Inter & Co, Inc. (INTR) Q2 2025 Earnings Report, Transcript and Summary

Good morning, everyone. I'm Rafaela de Vitoria, Inter's IR Officer, and I would like to welcome all to Inter's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] A replay will be available at the company's IR website. With me on today's call are Joao Vitor Menin, Inter's Global CEO; Alexandre Riccio, Brazil's CEO; and Santiago Stel, Senior Vice President and CFO. Throughout this conference call, we'll be presenting non-IFRS financial information. These are important financial measures for the company but are not financial measures as defined by the IFRS. Reconciliations to the company's non-IFRS to the IFRS financial information are available in our earnings release and earnings presentation appendix. I would also like to remind everyone that today's discussion might include forward-looking statements which are not guarantee of future performance. Please refer to the forward-looking statements disclosure in the company's earnings release and earnings presentation. Today, Joao will discuss the interest strategy and business overview. After that, Alexandre and Santiago will take you through our financial and operating results in more detail. We'll then open the call for questions. I will now turn the call over to Joao. Joao, please go ahead.

Thank you, Raf. Good morning, everyone. Today, I'm happy to share that we had another quarter of solid results. I'm also excited about our progress. As we keep innovating and making the client experience better every day. Inter was designed with a clear focus. From the beginning, we choose to offer sustainable credit options, for us and for our clients. We also worked hard to diversify our source of fees and to build a strong funding franchise. Because of this choice, our profitability has compounded quarter after quarter. For the last 10 quarters, we have drawn our profits in a consistent way. This compounding effect gives us a solid foundation for the future, and we plan to keep building on it. What gets me really excited is in addition to deliver increasing profits, we are building long-term value for our stakeholders. This quarter, we delivered two features that exemplifies this value creation. One on the asset side and another one on the funding side. Let's start with My Credit. This is a new journey inside our app to help clients build a healthy credit relationship with Inter. Our goal is to expand credit access in a safe and responsible way. With My Credit, clients can now track their scores with us directly in the app. This is much more transparent than what you usually see in Brazilian banks, where your score is often hidden. Through My Credit, clients can take steps to improve their scores and unlock higher limits out in clear states. This feature is not just for those who are behind on payments and want to rebuild their credit. It is also for clients who want to improve their scores and plan their finance better. We believe My Credit is a strong tool for financial education, and it will help us grow credit penetration in a sustainable and healthy way. Now moving on the funding side. We have launched My Piggy Bank By Savings Goals. With this new feature, clients can organize their savings for a specific purpose. Like buying a new car, planning a vacation, or getting a new smartphone. It is a simple way for people to take control of their future. The response has been excellent. In less than 1 month over 425,000 clients have used this feature, creating more than 520,000 (sic) [ 529,000 ] savings goals. This shows how engaged our users are and the strength of our platform. For example, if a client is saving for a new smartphone, we can offer a special promotion from Inter Shop and send tailored communications. If someone is saving for a new home, we can present our mortgage solutions. By understanding our clients' goals, we can offer the right products at the right time. This is a partial tool for monetization as it drives cross-sell across our verticals. Features like My Piggy Bank By Saving Goals and My Credit, show how we listen to our clients and bring useful solutions for their everyday lives. By doing that, we were able to continuously grow our client base. Just a few days ago, we reached 40 million clients. This is a clear sign of the trust people place in our platform. We know this trust will keep growing as we deliver real value to our clients. That's why user experience is always at the center of what we do. Every interaction must be simple, intuitive and enjoyable. This approach has helped us build a strong brand. We are proud that Inter was named the 7 most powerful brand in Brazil, and the #1 banking brand for Gen Z. These achievements tell us that we are on the right path. We want to create lasting and meaningful relationships with our clients. We're very grateful for their trust. Now Xandre and Santi will walk you through the quarterly results. Xandre, please go ahead.

Thank you, Joao. It's incredibly exciting to see 40 million clients embracing our platform and joining us on this journey. The strength of our brand is rooted in the close relationship we build with our customers. Our Net Promoter Score remains firmly in the excellence zone at 85 points. We also continue to receive outstanding feedback with ratings of 4.9 in the Apple Store, and 4.8 in the Play Store. These numbers aren't just statistics. They reflect the trust and engagement of real users who interact with our platform every day. In June, we saw nearly 19 million daily logins, and we now process over 780 million financial transactions each month. All these achievements highlight the high level of engagement our clients have with our ecosystem, as well as the value and synergy we create across our 7 verticals. Moving to the next slide. Let me start by highlighting our ongoing robust client growth. We've consistently added 1 million to 1.1 million active clients each quarter, showing how attractive and relevant our platform is to millions of people. Our activation rate has reached 57.7% with a clear upward trend towards 60%, driven by continuous improvements in marketing, onboarding and personalized experiences. Our private payroll loan is helping us reactivate former clients and attract new active users from day one. On the business side, our client base grew 19% year-over-year to 2.4 million accounts, with strong engagement and rising ARPAC levels. These achievements demonstrate the power of our platform and our commitment to deliver innovation and value. Moving to the next page. When we look at banking performance, we see strong momentum. Total payment value grew by 33% year- over-year and reached BRL 374 billion, a new record high. PIX was a major driver, accounting for BRL 346 billion, and achieving an 8.2% market share. On the chart on the right, we can see that TPV levels keep rising across all cohorts with the darker lines representing our newest clients. These cohorts are transacting even more intensely and at a faster pace, showing higher engagement levels from the beginning. These results highlight the growing engagement of our users and the power of our platform to drive sustainable, high-quality transactional growth. Moving to the next page, we see that we had a strong quarter in credit across both secured and unsecured products. Credit penetration among active clients continues to climb now reaching 33.8%. This healthy and sustainable growth is underpinned by initiatives such as the My Credit journey that Joao presented, as well as our monthly credit reassessments to make sure we're supporting our clients. A standout highlight this quarter is our private payroll loan portfolio which soared to BRL 728 million, and now serves 153,000 clients. This success demonstrates the strength of our digital distribution and how seamlessly this product fits into our strategy, truly Inter by design. Real estate lending also continues to perform exceptionally well. Despite a high interest rate environment, our portfolio grew 37% year-over-year, reaching BRL 13.3 billion, including mortgages and home equity loans. In the last quarter, I shared our focus on reshaping our credit card portfolio. We're continuing to increase the share of installment products that help clients organize their financial lives. Santi will provide more details on our strong and balanced loan book performance in the next session. Altogether, these results reinforce the effectiveness of our credit strategy and our commitment to delivering sustainable, high-quality growth across all of our lending products. Moving to the next page. Let's now look at the strong performance of our other verticals. Investments continues to deliver impressive results, reaching 7.9 million active clients, a growth of 38% year-over-year. This was fueled by the success of My Piggy Bank with its new savings goals feature driving high engagement. As a result, assets under custody grew by 47% year-over-year. Insurance adoption continues to rise, reaching 10 million active contracts, up 272% year-over-year. This reflects the success of our fully integrated offering across other verticals, including e-commerce and banking. In shopping, our in-app e-commerce platform, we saw our net take rate increased to 7.6%, while GMV grew 9%. Additionally, 9.3% of our total GMV was converted into Buy Now Pay Later, highlighting our ecosystem's strong selling power. Finally, in loyalty, our client base grew 64% year-over-year to 13.6 million. Member of our loyalty program are highly engaged, transacting 3x more than nonmembers and using more products across our platform. These results show how each vertical not only grows individually, but also drives greater engagement and value through integration within our ecosystem. Our global front, in the next page, continues to accelerate with a remarkable result this quarter. The number of global account clients grew 34% year-over-year, reaching 4.4 million. We also had a record performance in deposits, which surpassed $294 million this quarter, up 90% year-over-year, marking our best ever quarterly growth. This vertical is becoming increasingly relevant for our clients. Whether they're traveling, diversifying their investments internationally, or doing business abroad. This significant deposit growth is a clear sign of the scale and importance we have achieved with our global account offering. These results confirm that our global platform is not only gaining traction, but also building real materiality for Inter and our clients around the world. To wrap up on the next slide, I want to highlight our continued and impressive market share gains across some of our key -- the key markets we participate. Quarter after quarter, we see tangible progress in both our credit and fee-based businesses. This momentum is a result of giving our clients real access through a complete range of solutions, which increases our share of wallet and compounds the positive impact on engagement. Our strong performance in market share demonstrates not only our capacity to attract new clients but also should deepen relationship with existing ones, showing the strength and relevance of our platform. I'm confident that we will continue strengthening our position and capturing even more opportunities ahead. With that, I'll hand it over to Santi, who will share more about our financial performance.

Thank you, Xandre. Starting with loans, we had another great quarter. The total portfolio grew 8% quarter-on-quarter with a run rate basis that is slightly over 30%, marking a slight acceleration versus the growth we experienced in the prior quarters. The quality of our portfolio mix continues to be very strong, with close to 70% of it being collateralized, and therefore resilient to asset quality cycles while maintaining strong profitability as our mix continues evolving towards the high ROE products. As shown on this slide, we outpaced the market growth rate in most of our portfolios. FGTS and home equity grew at around 40% on a year-on-year basis, continue to gain market share and prominence in our loan mix. Mortgages, as Xandre mentioned, performed very well, growing 27% year-on-year, benefiting from an operating environment where incumbents are struggling to grow through earmarked loans. On payroll and personal loans, we accelerated to 27%, led mainly by digital private payroll, where we have been aggressively ceasing the opportunity given strong fit in the Inter by design model. Credit cards also grew nearly 1.5x the market, reaching a 24% year-on- year growth level. This was achieved while working on the reshaping of the portfolio, as alluded by Xandre, and therefore, improving the profitability profile of the product. Lastly, on SMEs, we have strongly prioritized profitability over loan growth, focusing on secured working capital lines such as [indiscernible] and FGI PAC or in Portugese [indiscernible]. Moving on to the asset quality metrics. The 15- to 90-day NPL improved 20 basis points, while the 90-day past due demonstrated a stable trend. The credit card NPLs, when analyzed across cohorts, continue to show strong performance, validating the improvement made in our underwriting and collection models. And finally, NPL formation and Stage 3 formation stood at 1.6% and 1.5%, respectively, in line with the historical trends. As we observe the evolution of our cost of risk, we reached 5.0% this quarter. It is worth reminding what I've mentioned in prior calls that we are not solving to minimizing this metric but to continuously expand our risk-adjusted NIM on a healthy and sustainable basis, both for us and even more importantly, for our clients. This level of cost of risk allowed us to build a coverage ratio of 143% since the prior quarter, which is approximately 10 percentage points higher than the one we operated in the prior quarters. We had another strong quarter of funding growth, increasing 30% in 1 year, and surpassing the BRL 62 billion mark. This growth was driven primarily by time deposit which is mainly explained by the Selic increase and the success of My Piggy Bank, our product through which clients can invest in fixed income. It is also important to mention that our active clients had on average, nearly BRL 2,000 in deposits, our second highest level on record, or the highest outside of our fourth quarter, which is typically the moment of the year where the liquidity is at the highest. Once again, the healthy growth and mix funding shown in the prior page, enabled us to have an industry-leading cost funding, which stood at 64.8% of CDI. It is interesting to note that even though our funding mix may be affected at times of high interest rates as clients naturally gravitate towards higher-yielding deposits, on the other hand, this funding cost becomes more advantageous to our performance, the highest nominal interest rate level is. Jumping into revenues. We achieved BRL 3.6 billion in total gross revenues, and $2.0 billion in net revenue, a year-over-year growth of 48% and 35% respectively. Quarterly growth levels were also strong at 13% and 9% respectively. This quarter, the fees performed even stronger than NII, as explained by our growth in interchange investments and shopping. As we are experiencing higher engagement, as presented by Xandre, we observed acceleration in client monetization across cohorts. On a mature basis, we reached BRL 128 and BRL 89 on gross and net basis, respectively, when the average across active clients reached BRL 54 and BRL 32, respectively. These strong levels, combined with the cost to serve of BRL 13, allowed us to print our second best quarter of gross margin per active client, which reached BRL 19. We are excited with the performance we're seeing in the monetization of our customers across cohorts, and believe the success in products such as private payroll will enable us to continue seeing performance in the coming quarters. Now let's deep dive in our net interest margins. Both our NIM 1.0 and NIM 2.0, which excludes the noninterest receivables of credit cards, are consistently showing growth quarter-after-quarter and achieving new record levels. This performance is a result of having a healthy mix across products with an ROE-driven credit origination model, which is resulting in an increasingly optimized capital allocation of our balance sheet. When we consider the risk-adjusted NIM which deducts the cost of risk from the NIM, the performance is strong too, demonstrating the compounding result of our strategy. It is interesting to see that despite the big movements, macro variables such as inflation and CDI, the trend in our NIM has remained stable, moving in the right direction. We think this is a good example of our ALM strategy is proving successful. On the expense side, we grew this quarter 5%, reaching BRL 873 million. A few important remarks. We continue to make strategic investments in marketing to strengthen our brand awareness. This has resulted with a record net adds of 1.1 million new active clients this quarter. On the personal side, we continue to invest in the seniorization of our team. An example of this is the addition of Marlos Araujo that joined us as the CRO of the company, after having a highly successful career of more than 20 years at Bradesco. We are also actively investing in technology, focusing on process automation and providing a seamless experience to our clients. As our business continues to expand at a strong pace, we are focused on converging the contracts with major vendors to further reduce our cost per transaction and improve the overall efficiency as we continue to scale up. We continue focusing on operational leverage, which is one of our core pillars of our digital banking model. As a result, we are able to see improvement in our efficiency ratio where we delivered 100 basis points improvement, moving from 48.8% to 47.8%. We added this quarter another version of the efficiency ratio, which excludes the tax expense that comes from paying interest on capital, or JCP in Portuguese, which isn't an operational expense, but instead a tax one. We think that this metric is more accurate to observe and assess our operational leverage evolution. And in that basis, we reached 47.1%, a record low level. Same as with all of our other KPIs, we added the detail of this metric in our historical excel series, which is available in our Investor Relations website. And last, but certainly not least, I'd like to highlight our journey towards higher profitability. We reached a record ROE of 13.9%, delivering a record net income of BRL 315 million. On a quarterly basis, we think that the page speaks for itself showing a remarkable consistency that makes us very proud. And it does so because we achieved it while keeping a fortressed balance sheet while continuing to invest in our long-term franchise. With that said, I'll pass it back to Joao for his final remarks. Thank you.

Thank you, Xandre and Santi. After sharing the quarter highlights, I want to share why I'm so excited about Inter's future. Back in 2015, when we started this journey, our focus was on building the platform. Over the last 2 years, we have added consistent profitability to our story. Today, growth and profitability working through symbiosis. Each one is strengthening the other, and this is the engine behind our network effect. As our client base grows, we gain scale and efficiency. This greater efficiency feeds our profitability. With higher profitability, we are able to invest -- to reinvest more in our platform, improve our products and bring even more clients. This restarts the cycle stronger and larger each time. Thank you to our clients, partners and the Inter team for making all of this possible. Let's keep building the future together.

Before we move to the Q&A, I'd like to remind our investors about the current subsidy period for converting BDRs to Class A shares. We've been highly successful in our journey to migrate our share liquidity to the U.S. market since 2022, and it's now surpassed 50% of combined volume on most trading days. I want to emphasize that the subsidy period ends at the close of this month on August 30. If you have any questions, please don't hesitate to reach out to us. On our IR website, we've made available all the conversion rules and comprehensive guide to help you through the operational process. We want to reinforce that this movement benefits everyone, both shareholders and the company, as having shares traded in a single market creates value for all parties involved. Now let's open for questions.

Our first question comes from Eduardo Rosman.

Can you hear me now?

Yes.

Congrats on the numbers and on the execution. My question, I think it's on the private payroll product. It would be great to hear an update from you on your expectations for the product and how we can, I think, Inter's great UX and hyperpersonalization offering can help boost the product success with clients?

Rosman, this is Xandre speaking. Thank you for your question. So first, I'd like to say that we're very constructive with the product. So we've said before that it was like a -- almost a product that's like made for Inter by design that we've been talking about. So we were very happy with the launch. The early days were great and the first quarter was even better. So we should pass the $1 billion portfolio soon here in the next days. We've been increasing in-app sales. So it's around -- getting close to 40% already. The other part comes from the government app. And it is a digital-only product for us, which also fits all the digital strategy that Inter has. And the potential pain point with the product that is delinquency is coming better than our expectations. So as we have discussed before, we started the product pricing it in the conservative side with the expectation that delinquency could be in the range of 15%, but the early signs that we see as the collection progresses is that it's going to be in the single digit side. So much better than what we forecasted in the beginning. But again, this is a story to be written. We've been saying that, let's say, the first 12 months is going to be at least what we need to stabilize and have a good view. But the first readings are very good. The base scenario given the -- what we see in terms of delinquency is that the product will run with an ROE beyond 30%. Finally, as we go to the UX and hyperpersonalization, the first goal that we have is to keep bringing underwriting volume to the app. So having Inter's app as the primary channel for underwriting is an important goal for us. We're working on it. And how do we do this? You touch the hyperpersonalization and it's a good point there. It's about feeding the product not only for people that push like the credit button that are looking for credit, but also finding situations where we can solve the customer's problem with the credit, and it's where we're going. So finding the right journeys to offer the product and solve the clients' problems. We'll see a lot of that in the upcoming months.

No, great, Xandre, just a follow-up here. Given that the product is digital first, and everyone is kind of starting from the same kind of lane, let's say, starting point. It's fair to say that you expect to have a substantially higher market share in this product than you have, for instance, on the public sector payroll?

Yes. We expect to get like -- in the old products, as you mentioned, so like in PIX, we started with a high market share. Even FGTS, since it was a new product, [indiscernible] started 4% market share. And that's what we're seeing in the private payroll. So we do expect to have a market share that's going to go, say, beyond 5% given that we're starting together, and we do have appetite for the product and it's additional product. And Joao will complement me here.

So Rosman, Joao speaking. Thank you for your questions, for your comments. One thing to highlight, we have on the numbers that were released. We have the portability rate in place. So the incumbent banks migrating their former contracts to the new one. If you exclude that, we are already running at between 15% and 20% market share. So this is very good. So we believe that we have all the tools to get a big market share of this product. And last but not least, we're very excited with that. I'd like to say that the private payroll, which has been a common topic on all the conference, all the earnings calls, I mean, it's a perfect product for Inter. I like to say that it's a combination of [indiscernible] Yes, it's 100% digital. Yes, it does have a good capital allocation, as Xandre mentioned, 30% ROE. Yes, it does have a significant pent-up demand in Brazil. We're talking about maybe hundreds of billions of BRL of portfolio on all 3, I don't know. Yes, it does have a very good win-win situation with the client, which is very important for us. That's our mindset. It's good for the client, good debt services, good for our confidence, good for our balance sheet. It's good for a long lasting relationship with the clients. So that said, I mean, we're very happy with the product. And not only that, we believe that some other private payroll like products will merge such as [indiscernible], which we also want to get there at first, do this digital approach and get a significant market share on the market. We're very happy, and thank you for the question.

Our next question comes from Tito Labarta.

Can you hear me now?

Yes.

Okay, great. Congratulations on the strong results. I guess my question, asset quality seems to be holding up fairly well. Your provisions kind of did go up a bit, cost of risk a bit higher as you're growing, I guess, in riskier products, particularly maybe with the growth in the private payroll as well. So just how do you think about those two lines in terms of the outlook for credit quality for the rest of the year, given you kind of had to factor in a higher Selic and maybe economy slowing a little bit? And then your outlook for provisioning levels as well as you continue to grow at a very healthy pace, and you're growing in somewhat higher risk segments. Just help us how you're thinking about those two lines?

Tito, this is Santiago. I'll take that one. So starting by the inception of the Inter by design, that's how we prepare to navigate the asset quantity cycles through a diversified loan portfolio, which is skewed towards securitized products. And with sustainable borrowing cost for the clients, which we think is the way to have a healthy long-term relationship. And as we mentioned, we are solving to increase risk-adjusted NIM. We're not solving to increase NIM alone, or to minimize cost of risk. So we see that as a variable that we're aiming to optimize. We did report the lowest 90-day NPL since 2022. We think that this is the result of all of the great work done by our credit underwriting collections and risk teams, and that is paying off as we continue to improve quarter-over-quarter. We are taking, as you mentioned, a more marginal risk on certain lines. Private payroll is an example. We're super happy with the performance that we have in the risk-adjusted NIM and the ROEs, as Xandre mentioned, are significantly about a 30% level. We are reshaping the credit card portfolio and Buy Now Pay Later is another product that we're trying to lever on the success of the Inter Shop platform. So all this together, it's resulting in an increase in the credit penetration of our active clients, which is something that we're increasingly more focused on. We want to monetize our clients increasingly more. And the ARPAC has a high sensitivity to this credit penetration. All of this to say -- to answer your question, Tito, the 5% to 5.25% number that we have been mentioning in the prior quarters, we continue to think that's the case. We have been surprised on having many quarters better than that. So the reality has shown us a bit better performance than what our models were predicting. We would like to continue to be positively surprised going forward, but our base case continues to be in the 5% to 5.25% cost of risk basis.

Great. That's helpful, Santiago. So I guess at a high level, maybe because of the growth that you're having, growing in higher risk segments, the cost of risk could be a little bit higher, or just maybe getting closer to that 5.25%, I'm not sure the exact number, but compensated with better margins overall. But in general, maybe cost of risk can still trend up a little bit more from here given the risk and the growth that you have?

The 5% to 5.25% already contemplates the mix at which we are originating today. So we are continuing to do a lot of FGTS as well. Mortgages were accelerating. As Xandre mentioned that in his part, we're seizing the attractive opportunity. Home equity continues to be a product with a lot of success. So we're also growing on the other lines, right? So when we put all of it together, and we add the improvements that we're doing in the Credit and Collections fronts as well. We see the 5% to 5.25% continue to be the base case with some potential to be surprised as we have in the prior quarters.

Okay. And on the asset quality front, it sounds like you feel fairly comfortable with asset quality given the NPLs that you're delivering?

We are. We have been, as I mentioned, seeing that improvement. It's the lowest level we had since the 2022. And as we continue to navigate these new products, private payroll, Alexandre mentioned, we see that trending towards the single digit. We need more time to see where it actually ends up. But again, the goal is to continue to improve the risk-adjusted NIM. And that's what we're trying to aim for. And we see that on Page 27, moving consistently in the right direction.

Our next question comes from Yuri Fernandez.

Congrats, Joao, Santiago, Alexandre, for a good quarter. I would like to ask you about margins on your NIM expansion, especially on a by-product when we try to look after the hedges. We see a pretty good improvement on personal loans and real estate. I think like the personal loan yields, they moved to 23%, from 19.5% in the first Q. So if you can explain a little bit what drove this improvement? If this is seasonal? If it is sustainable? If it is driven by, I don't know, your peak finance product? Is it mix? So just to understand. And in addition to the yield, if you can comment a little bit on the margins. It has been a pretty good run. Markets continue to go up even with a small increase in the funding cost that is still very low, right? But if you can also comment a little bit on your new trajectory, I think that's interesting.

Yuri, it's me again. So yes, we're very happy with the way the interest rates on the product level evolve. When we look at the all-in loans rate. We grew from 20.3% to 22.5%. So a pretty nice growth, twice more than what we had in the prior quarters. The driver at the product level, the main one was personal -- on the personal lines, which is a digital private payroll. That loan balance now surpassing BRL 130 million. It has -- it pushes the interest rate of that product up. Then on mortgages, or real estate, we have been accelerating that loan growth. As we mentioned, the competitive dynamic is favorable for us to attack that segment. And the newer loans are coming at interest rates. So the front book is significantly more accretive to NIM than the back book. So the repricing is accelerating there and performing very well. Then on the SMEs, as we mentioned also in the intro, we are prioritizing performance over size. The size is an output, and we want to continue to foster these lines like [indiscernible] which are lines that have a very strong profitability profile. So when we put all that together, we see this improvement and other lines that were not mentioning because we were already performing well, we think from before, like FGTS, which has a 1.8% rate, or home equity, which has inflation plus 10% -- plus 15%, plus 15% are also pushing the NIM up. So we're seeing the model working. This ROE-driven underwriting framework is working across the firm in a very positive way. And the results compound. And also we seize the opportunities that come to us. Joao mentioned that. Private payroll was something we did not have factored in our budget for 2025, and we did it at the end of the prior year, and we're able to start offering the product since the very first day that it was available.

No, super clear. So basically, repricing and mix, right, those two things combined. If I may, just a follow-up, Santiago. You mentioned like in about the change in the nature of the credit card offering. If you can simplify a little bit more what are those changes if this is loyalty, new product, finance, whatever? Just trying to understand what you mean by that. And congrats on cards TPV. I think like the growth on volumes were strong. So I just want to understand what is different on the credit card product here for you?

Yuri, this is Xandre speaking. So on the credit card product, there is a lot going on. We are working to grow that portfolio. And there are a few things that we're doing there. One, which is one of our key goals is to do the reshaping, the reshaping to clarify means increasing the interest earning portfolio. And this increase comes in mainly two ways. One is increasing fixed finance and we keep on working to increase this volume. And the second one is helping customers solving their problems when they have delinquency, which means offering them more products of installments. So in the second quarter, we saw an improvement in this reshaping initiative. As you see, we went from 78.5% in transactors to 78%. So we did see this improvement. We launched a new product in about May, which is a full balance installment renegotiation. With that launch, we held a little bit on the fixed financing for the 45 days in the tail of the quarter. And overall, did see a growth in the installment portion, as you can also see on Page 14 with the BRL 1.2 billion portfolio. So we'll keep doing that. We'll keep stimulating growth in the installment portion, in the interest-earning portfolio. And one last piece that I'd like to mention in terms of the growth of the portfolio is the product we talked about in the last quarter call, which is Inter Card, which is a credit card limit that works exclusively to PIX financing, or or for -- just to pay. So it's only -- it's a credit card that's always interest earning. That's the new one. We have a few clients with already this feature enabled, and we'll see how it evolves here in the next few months. Thank you.

Our next question comes from Gustavo Schroden.

Can you hear me?

Yes, we can.

Congrats on the results. Strong evolution indeed. So my question is regarding the 6-30-30 plan, right? So we are doing some math here, taking into consideration the current run rate you have presented. And in a simple math here, we estimate an ROE by the end of this year, around 16% to 17%. Efficiency ratio around 45% and the number of customers around 40 million, 42 million customers by the end of this year. And for the next year, assuming the same run rate we would be around 22%, 23%. And efficiency ratio around 40% and 50 million clients by the end of 2026. I know that you don't give official guidance, but my point here is that would you be able to elaborate on these numbers that I just mentioned? If those numbers, they make sense? And how do you see the evolution of these KPIs, let's say, to achieve this 6-30-30 plan by the end of 2027?

Schroden, thank you for your question. Joao speaking here. First of all, I mean we're very proud of the 6-30-30 plan, which was unveiled 2.5 years ago. As we just mentioned, it's not a guidance, but we're really focused on delivering the 3 KPIs of it. Number of clients, efficiency and also ROE. In a 5-year period, a lot of things change. We have some headwinds, some tailwinds. For instance, we didn't expect that the macro will be like that today. But also we didn't expect that we would have the private payroll kicking in. We didn't expect that, for instance, we might have the [indiscernible] starting next year as the Central Bank is advocating for. So it's a lot of uncertainties, of course, for a 5- year plan. But the good news is, as I told in my closing remarks, we see that the network effect of our platform is starting to kick in. So we have more profitability, invest more, grow more, more clients more dilution of expenses. So I'm really not only committed, but I'm really excited and I really think that we can achieve that. Okay, you might go a few months, a few quarters ahead. It doesn't matter. At the end of the day, we are not running the company only to get to these metrics. So we're running the company to have the best capital allocation ever, the best customer-centric approach ever. And the good news is we have the tools, we have the clients, we have the portfolio. We have the data. We have all the regulation behind us to get there. So excited. I believe it's feasible that you get there. And I think that our numbers are pretty much in line of what we have in-house, okay. Thank you for the question.

Our next question comes from Pedro Leduc.

Congratulations on the journey here. First question, just a quick follow-up on PIX financing. Now you mentioned as a driver for the nontransactor portfolio to be gaining share. Can you elaborate a little bit more just for us to get a sense of -- for example, how many clients of yours already have it, maybe how representative, it's already being in the nontransactor card portfolio? And then tied to that, the second question on general credit appetite. On one side, we have macro indicators turning a bit worse. On the other, you have very good credit harvest coming through that you're showing. How are you weighing these factors when thinking about growth plans for the second half as we try to also get a glimpse for next year, especially compared to when the year started? How are you feeling on credit appetite looking ahead?

Leduc, thanks for your question. This is Xandre speaking. So I'll take the first part. So the way we're approaching the PIX finance is not to get the clients and expect them to have full usage of their credit card limit on PIX finance. It's a product that adds up in the mix that they use. So they will do normal purchases as a transactor, and then they use part of their limit to PIX financing. This is the way this behavior is happening, say, 2, 3 users a month recurrently. And delinquency levels are also following almost a normal path. So marginally higher than the normal -- the client that doesn't use PIX credit, but nothing that -- so good behavior overall, good trends that are aligned with what we presented in NPLs overall. So that's kind of the way we approach it. Obviously, we stimulate usage of PIX credit, and we'll keep stimulating the usage of it. But it's a product to help clients in situations where they don't have cash to pay with a debit card and they will use this product. Yes, I think this is it. Santi?

So on credit appetite, it's as high as it's ever been for us. You saw the loan growth this quarter was one of the highest we've had in a quarter. We want to put our balance sheet to work. We have a blessed funding franchise, which is something that we want to increasingly deploy towards our clients through an increase in the credit penetration, we're seeing very positive signs of that credit penetration on the active clients is also a moving target as we continue to add 1 million, in this case, 1.1 million new active client per quarter. So we are strong there. The fact that we have a diversified portfolio, which is skewed to products that have collateral makes us less -- we change less our perspective to the macro, right? Because the home equity, the FGTS, the private payroll, they don't change if the economy grow a bit more or a bit less. Now the dynamic is the same. We are aggressive in the market. We want to take, as we mentioned in many calls before, our market shares towards the PIX market share, which is 8%. We already did that in home equity, what for unchanged in FGTS growing quarter-by-quarter, and we expect to have the same dynamic in many of the other products. So our risk appetite is as mentioned, as high as ever. We think that this is an opportunity for us to accelerate our business plan in the credit side and is one we are intentionally attacking with the tools that we have.

Our next question comes from Daniel Vaz.

Congrats on the results. I wanted to touch base on your renegotiated portfolio. Just to understand how do you classify in the stages, right? So do you classify it as normally as a Stage 2? Or is it Stage 3? Because we have been seeing a rising trend on the renegotiated portfolios. And when we listen to incumbents, and I don't want to trade you as an incubent here, but they are being more restrictive in terms of renegotiating clients and now they're accelerating some write-offs. So I want to hear you about your renegotiation strategy? And how do you classify between the stages here? Just to understand how it can evolve for the next 12 months?

Yes, Santiago here, taking that one again. So it depends on the case of the renegotiations, we have some that are in Stage 1, in Stage 2 and Stage 3. The ones that grew this quarter were within Stage 1, which were real estate contracts that were reputated this quarter, which means that the client was performing, but the -- the contract was amended for certain conditions. That was the delta of this particular quarter. In those cases, those who are still within Stage 1, and then the others depend on the case of the loan. Some are in Stage 2, Stage 3 and others in Stage 1.

So basically, these clients are not defaulting on credit card lines. You're pretty much focusing on adjusting some conditions on the mortgage portfolio. Is that correct?

Yes, it's correct. It's commercial renegotiations. Most of them are on the real estate front, by the way, which are the ones where we have collateral, and it's a longer-term agreement and they are within Stage 1.

Our next question comes from Mario Pierry.

Congratulations on the results. I wanted to go back on the private payroll product, Xandre, you talked about running this product having a 30% ROE and you're very excited about it, which we agree, right? We see this as a tremendous opportunity. However, talking to the other banks, they have been quite reluctant so far to really grow into this product, citing that they don't feel like the guarantees are good enough, or they're still seeing a lot of operational risks. And we even heard some news outlets in Brazil talking about the NPL or the product being around 10%. So can you discuss why are you more positive right now at the beginning than the other players? And you show that you already have 10% market share. But at a time when the other players are quite cautious as they come back to the market, do you think you're going to be able to retain this 10% market share? What do you think this could put some pressure on the prices that you're offering right now? So basically, I'm just trying to get a little bit more why are you so comfortable with the products and the other players are not at the beginning? And then I have another question on the efficiency.

Mario, Joao here. Thank you for your question. I'm going to start and then Xandre can complement. I have been in the industry for a while since 2002 -- since 2004, working at Inter. And I see the same pattern when the payroll started back in 2002. Back then, everyone said, oh, this is not a good product. There's a lot of risks. And what we realized later on was the guys that had the consumer finance portfolio, they were reluctant to jump in because there was a normal cannibalization on that product. Of course, there are some issues back then and throughout the time the government -- and all the institutions were able to fix it. And long story short, it is an excellent product today in the market. We're talking about [ BRL 700 million ] plus credit portfolio, good service debt for the population in Brazil and very good business also for the banks. I see the same pattern here today. Of course, the product has some issues that we are -- we have been seeing already that they are fixing it. We're constructive, is a big portfolio, and we also see the same pattern. Big banks, incumbent banks, banks that have a lot of consumer finance portfolio reluctant to jump into the product because they might cannibalize their revenues, their fees. So we disagree with that. We are very construct, as you say, and are not alone, to be honest. We have a lot of other players jumping into the product. So that's how I see the trend. The same thing that happened to the private -- to the payroll back then and what we saw in 2005 and -- between 2010, big banks buying out the banks that were doing very well on the payroll portfolio. So I think that we're going to see the same picture ahead. Xandre will comment on the details of that.

Mario, just a few points to finish this answer. So one, Joao talked about it, which is why are we so engaged and excited and why are others sometimes not? Cannibalization risks. So we don't have a portfolio to be cannibalized, whether it's personal loans or private payroll loans, we don't have a portfolio to be cannibalized, and that is the situation with many players of the industry. That's the first point. Second one is about delinquency and operational risks. They exist. We're aware of them. But we price for them. Taking a little bit of what Santi mentioned in the, I think, the last question. We're very disciplined in pricing and being detailed about all the risks that we assess. And in this particular product being conservative, and so we're comfortable that our pricing is right, and we will deliver the ROEs that we are modeling given this pricing. And finally, to your point on price reduction. We do believe that this will happen because delinquency levels are going to be better than originally forecasted. But this is good news, right? We're talking about a portfolio that can be much bigger than originally planned. We've been talking about [ BRL 200 billion to BRL 250 billion ]. Where can this go, is a product that's going to be priced at, say, 2.5 on average rather than what we're seeing today, which is close to 3.7. So again, exciting times to come, and we will be vigilant and work hard here to have the lowest delinquency levels possible and the highest origination volumes possible also.

That's very clear, Xandre. And on these originations that you're making, are these like new originations? Or do you think there are people replacing their existing private payroll loan, with your private payroll loan?

The absolute majority, new originations.

New originations. Okay. And then my follow-up question also on efficiency. Joao, right, you've made a lot of progress since the day that you announced your [ 60-30-30 ] plan. Efficiency ratio has improved quite a bit, but it has stagnated over the last year. It's primarily not because of revenues, but primarily because of the expenses went up. It did have an acquisition and that impacted. However, should -- we would have expected there to have been more operating leverage in the business. How do you think we should see this efficiency ratio evolving, right? I think Schroden asked that question. He gave you some numbers. But do you think efficiency gains now are driven by revenue generation or an increased focus on nominal expense growth?

Mario, I will take this one. So it's a great point. So we want to see compounding results. And that's what we have been seeing. We do not control all of the variables at the exact same time. Life is not linear like we like to say, but we do see a trend of improvement across the metrics, efficiency ratio being one of them. We, in fact, mentioned -- or added this quarter, a new methodology for the efficiency ratio in addition to the prior one, which is cleaner given that it takes out the IOF or JCP tax from that. And you can see the evolution there very clearly with a record level of 47.1%. What we are doing structurally is to continue to switch our contracts with our largest vendors from a variable dynamic to a fixed dynamic. So many of these contracts are associated with a number of clients or volumes, and that gives us less room for operational leverage. To the extent that we can change those contracts to less variable and more fixed then the revenues would outpace the growth of the expenses. But with no doubt, expenses will grow. We expect to have revenues growing significantly higher than expenses. This is a good quarter to see that playing out, 5% expense growth and 8% revenue growth. So that is the dynamic that we expect playing out. In terms of the shape or the angle of the slope of the curve of the efficiency ratio, going forward, it's very hard for us to predict, but we do want to see quarter-over-quarter improvements. We haven't seen that. And the Inter Pag transaction of last year made that analysis a bit more blurred, because it was a company that we acquired with 100% efficiency ratio, therefore, increased the number up and now as we are delivering the efficiencies that we have planned there, many of which are on the expense side are in other fronts as well, and that number is continuing to improve versus the prior level that we have prior to the Inter Pag transaction. So all of this to say, it's a variable that we do expect continuous improving in the coming quarters. And we will continue to see how that plays out as we solve the more structural contracts that we have with our clients, which, as you know, represent more than the ones that we have a more short-term control. Where we have a bigger short-term control on a number of employees, which we were able to increase from the levels that we had at the end of last year. And other fixed expenses like rental and a few other things. On the big vendor contracts, it's where we are doing the majority of the work and that's what will change in the coming quarters versus what we had in the past few years.

Santi, that's clear. But what percentage of your costs today are fixed versus variable? And some of these contracts that you're trying to renegotiate, are these like technology that you could develop yourself rather than relying on third parties?

So on the expense breakdown, we have around 1/3, which is personal and 2/3 which is administrative. In those 2/3 which are administrative, we have around 75% that are with this technology provider. So it's a big part on the administrative. Within those, we are working to make them less variable and more sticky and therefore, to have more operational leverage. These contracts are multiyear contracts, so it doesn't happen overnight, but we have been seeing increasing level of success. And it's not only on the top 3 or 4 names that you may imagine, but also in the longer. We're working on the 100 top providers who are using the tariff control McKinsey approach to revise them thoroughly every single week. And we see that will continue to play out. But again, the revenues will grow. This is a high-growth company. And by doing that, the difference of the revenue growth versus the expense growth is the one that will result in the operational leverage continuing to play out.

Our last question comes from Neha.

Congratulations on the results. Just two quick questions. Again, on the private payroll side, I think one of the questions that the industry has is how effective will the collateral be? Do we have any more color on collateral in case of delinquencies, which will arise in the future, it's too soon to say? And my second question is on expected loan growth for the year. You mentioned that the private payroll, which has been doing so well was not budgeted initially. What kind of loan growth should we expect for this year and for next year, in view of this new product and also in view of the macro, which is ever evolving.

Neha, this is Xandre speaking. Thank you for your question. So I'll start with the collateral for the private payroll. We expect it's going to be a very good collateral to be exercised. Today, it's already, as I mentioned, pointing towards somewhere in the single digits as a long-term delinquency. Why is that? Because companies are learning and engaging more and more with the paying process and the third round of payments is much better than the first round, and it should keep improving as we move forward. On top of that, we have a piece of -- a part of the FGTS balance of these customers that will be used to pay for some of the debt. That's not yet happening. It's going to be a piece for another improvement around on this whole private payroll process. And also, you have the client itself, right? So if -- if the company didn't collect, didn't pay as they should, the client is still liable. And what we're seeing in the early days is a good behavior on these clients as we approach them to do the collection process. So good collateral, but also other means of payment with the final one that I almost forgot to say, which is as customers switch jobs, the liability or the collateral follows them almost like lifetime. And with automatic recollection, this is being fine-tuned by the government now. But everything points towards like an automatic reestablishment of the collateral as clients change jobs. So again, it should be exciting. We're going to have to learn. We'll keep working on it. But it seems to be good. Moving to loan growth. So we had a strong quarter, 8% growth quarter-on-quarter. The core portfolio grew 31% year-over-year. And what we're seeing, also given that we have new products such as the private payroll, is to be on the high end of the range we've been talking about. We have been talking about a range of 25% to 30% growth for the loan portfolio, we believe we're going to be on the high range. With the main -- and why this confidence? Why can we grow 30% in a year despite macro 15% Selic? Because we have good products as drivers of this growth that are aligned to this type of environment. So private payroll loans is the new kid on the block, that we can keep on growing. Mortgages are behaving very well, and we've been able to price them properly. Home equity, also FGTS. And given the size of the client base and the opportunity, we will keep pushing to grow also the unsecured lending, fix financing in these other lines to get us there to the 30% overall growth. Thank you, thank you, Neha.

And this concludes our Q&A session. I'll pass the word to Joao for his final thoughts.

Thank you, Rafa. Thank you, everyone, for being with us today. It's been a long journey so far. As I told you on my final remarks, I believe you were on our early days for the business, for the network effect that it's kicking in. We have an amazing team committed to deliver the best we can for our clients, for our shareholders, for the regulators, for the country, for the industry. So I'm really happy with this earnings call with these earnings results. Not only because of the number, but what we have been able to accomplish in a short period of time. And as I told you, I see a bright future for this company and bright future for this project, I'm really proud to be a part of it. Again, thank you, shareholders, employees for helping us to make this dream come true. Thank you very much. See you on our next earnings call. Have a good day.