Inter & Co. Inc.

Good afternoon and thank you for standing by. Welcome to Interim Co.' 's fourth quarter earnings conference call. Today's speakers are João Vitor Menem, Inter's CEO, Alexandre Riccio, Senior Vice President of Retail Banking, and Santiago Stel, Senior Vice President of Finance and Risks. Please be advised that today's conference is being recorded and a replay will be available at the company's IRR website. At this time, all participants are in listen-only mode. 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&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. in this case our operator will read your question for you please note that there is an interpretation button at the bottom of 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 Inter & Co. Earnings Release and Earnings Presentation Appendix. 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. João Vitor Menem. Sir, the floor is yours.

Thank you, Operator. Good morning, everyone. I will start with a quick overview of our strategy to then passage to Sanji and Santi to cover the operating and financial performance of Pintra. As in prior calls, I will close with some final remarks and then open it for the Q&A section. At our investor day held in Belo, a year ago, we introduced our five-year business plan, known as the 60-30-30. This north star means that Inter's goal for 2027 is to achieve 60 million clients, 30% efficiency ratio, and 30% ROE. When we announced it, it was received as a highly ambitious plan. I'm glad to say that the first year of our plan was a resounding success, much better than any we met. Aside from being an important direction to the market, the point of the plan was to engage and drive our organization toward that goal. In sum, as Armstrong family said, a small step for man, one giant leap for mankind. We're both humble and proud of our progress. This is the first step toward profitability. But more importantly, it validates how sustainable our business model is. To illustrate there the progress in year one, as you can see, we achieved 30 million clients right in the track, an efficiency ratio of 51%, significantly ahead of schedule. and an ROE of 9%, also ahead of the plan. As you can see, our metrics are stronger than expected, demonstrating our strong execution towards the plan. We have been able to combine growth, operational leverage and profitability, while staying true to our core principle of always putting the client first. by innovating and bringing new solutions in our financial superpower. This is only possible thanks to our unmatched set of products that are organized across seven verticals. These are banking, credit, insurance, investments, shopping, global, and loyalty. This powerful engine that is our financial super app is continuously evolving and improving day by day. Our wide set of products and services complement each other, creating a flywheel that brings together a complete ecosystem of financial solutions. When I say clients connect to our solutions, I really mean it. For instance, we see strong acceleration in the adoption of new products. Today, we have more than 12 products with more than 1 million active clients. At this pace, it is highly likely that by the end of this year, we will have a new product that we didn't even launch yet and with more than 1 million active clients by year-end. This is what happened this year, for example, with Interloop and Milporquim. This is the consequence of having what you believe is the best super app in the Americas. With over 30 million clients, more than 4 million individual daily logins per day, and a run rate TPV of over 1 trillion tags. With all that said, I have no reason to doubt that the only possible direction in our profitability and growth trend is up. We have reached and surpassed the inflection point. And in 2023, we presented four consecutive partners of consistent growth in net income, EBT, ROE, and many other metrics. We are on the right track towards our long-term plans. and you are thrilled to announce that we are on track to deliver an even better year two of our 63030 plan. Now, Shandy will walk you through our business updates. Thank you very much. Shandy, please go on. Thank you, João. Good afternoon, everyone, and thank you for joining us today. I'd like to discuss four topics as we go along the presentation. First, clients and engagement. Second, the performance of the different business verticals. Third, our innovation capabilities. And fourth, our potential for further growth. Before going through the numbers, I'd like to quickly reflect on what we said a little over a year ago in our 633 Investor Day. At the event, we said our mission to deliver the CC-3030 was relatively simple, but not easy, and that the most uncertain part of building it was already delivered from 2018 through 2022. Having a lot of focus and discipline is the key, and the results we're about to share demonstrate our team's commitment to getting there. Moving to the results, When we look at clients, besides surpassing the impressive mark of 30 billion, we're happy to announce a 135 bps improvement in our activation rate, which now stands at 54%, the highest level in eight quarters. Our efforts to boost activation include, but are not limited to, improving onboarding, personalizing the super app, streamlining customer lifecycle strategy and offering high-engaging new products, such as Loop, along with overall UX fine-tuning. This, combined with the lowest CAC since 2020, brings us confidence in the future and in our ability to keep the flywheel going with low CAC and high engagement, building stronger relationships for a seamless and complete experience. To page 13, we start talking about business looking at day-to-day things. It makes us proud to see the robustness of our transactional business and that despite the materiality achieved, we see accelerated growth. The fourth quarter was of strong acceleration in our TPV, surpassing 250 billion reais. we see a consistent growth in PIX, which grew 45% in 2023, and an important 36% growth in the credit card volume, continuing our focus on gaining credit share against debit in cards. When we look at the full year, we achieved an amazing R$851 billion in DPV, with over 1 trillion DPV at the fourth quarter run rate. On a cohort basis, as presented in the right chart, we see another quarter of improvements on both new and old cohorts. New cohort's performance shows the consistency of our client growth strategy that starts with higher levels of engagement and growth faster. I'd like to finish saying that the new cohort performance on top of the older cohorts that keep accelerating engagement puts us in a confident position for future revenue growth and margin expansion. The current price alone can keep us growing for many years to come. Moving to page 14, I'll talk about three verticals that are a great representation of the powerful numbers the financial super app ecosystem can generate. On e-commerce, We reached 3 million clients and surpassed 10 million transactions in the quarter, another record. We also surpassed 1 billion reais of GMV, leveraged by our Orange Friday and the holidays. Launched recently, we're scaling our buy-now-pay-later partnerships with RM. Now, we have nearly 150 merchants with which we offer these new payment methods. This is likely the engine that will fuel the beginning of personal loans in Inter. On insurance, we also have another great quarter, reaching more than 388,000 sales and 1.7 million active products. Combining this, we reached a record-breaking net revenue in this vertical of 47 million reais. A successful product to highlight is Consortium, which grew 21% on a yearly basis, surpassing 38,000 sales. Finally, on investments, a cutting-edge product offering resulted in an impressive 66% year-over-year client growth, the highest adoption amongst our verticals beyond day-to-day bank. With increasing clients, our AUC reached R$92 billion, 9 billion being third-party fixed income products distributed within our super app. We also innovated by launching Novolquino, or Picibank, an incredible product that surpassed 1 billion reais in AUC and 1 million clients in just one quarter. On global, as we move to page 15, we see a quarter of strong success. and some early signals that our global vertical is a big driver of that creation. We achieved more than 2 million clients and more than $360 million in AUC and deposits, a 4x growth compared to 2022. The clients that are active in our global products have better profiles, are more engaged, and adopt three times more products than the average client. To continue having this great success, the branding strategy included some investments in the U.S. We became, in 2023, the official financial institution of Orlando City and Orlando Pride U.S. soccer teams, and now have the naming rights of their stadium. We believe being in Orlando and connecting through soccer will not only bring awareness, but also create an emotional connection between Inter and the Brazilian and Latin community living and traveling to Orlando. It is worth mentioning that per year more than 900,000 Brazilians visit Florida, and that more than 400,000 Brazilians are U.S. residents in the state. Jumping into our seventh vertical, loyalty, we achieved 5.4 million active clients in the fourth quarter, adding 1.5 million in these last three months. As we observe with our global clients, loop clients also create better profiles, spending on average 60% more than average on cards. Positive engagement trends have been observed in verification initiatives as well. As we move along, we're adding other ways to earn and burn points, with one of the last additions being allowing our clients to convert their points into US dollars in their global accounts. This week, we made available an option to pay with points for products in our marketplace. As you can see, our loop allows us to unlock value from all the other verticals in our financial supernet. Very excited to see the results of it. Moving to page 17, we see that 2023 demonstrated our unique capability to combine innovation in a year focused on efficiency. We launched many products, such as fixed credit, but find out a later overdraft and loop. We also created a brand new version of our financial super app. to deliver an even better UX with personalized home screens to optimize our clients' lives. As something we'll show in the financial performance section, we need to stop innovating while continuing on the path to deliver operational leverage. We're confident that our vendor proposition is best in class and that our next moves will keep us in the frontier we need to keep delivering. Finally, and before I pass the word to Santi, I'd like to say that the best of all is we're still in the early stages in every market we operate. On one hand, we were able to achieve material market share in multiple segments. In the other, there is a lot of room to grow in every one of these markets. We remain confident that we're well positioned to reach our long-term North Star. and continue to drive growth and profitability in the years to come, as we increasingly deepen our relationships with our clients. The team is ready, and our financial super app is adaptable and is capable to navigate into those challenges. Now, I'll pass the word to Santi to present our financial performance.

Thank you, Xande. Hello, everyone. Now, I'll move you to our financial performance section. Jumping into page 20, here we can see strong acceleration from the credit side. After growing our portfolio two consecutive quarters at 5%, we reached 7 and 10% in the third and fourth quarter respectively, therefore entering 2024 with strong momentum. Our close-run portfolio reached an impressive 31 billion reais mark, which is a result of growing four times more than the resilient market average, therefore gaining significant market share across products, as Sean mentioned before. Moving to interest rates on the top of the page, you can see personal, FGTS, and real estate rates growing sequentially, while SMB, the only regular portfolio, remains stable. We go deeper into the full impact on rates on the link pages. Going to page 21, here we go a bit deeper on growth by loan products. As you can see in the chart, we remain disciplined on growing the most profitable lines. Our best credit products, MCTS and Home Equity, presented the highest growth levels in significant scale within our portfolio. For credit cards, our successful approach of eradicating credit limits to existing and strong performing clients, enabled us to increase by nearly 40% the portfolio, while improving asset quality trends. Finally, our real estate and payroll, with balance growth with repricing to ensure that profitability continues to improve. Jumping on to page 32, we have a point quarter for asset quality with all the metrics improving this quarter. Starting with a 15 to 90 day MPL ratio, we saw an improvement of 30 basis points quarter per quarter. We also improved the 90 day MPL metric to have the MPL as a three formation metrics, each of them by 10 basis points. Finally, when we look at the adequacy of credit card by the cohorts, we continue to see strong performance compared to YB in recent quarter cohorts. Jumping on to page 23, we can see significant decrease of cost of risk, about 70 basis points. This dynamic was driven by the remedies and protection processes for using cohorts with stronger performance. The coverage ratio remains stable at 132%, It is always what you know by name that 70% of our portfolio is collaterals, presenting lower average risk problem. Overall, as a point in front, we see that the strong work that our data is paying off is enabling us to start going to the form of . On page 84, we can see once again our leading franchise. clients trusting us with our deposits. Moreover, our transactional deposits represent 53% of our total funding, which is one of the best mixes of funding with resilient financial entities. Funding accelerated 10% this quarter, reaching almost 44 billion reais. The product level is well connected to 17% growth in transactional deposits, which reached 14.4 billion reais. Finally, we experienced growth in the average deposit balance per active client, reaching 2,000 reais, with a 6% growth versus the current quarter. On page 25, we can see that our cost of funding continues to be one of our key competitive advantages. This quarter, we reported 59.2% of CDI costs. Once again, the lowest 50% mark that we aspire to have. In terms of an all-in cost, the improvement was 100 bps, going down from 8.2% to 7.2%. As the LEED further decreases, we should continue to benefit from this dynamic in the structure of our balance sheet that makes Interbeak that big sensitive. In terms of revenue, we had a great year, reaching record-breaking numbers in all the quarters. We achieved 2.2 billion reais revenue the fourth quarter and 8.1 billion in the year. On net revenues, growth was picked by NII, with an impressive growth of 31% in the year. In terms of the income, we were able to keep practically the same level as the prior quarter, with a healthy growth on the main financial lines, just interchange, banking, and investments. Moving to the unit economics page on page 27, This combined with a stable cost to serve, led us to keep enhancing our gross margin for active clients. We reached 17.7 reais on a day basis, which is our second best quarter ever. Finally, in terms of active clients per year, we have increased our gross margin for active clients. On page 28, we present our new evolution net of cost of risk. We do this because it helps capture in the full picture of our repricing and risk managing practices. In the fourth quarter, risk adjusted mean reached the highest level in the year, the second highest level since 2020. This strong expansion is a consequence of, one, improvement on repricing of legacy real estate and payroll loans. Two, changing the loggings towards the most profitable markets. Three, lowering cost of funding. Four, efficiency in the reserve requirements as a result of our new priority program. For 2024, we see a continuation of this dynamic, plus the scaling of new product launches such as fixed credit and buy now pay later. Going on to page 29, we see the expenses that have been preceded. With most of the breakdown items remaining roughly in line with prior periods, we achieve a 1% reduction in the . This is a consequence of focusing on expense management. We still see a strong opportunity to continue delivering . Moving on to page 30. Here we can see our efforts on the operational areas with more detail. In the next chart, it's clear that in the fourth quarter of 2023, we were able to further increase the gap between the growth of net revenues, growth of expenses. On the center, we had another impressive quarter of improvement in our efficiency ratio, leading us to end 2023 with a record low left, 51.4%. On the right side, we can also see the efficiency ratio which, similar to the risk-adjusted mean, also precedes the cost-of-risk element. In such measure, we have another 5 percentage points for this quarter. In phase 31, as we can see in the chart, our net fees continue to cover 2 percentage of our SD&A base, which is currently at 70%. It is worth to remind, again, that the fees will the third quarter of this year, and then continue rapidly in the same level to change banking and investment lines. We track this metric closely as it is a key component to achieve our third B. The last, but certainly not least, we couldn't be prouder of what we achieved in terms of profitability. We delivered a record ROE of 8.5% by printing our best everyday income of 160 million euros which on an annual basis translates to a 6.4 million . On a previous basis, we reached 2.8 million health, reflecting a remarkable 3% increase over the past quarter. These results show we are working full speed with a focus on maintaining this momentum . Now I'm passing it on to Joao for his closing remarks. Thank you.