when compared to Nu Holdings at 31.96x earnings and 8.39x sales, or XP Inc. at 10.34x earnings but with slower growth.

Inter's 13.8% ROE trails Nu's 27.8% and XP's 22.5%, reflecting the macro headwinds and upfront investments in new products. However, the 17.06% payout ratio and 0.97% dividend yield demonstrate a balanced capital allocation approach that rewards shareholders while retaining earnings for growth. The 1.15 beta indicates moderate market sensitivity, appropriate for a Brazilian financial.

The key valuation driver is whether Inter can achieve the 30% ROE target. If private payroll and other high-ROE products scale as expected, the multiple would compress rapidly on earnings growth. If ROE remains stuck in the mid-teens, the stock is fairly valued at best. The market appears to be pricing in moderate success, leaving upside if execution exceeds expectations.

Conclusion: Execution at an Inflection Point

Inter & Co has built a unique super-app ecosystem that transforms engagement into profitability through network effects, AI-driven personalization, and integrated commerce-finance loops. The Q3 2025 results—record profitability, 30% loan growth, and breakthrough private payroll scale—validate that this model works even in a challenging macro environment.

The central thesis hinges on two variables: whether private payroll can scale from 300,000 to millions of clients while maintaining single-digit delinquency, and whether the super-app flywheel can continue driving operating leverage toward the 30% efficiency target. The Selic rate headwind is real but manageable given Inter's collateralized portfolio and low funding costs.

For investors, the story is attractive because Inter occupies a defensible sweet spot with 41 million engaged clients, small market share providing ample runway, and a product suite that incumbent banks cannot easily replicate without cannibalizing legacy businesses. The valuation multiple provides reasonable entry for a 30% growth story, but execution missteps on credit quality or competitive pressure from Nu could compress the multiple.

The critical monitoring points are private payroll delinquency trends, the pace of NIM expansion, and the efficiency ratio improvement. If these metrics continue trending favorably through 2026, Inter will have proven that its "Inter by Design" philosophy is not just strategy but durable economic moat.