Inter’s shares and BDRs (INBR31) soar after the balance sheet; CEO reinforces the bank’s conservative stance in granting credit

Inter & CO’s second-quarter figures resonated well with investors. The papers of holding, owner of Banco Inter, operate strongly on the New York Stock Exchange, as well as their certificates traded on B3. At 1:35 pm (Brasília time), the INTR share rose 8.57% on Nasdaq, an American stock exchange that brings together technology companies. The INBR31 BDRs advanced 12.67%, at R$ 19.48.

In the balance sheet released last night, Inter & CO presented net income of R$ 15.5 million in the second quarter, reversing a loss of R$ 30.4 million in the same period of the previous year.

In the conference call about the results, the company’s executives spoke about their more conservative stance in the period. Inter’s credit originations in the second quarter dropped 1% compared to a year ago, to R$4.7 billion. “We decided, as a strategy, to slow down credit underwriting, monitoring the performance of the portfolio and the macro environment”, said Alexandre Riccio de Oliveira, vice president of financial operations at Inter.

“We hope to re-accelerate when we see appropriate conditions for this”, said the executive. Caution was reflected in Inter’s loan portfolio, which reached R$19.5 billion. Compared to a year earlier, there was a growth of 56%. However, in comparison with the first three this year, the expansion was 7%. “The growth was intentionally more modest because we became more judicious in our subscription models”, explained Helena Lopes Caldeira, Inter’s CFO.

Bad debt grew, but worse was behind, says CEO

João Vitor Menin, CEO of Inter & CO, says he believes that the worst is behind him in terms of default. “We have a very collateralized portfolio [com garantias], which is good for business,” he said. The uncovered part of Inter’s portfolio is basically the credit card segment, as the bank does not deal with personal loans.

Inter & CO’s more than 90-day delinquency ratio ended the second quarter at 3.9% (compared to 3.5% in the first quarter), driven by an increase in credit card delinquency to 7.9%. “If something really bad happens, which I don’t think is likely, we could see some deterioration. But if things improve in the macroeconomic scenario, we may improve faster than we thought,” Menin said.

The executive recognizes that the credit card is important to engage and retain the customer. But he says the timing calls for a little more caution. “We are a disruptive bank, we earn a lot market share and now we need to slow down a little,” he said. “When we realize that the market is in better shape, we will be able to grow in credit cards at a faster pace”.

Engagement decreased despite larger customer base

Inter recorded a 51.7% year-on-year growth in the number of active customers, to 10.7 million. However, the representation of these customers in the bank’s total base decreased between the periods. João Vitor Menin, however, says that this should not be a trend.

“We are not at all concerned with engagement. We don’t think there is a downward trend for engagement. Half of our customers joined 12 months ago, so the pace of growth we’ve experienced in that period has been great. It takes time to engage customers – they have to be given a card, they have to have a credit limit,” he said.

The CEO explains that when the base was growing at a slower pace, in 2020, the activation rate was higher, exceeding 60%. “Of course, giving higher credit limits also helps with activation and retention,” he explained.

In the second quarter, the average revenue per active customer was R$ 32. But Inter expects the figure to increase to around R$ 50 in the short and medium term. “We think that R$50 is the minimum we expect to have, if financing costs remain stable. We have several products that were launched recently and are still in the maturation phase. In addition, when we compare ARPAC with that of large banks, we see that there is room for significant growth,” said Santiago Stel, director of strategy and investor relations.

Analysts’ view

For Pedro Leduc, an analyst at Itaú BBA, the company’s profit in the second quarter is still not material, but the results show that the worst is probably over.

“Compared to Nubank, which also reported this evening, Inter reported less loan backlog and revenue growth, but also less credit quality pressures,” says Leduc’s analysis.

The BBA remains positive in INTR, with a outperform and target price of $8 by the end of 2022.

“Compared to Nubank, Inter reported less loan portfolio and revenue growth, but also less credit quality pressures,” says the house’s analysis.

For UBS BB, the result showed operations with mixed trends, with a “decent” expansion of the revenue line (especially Inter Shop and credit card), but a deterioration in asset quality.

“The macro scenario (with higher inflation and modest GDP expansion) may postpone the
ROAE expansion [retorno sobre capital] of Inter”, wrote the bank’s analysts. On the other hand, UBS assesses that INTR is trading at a discount, with less chance of a downside. The house has a buy recommendation for the paper and a target price of $6.

In Bradesco BBI’s assessment, the second quarter balance sheet continued to show a challenging environment for credit underwriting. Inter should continue to benefit from recent rate adjustments and spreadsbut the market seems to have already incorporated this movement in the stock price, leaving little room for optimism in the short term, in the analysis team’s view.

For BBI, provisions also point to a challenging scenario, with credit card delinquency growing by 130 basis points.

The house is rated outperform for INTR and $10 target price.

Looking for a good buying opportunity? XP strategist reveals 6 cheap stocks to buy today.

About Yadunandan Singh

Born in 1992, Yadunandan approaches the world of video games thanks to two sacred monsters like Diablo and above all Sonic, strictly in the Sega Saturn version. Ranging between consoles and PCs, he is particularly fond of platform titles and RPGs, not disdaining all other genres and moving in the constant search for the perfect balance between narration and interactivity.

Check Also

Anatel public announcement about TV Box (Smart) equipment, what can happen?

The National Telecommunications Agency – ANATEL – promotes Public Consultation in order to gather opinions …