Inter & Co. Inc.

Thank you very much. and then on asset quality we are quite happy with the performance it is in line with what we expected remember that we mentioned three drivers last quarter two were internals the additional growth that we're taking in private payroll and the credit card mix or reshaping that Chande commented and then the external one which has to do with high interest rates and seasonality so on those two that are internal Private Payroll, we continue very excited with it. Chandler can touch upon in more detail, but this is a product that fits, as we said, perfectly well in the intro by design. And Credit Card has been our stellar P&L product internally. We are monetizing it a lot more, as you saw, 64% interest income increase in the last 12 months. That comes together Thank you very much. Thank you. And the outlook for the rest of the year remains unchanged, both on the name side, as I mentioned in the first question, as well as with the asset quality.

Okay, thanks a lot, Santiago.

Our next question is from Henrique Navarro. Navarro, please go ahead. Navarro, your mic is open. Our next question is from Mario Pierre. Mario, please go ahead.

Good morning. Thanks for taking my question. Congratulations on the results. Let me ask you a more general question about asset quality trends in Brazil. You continue to grow your loan book at a very rapid pace, close to 30%. You are seeing higher cost of risk, but you're compensating that with higher revenues. However, there's a perception that families in Brazil are highly indebted, that service ratios are very high, we have an uncertain environment second half of the year of the elections, and then there's a perception that next year the fiscal spending in Brazil is going to have to decline because the government has been very populist this year. If you can discuss how are you seeing the operating environment in Brazil and key concerns that you have about asset quality going forward? Thank you.

Mario, João Vitor speaking here. Thanks for the question and I'm going to take this one. Look, we IPO the company back in 2018. So it's been, what, eight years or so that the analysts, the investors, they have been following Inter. And we have always been very, very careful on approaching credit risk, credit underwriting, and so on. That said... We have a very, I'd say, good tailwind that helped Inter. And it's pretty much a simple thing. We are still a small loan portfolio with a lot of clients, a very good cost of funding, and a very good distribution channel. That said, of course, as Santi just mentioned, we will adjust accordingly. So we might... Thank you very much. On the page that we show the growing opportunity, the 2.7 trillion reais portfolio, the 1.3 reais portfolio on the left side, and the 2.6 trillion reais portfolio addressable market on the right side, we have, as I mentioned, the tools to attack all of these three addressable markets. So still, with inflation pressure on the families, with elections and everything, Thank you very much. And we have been doing that carefully, but again, because we are still a small loan portfolio platform, we can keep growing on that pace ahead without putting the balance sheet of risk. So that's the overall view from my side, from my end, on how Inter will perform on this current credit cycle in Brazil. And when you think on the mid-long term, we have all the tools on the platform to keep gaining momentum, to produce in alpha. So again, the best cost of funding, the right distribution channel, a very efficient business model by being digital. So we see a very great opportunity for Inter to keep compounding our loan portfolio, both on secured and unsecured portfolios ahead. That's the view for the business in terms of risk-reward and credit cycles.

Very clear, João. Thank you. Let me ask Adana a second question really quick. You guys didn't mention anything about the debt renegotiation program in Brazil, this in Rola. So I just wanted to know, like, did they have any impact on your asset quality ratios? Were you active renegotiating loans?

And you will take this one, Marco. Hi, Mario. Good morning.

So, Mario, the desenrola was good, much better than what we saw in the first desenrola. And what we saw was, first, renegotiation. Renegotiations of 100 million, so a good volume driven by Desenrola. An overall impact in the P&L of around 40 million, although we believe that half of this we would have realized in other ways, so using a SIR to our collection company, Also using our internal team, which is very strong and doing a lot of actions to control delinquency. So we can say that Desenrola brought 12 million of EBT impact. When we look at delinquency metrics, we had minus 10 bps in NPLs, we had minus 15 bps in cost of risk, and about 15 bps Thank you very much. and sometimes we renegotiate in Desenrola credits that are say between 90 and 360. When we do that, we move them to stage 3 and increase that proportion. The good news is that this stage 3 is highly recoverable given that it has the FGO backing it. João will give in some additional comments.

So, Mário, just going back to the first question about addressable markets and how Inter will grow ahead, one thing that's important to mention and to give you some color on, I mean, how big the opportunity is. So, again, connecting to the page 8, where we have the 1.3 plus 2.7 plus 2.6 trillion reais addressable market, We are today pretty much only on the central column and we are widening, as I said in my first speech, we're widening to the left and to the right side of the addressable market. And one thing to factor, we have the public information on the central bank on the credit exposure that our clients, they have on the system. And it's interesting that clients that have a primary relationship with us and Salary and everything. And we have less than 5% of the credit exposure of those clients. So within our own clients, the clients that already use our platform, that are already investing with us, doing picks with us, using our products, we can penetrate a lot. So that's how I try to put some numbers and some color on this big opportunity, this big address for Mark and the fact that we're still... From a credit perspective, a small platform. We're a big platform from a transactional perspective, but from a credit perspective, we're still a small platform in Brazil. So I see that as a very good news for us.

Very clear. Thank you. Thank you, Xande and Joao. Thank you.

Our next question is from Tito Labarta. Tito, please go ahead.

Hi, good morning. Thanks for the call and taking my question. A couple questions, actually, just a couple follow-ups, both on NII and provisioning. On the NII, and Santi, you kind of explained a little bit, right, the inflation impact, but, you know, just looking at the financials, right, the big jump came in this income from securities, derivatives, and FX, which is almost 200 million reais quarter over quarter. If you look at just interest income, it was less than 100 million reais increase. So, you know, just going forward, Can you still do the 10 to 20 bps NIM expansion per quarter? Should we consider this... The higher income from securities as the right level. I know there's adjustments from quarter to quarter, but just think about that incremental NIM expansion given that this quarter NIM was higher probably than expected. How do you think about that quarterly NIM expansion just given this movement in the income from securities? And then just following up also on provisions, Your coverage ratio did come down. I know part of the MPL increase was more mixed, but just given the current sort of macro environment, how are you thinking about that coverage ratio? Why is it coming down? Should you be increasing it in the current environment, given some of the macro concerns? Just want to think about sort of provision levels and coverage, given the credit cycle that the market's somewhat concerned about. Thank you.

Tito, I'll take that question. Thank you. And there what you can see is that the income from securities has two things inside it. One is the proper income from securities, from the securities themselves, as well as the income from the derivatives. And the income from the derivatives that come from the portfolio needs to be added to the interest income from the loan portfolio. We do that in that tab and we reconcile the implied interest rates from the interest income from each of the products with the associated loan portfolio so that you can see the interest income of each of the portfolios after the hedge and before the hedge both. So from that delta of this quarter of 186 million reais in income from securities, approximately 130 of those, Rafaela de Oliveira, Rafaela de Oliveira, of the seasoning of the private payroll product. We have been running for a long time around 130%. When we were growing the early quarters of the private payroll product, we took it up to 146, but the delinquency didn't hit in as the product was very early on. And then as the product matures, then that consumption happens. And we are now www.patreon.com.ar Thank you very much. So there are a few moving pieces, but to answer and give you a sense, we think that the number of around 130 to 135 percent, at least for the coming quarters, is something safe to assume.

Okay, that's very helpful. Thank you, Santiago.

Our next question is from Niha Agarwala. Niha, please go ahead.

Hi, thank you for taking my question. I have two questions, but can we first talk about the right of policy change that you made this quarter? What drove that decision? What is the new right of policy? I understand it's only on the credit card segment or any other segments impacted. And I believe the benefit on the 90-day NPL ratio is 30 basis points, as you called out in your earnings release. But if we can just give more color on that.

Good morning, I'll take that one as well. So yes, we did migrate our write-off for credit cards specifically from 360 days to 330 days in line with Resolution 4966 Best Practices and our own ongoing commitment to aligning our accounting methodology with the highest industry standards. That's exactly the kind of proactive technical rigorosity that we want to have. And the rationale behind it is that our data shows that Thank you very much. As this was fully provisioned by the day 330, 100% provisioned by then, and yes, on the NPLs, as the product lives shorter in our balance sheet, it has an impact of around 30 basis points.

On the overall NPL ratio, right?

Correct, on the overall companies. On the overall, we report overall.

Okay, great. The other question is on the private payroll segment. You mentioned that you recently started doing the linkages on your own because the data previ linkages is taking longer than anticipated. So how should we think about the delinquencies? With that new connection being made, what are the early results that you're seeing? And I believe it started in the last one or two months. So why didn't we start a bit earlier on that, which would have made the frequencies better in this particular product? If you can shed some light on that.

Good morning, Niha. This is Shand speaking. I'll take the private payroll loans on one. And I think it's useful to talk about three dimensions here, growth, credit quality and profitability. As you asked about credit quality, I will start there. So the first point is we are operating on the higher band of our expectations in terms of cost of risk for the product. But despite that, the profitability is within what we expect. We're solving for like a marginal ROE of around 30% in the product. And we're moving all the levers internally to converge to this number as we go. So since the beginning, maybe we were running at a marginal ROE a little bit higher than that. It came down with the delinquency and we're moving it but it's important for everybody to understand that we manage the process to deliver this marginal ROE of 30% in the product. We have very good actions in process. You mentioned the relinkage. So the relinkage is now being done with discipline and it's helping the NPLs. This is an action that's already in place, but we do have more coming up. So to give you a few examples, we have the credit insurance, which is about to be launched in the next few days. We're doing and we're also doing the implementing some features to do Thank you for watching! Credit policy tune-ups that help this cost of risk. So the idea is to keep bringing and pushing this credit risk down to levels that are closer to low teams. That's kind of the view we have and what we're working towards in terms of credit quality. Coming back now to growth, so we're very confident in the market size. We've been vocal about believing in between 200 and 300 in the relatively short term. We believe it will converge to that. We're confident to keep on growing as the market grows. Today, our market share in terms of portfolio is at about 2.5%. And there are external factors that make the underwriting volumes adjust. For example, the interest rate caps, although we do see some positiveness in the interest rate caps. So we had super high interest rates coming from some players, and we don't believe that's good for the long-term health of the product. So I think this is a good summary on the product. We're positive. We're moving the underwriting levers to keep growing the portfolio. And we believe it's very well connected with what Inter needs in the future.

Just to clarify, any impact on the rate caps in your origination? I believe you're originating with the higher rate cap and without the FGTS guarantee, right?

Niha, in the first, there were two movements. In the first movement, we had a very, very small change because it moved from being free to having 4.99, if I'm not wrong, or 4.9 cap. So we had a reduction of less than 5%, given that a very small percentage of our loans went beyond the 5%. In the second cap, Thank you very much.

Thank you so much for the comprehensive answers.

Thank you all for the questions. In order to be conscious of the time, we're going to move to João's closing remarks. João, please go ahead.

Thank you very much, Rafa. Thanks for the audience. Thanks for everyone that just joined us. I'd like to share with you how happy and confident I am with Inter. Happy because, as you can see, we delivered our best earnings ever. As we can see, 13 consecutive quarters growing our net income. Thank you very much. You all know that Inter has been mastering the UX, the UI, the technology, the platform since we launched the first ever Digital Bank of Brazil back in 2016. But back then, we were still consuming capital. We were not deepening our credit underwrite portfolio with the clients. But fast forward to 2026, we were able to manage that, to improve the credit underwrite, to grow our loan portfolio, Thank you very much. Good future ahead of us. Thank you all. And mostly, I'd like to thank our employees for helping us on this journey. And I'm sure that the best is still yet to come. Thank you very much and have all a great day.