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.

Thank you, Sanchi. Thank you, Sanchi. So, since we launched our digital bank back in 2016, we have been focused on creating a unique platform that attracted tens of millions of clients who engage with us every day and transact over R$ 1 trillion last year. For the past two years, we entered what we call the compounding phase. This is nothing else than continuing to innovate and deliver the best for our clients, while starting to see the benefits of our digital banking model. These benefits are scalability, strong weight on fee income, strong mean risk-adjusted margins, best-in-class funding mix, and also highly diversified revenue base. We think that this year, this competitive advantage became very visible and allowed us to deliver even more than what we expected for our year one on the 60-30-30 plan. We are highly proud of what we achieved this year, both from our business and financial performance, and could not be more excited for what's coming in 2024 and beyond. Thank you for joining our call today. Now, we will start the Q&A session.

We will now begin the question and answer session. Please note that in the interest of time, we will allow each participant to ask one question with one follow-up each. Again, for this Q&A session, we ask you to write down your question via the Q&A icon at the bottom of your screen. Your name will then be announced and you will be able to ask your question live. At this point, a request to activate your microphone will appear on your screen. If you prefer not to open your microphone live, please write down, no microphone, at the end of your question and our operator will read your question out loud. Our first question comes from Mr. Tiago Batista from UBS. Sir, we are now opening the audio so you can ask your question live. Please, go ahead, sir.

Hello, can you hear me?

Loud and clear, sir. Yes.

Okay. Okay. Thank you, guys. Thanks for the opportunity. I have one question about the PIX Finance. I know that this product is still in a kind of early stage on Inter, but can you comment your initial impression and how relevant these products can achieve?

Yeah. João Vitor speaking. Thank you for the question. Actually, we are very excited with PixCredit. Just to put things on a context, we have 8% of the market share in Pix in Brazil. Everyone knows that. But most importantly, the UX UI for PixCredit is amazing. So most likely, we believe that we can outpace this market share for this product in Brazil going forward. a hundred percent of our credit of our clients use our app to transact this is a good advantage for us and not the last but not least the economics for x credits are amazing they are better than the current credit card scheme in brazil so we don't have the interchange you don't have the mdr for the merchant so it's a win-win situation I do believe that it's going to be a very profitable product for us going forward. We're very excited. The first readings on the liquidity are good, similar to the credit card. The rates are better. It's a way more efficient product. So I really think it's going to be a game changer for the payment industry in Brazil, mostly for the digital banks.

Very clear, João. Thanks and congrats for the results.

Thank you, Chuck.

Our next question comes from Mr. Tito Labarta from Goldman Sachs. Mr. Labarta, we are now opening the audio so you can ask your question live. Please go ahead, sir.

Hi, good morning. Thank you for the call and taking my question. My question is that there was some margin pressure in the quarter, I think, related to renegotiations and discounts that you did that also helped the cost of risk. Should we expect more of this going forward? How should we think about, I guess, both the margin and the cost of risk going forward from here? Thank you.

Thank you, Tito Di Santiago, for taking the question. So what we continued doing this fourth quarter was what we did in the third quarter, which was to be a bit more proactive towards renegotiating the delinquent loans. And we did that additional $30 million, or we have an impact of additional $30 million from the NAI into the cost of risk. Remember that we had a similar impact in the third quarter, relative to the second quarter, so it was 30 million in the third quarter, and now 30 plus 30 means 60 versus the second quarter, now in the fourth quarter. That impact drove cost of risk lower, and it also impacted NIM, which is the reason why we incorporated this new method, which we call the risk-adjusted NIM, that captures both variables together, and we think it's the proper way to see that we recorded a 5.0% risk-adjusted DIMM, the highest in the year and the second highest in the last four years. Going forward, we expect the level that we reach now to continue. We don't think we have more incremental changes in the levels, but we will expect to keep it as a percentage of the portfolio roughly at this size. We also incorporated new disclosure regarding the stocks of the renegotiated portfolio, which is a feedback that we got from investors and research analysts, and that's providing the press release for people to go a bit deeper on how that compares relative to the market.

Great. Thanks, Santiago. Maybe just one follow-up. We did see some improvements on the funding costs in the quarter. Is there room to improve that more from here?

So in the fourth quarter, there is seasonality, to be honest. So we took the level below 60%. But around 60% is the level that we want to operate at. As we always say, the structure of our funding base or our funding franchise, it is a key competitive advantage. We will try to defend that as much as we can. We do think that the worst moment of stress with the Selic being at almost 14%, which could have had a shift towards the higher yielding deposits, didn't happen. We continue having a strong funding mix and a 60% cost of funding. With Selic going down, we think we'll be in a downhill or in a tailwind in the front of cost of funding.

Great. Thanks, Santiago. Thank you, Nito.

Our next question comes from Mr. Mario Pieri from Bank of America. Mr. Pieri, we are now opening the audio so you can ask your question live. Please go ahead, sir.

Hey, guys. Congratulations on the quarter. Quick question on efficiency. As you showed, right, you have made significant improvements to your efficiency ratio. A lot of that because you were able to keep your costs flat, especially personnel expenses. So going forward, how should we see, clearly your target is for efficiency to continue to improve, but I wanted to understand from your perspective, is this improvement coming from revenue generation? Or can you do more to reduce your cost structure? Do you have any initiatives that they should reduce costs? Or are we just talking about maintaining costs relatively growing in line of inflation but revenue generation coming through? Thank you.

Hi, Mario. I'll start taking that one. So what we saw throughout 2023 was at the beginning we had certain low-hanging fruits, so to speak, which went very aggressive towards capitalizing them. If we look at the graph of the index of expenses and revenues, In the second half, both grew, but the growth on the revenue side was materially steeper than the growth on the expense side. That is what we expect to see in 2024. We will invest more to continue growing, but the growth will be at a much lower rate, half or less than half the growth in revenues. And for that, we have a fixed side and a variable side. The fixed side is mainly the personal expenses. That is a number that will also grow at inflation plus a few percentage points, but not too far from that. And then on the variable side, those are expenses that are more tied to the volume growth and those will grow at a higher level. But the growth, the improvement in efficiency will mainly be driven by revenues growing significantly higher than the expense growth.

Okay, that's clear. Just to, you know, like you showed that slide that you are almost halfway to your target for efficiency, you know, and this was like a five-year target. Do you think you are ahead of schedule on efficiency or was that the expected trajectory when you gave the guidance?

We're definitely ahead in the oil world. We are ahead the most. We went a lot more aggressive on expenses. And to be more specific, we have a project, which is Project Owl, or Coruja in Portuguese. We launched this project at the end of April. And that was a Coruja 1.0, meaning every Friday morning, the senior leadership of Inter attacking Coruja. all of the main line items. We had our first meeting of Coruja 2.0 of 2024, the first Friday of the year. So we are starting a lot earlier. Obviously, now it will be tougher to deliver incremental improvements, but the focus is there because we want to continue being above the level. We're not going to have 20 percentage points improvement like we had this year, but we think that the concept of the digital bank like we have, has a strong competitive advantage from the cost side, and that is something we want to continue delivering as we go along. So this is a fund where we expect to continue excelling.

Great. Thank you very much.

Thank you.

Our next question comes from Mr. Yuri Fernandez from J.P. Morgan. Mr. Fernandez, you have the floor now. We're opening the audio so you can ask your question live.

Thank you. Hi, Santi, Joel, Alexandre. I have one regarding recoveries, loan loss recoveries. It was a good quarter. We tracked this, and it was 80 million reais. It used to be tracking around 40. So just asking what happened there, like if it is level sustainable, if there was any kind of one-time recovery, because it was a good quarter for this line. Thank you very much.

Yes, so recoveries, typically the fourth quarter has better performance as there is more money in people's pockets, and we see that on the funding side as well, as we mentioned earlier. So there is a bit of seasonality, but we are a lot more effective on the work being led by by the underwriting team and recovery team, Mauro Rangel, has been spectacular. We expect to continue improving that metric, but the growth in the fourth quarter did have some seasonality. So we have to compare the quarters versus the prior quarter of the prior year in order to make it apples to apples. But we think this is a front where there's a lot to continue evolving.

Thank you, Santi. If I may, different topic, but quickly one. On the marketplace, on Intershop, the net take rate was slightly down. Should we see this recovering ahead? Is this like promotions, Black Friday, Christmas, and should we see the net take rate moving up back again, or what is the message for that line? Thank you.

Yuri, Jean-Victor speaking here. Just to complement something on the previous question, and then I'm going to answer about the marketplace. I think that most of the analysts remember that I have always talking about tricky elements for the credit card. So good underwriting, good products, good UX, good UI, and good collection. And the renegotiation is a very important part of a good collection. We're doing that seamless for the client through our app, in a very wise way, and therefore we have been improving the flow, the type that we make the collections. It's a win-win situation. It's very important. Going to the marketplace, Also, I mentioned in the past that we're always trying to do the best balancing, trying to find a sweet spot between growth and profitability. And the good news are we have been able to shift from one to the other quite easily. Every single week I have a meeting with Rodrigo. Rodrigo, all of you know Rodrigo because you're off the marketplace. And then we can decide, do we have a strong time of the year coming in? So should we put the take rate, the cashback, sorry, less competitive? Should it be more competitive because it's a low season? So we use that quite often to adjust growth versus profitability. Having said that, I believe that I don't see a major change on the trends going forward for 2024. But if we have a good recovery on the retail in Brazil, we can improve the growth, I mean the GMV, but also the net take rate going forward. So pretty much stable for 2024. That's what we foresee for the net take rate. But again, we can adjust that very easily and very often.

Thank you. That's super clear, Joan. Thank you, and congrats for the results.

Our next question comes from Ms. Neha Agarwala from HSBC. Ms. Agarwala, we're now opening the audio, so you can ask your question live. Please go ahead.

Hi. Congratulations on the results, and thank you for taking my question. A quick one on the revenue side. So you mentioned the cost-to-income improvement will be driven more by revenue growth. What are the main levers in your view that is going to drive revenue growth for 2024? What kind of loan growth should we expect for this year which will further translate into stronger interest income and fee income growth? And probably you can touch upon the BNPS order that you mentioned on your platform. Maybe that could be one of those new levers on the revenue side. And the second question, very quickly, what kind of ROE should we expect for trade 24? Something like a 12%, 13%, 14% seems reasonable. Any color on that, if not a number, would be very helpful. Thank you so much.

Thanks, Niha. This is Alexandre speaking. I'll start with the BNPL and then I'll go through the growth part. So the BNPL is a new payment method that we incorporated into our marketplace. We see it as the consumer finance 2.0. So bringing more of the pool of revenues of the system into Inter. And we see that as super positive. We're fine-tuning the model as we grow. and believe this could be in the ballpark of $250 million by the end of the year. The context of the partnerships is a driver to reduce risk. So in the end of the day, we get take rates that range from 20% to 30% from our partners, and that helps financing the delinquency that we may get in the model and with the clients. The nice thing about the BNPL, is that given the take rates from the partnerships, we can open it for a wider range of customers. So several million customers that don't have a credit card can buy with the Buy Now, Pay Later within the app. We're excited, and it is one of the drivers of margin expansion as we drive through 2024.

When you think about growth... Can I pause over there and just ask something very quickly? Sure. So it seems like for the BNPL product, you'll do part on your own balance sheet and part with the partners, which allows you to get a fee income from the partners. Could you talk a little bit about what kind of proportions we can expect, 10% on balance sheet, 90% with partners, or more like 50-50? And what kind of partners are we talking about? If you can name some, that would be helpful.

Yeah. So, Niha, in terms of balance sheet, it all goes to our balance sheet. So, in practice, what happens is, for example, let's say somebody is buying a phone from Samsung for R$1,000. Instead of disbursing R$1,000 to pay for this phone and making this a loan in interest balance sheet, the disbursement may be of only R$750 because Samsung is providing the stake rate of, let's say, So, we have a collection balance of a thousand, but a disbursement of only 750. That's the mechanics of how it works. And we will keep on expanding the partnerships so that the product can grow.

Okay. So, essentially, this is the take rate. The loan will still be, everything will be in your balance sheet.

Everything in our balance sheet, correct. Moving. Yes. And on the growth aspect, we expect to grow beyond 30% this year. We're excited. Like the fourth quarter was positive at around the 10% growth. So we're excited about 2024. The core portfolios will keep on growing. So home equity, FGTS, we're excited about those and good start of the year so far. And it's also nice to mention the expansion on the non-collateralized, right? Ron talked a bit about the PIX credit, and we launched them last year. So, Overdraft, Buy Now, Pay Later, which we discussed, PIX credit, as Ron discussed. We also have ViewPay using the credit card limit, and we're also allowing customers to put cash in their accounts using their credit card limit. We have a potential of a billion portfolio by the end of the year in these lines, and there's definitely going to be a margin expansion product for us, so we're excited about it. Thank you, Neha.

Super helpful. Thank you. Anything on the ROE front?

I can take that one, Mija. Hi. So, on RWE and net income, we don't provide guidance. But what we said last year on the investor day was that we agreed with the sell-side consensus of 5% for 2023. And we deliver that. But we can say now, exactly a year after. is that the flow or the curve of build-up both in net income and ROE that we saw throughout the year should continue into 2024. We can't get too much specific on that because they will become guidance and we don't intend to provide. But we see a continuation of the trend that we've had last year coming into what is year two of the 60-30-30. Perfect.

Thank you so much.

Our next question comes from Mr. Pedro LeDuc from Itaú BBA. Sir, we're now opening the audio so you can ask your question live. Please go ahead. We have apparently lost connection with Mr. LeDuc, Mr. Pedro LeDuc. Apparently is no longer in the room. So we're moving on to the next question coming from Mr. Brian Flores from City. Mr. Flores, we're opening the audio now so you can ask your question live. Please go ahead, sir.

Hi, thank you for the opportunity. Just a couple of follow-ups on the answers that you provided. You mentioned you were excited about FGTS loans. So the contribution to gross loans is around 6%. This has been increasing steadily. So I just wanted to get a sense on how are you thinking about this segment, any insights on the dynamics of the segment, and how should we think about the contribution going forward. So I think this is my first question. The second one, Santiago, you mentioned that in terms of strategic plans, you intend to defend your deposit base. Can you share with us, like, what are, you know, any ideas on how to do this? It would be really helpful. Thank you. Brian, this is Alex speaking.

May I ask you to repeat the question, please? We had a technical problem and couldn't hear you.

Sure, no problem. The first one was on FGTS loans. The contribution is around 6%. It has been steadily helping in terms of the total portfolio. So I just wanted to get a sense on how are you thinking about this segment. Any insights on the dynamics would be really helpful. And then the second one was on how are you planning to defend your deposit base. Great.

Thank you. So, starting with the FGTS, it's a product that we like a lot, 100% digital underwriting, good margin, high engaging product, and we've been able to do continuous improvement also operationally to make it easier for customers to obtain their loans. We have a lot of returning customers. Having said that, we expect to keep on growing. It's at 6% of the portfolio, as you mentioned. And we believe it could get to around 10% by the end of 2024 as we move forward. So we are excited about it. from uh deposit to in terms of defending the deposit it's all about defending the transactional business right so we've been consistent on keeping pits around the eight percent market share with we we're gonna work heavily to increase this market share as we move towards 2024 And with the transactional business, we're going to be indirectly defending the deposit franchise, right? That is one of the strengths of Inter, the massive transactional platform we've been able to bring in, along with also the investment platform. It's super nice. But that's the defense. The defense is to keep growing on the transactional business. Thanks, Brian.

Perfect. Thank you.

This concludes our question and answer session. The conference is now concluded. Inter-IR area is at your disposal to answer any additional questions, but first I'd like to yield the floor to Mr. João Vitor Menon for his closing remarks. Sir, the floor is yours.

Thank you very much. So, first of all, I would like to thank our employees for the great year we had on 2023. We worked a lot, we worked hard, and we worked with the right strategy, with the right focus, with the right North Star, which is our sixth 30-30 plan. And I really feel that it's no longer different on 2024. I see already for the first month, our team engaged, motivated, to also deliver another positive year on our 6-30-30 plan. We were chatting this morning about the priorities for the year, and I'd like to say that I have two priorities for 2024. The first one to make sure that we also deliver another year ahead of the budget of the 630 plan. And the second, guys, to make sure that I'm going to stick with the first one. So that's about that. Be focused, engaged, motivated, and I'm sure that we can deliver good results. Both. on a profitability basis, but also, very important, on a growth perspective as well. We are still a growth company. But combining these two elements, we could deliver it on 2023, and we will deliver it on 2024 again. I'm sure about that. Thank you, all the employees. Thank you, all the shareholders that support us for a while, that will keep supporting us. See you soon. Thank you very much. Have a good day.

The conference is now concluded. Inter-IR area is at your disposal to answer any additional questions. Thank you for attending today's presentation. Have a nice day.