Record margins meet rising private payroll credit risks
- Inter has reached 44 million total clients, giving it a large base to cross-sell loans and services.
- The bull case is scaling efficiency, with Q2 efficiency falling to a record 42.1% and ROE hitting 16.3%.
- The bank reached capital neutrality, generating more capital than it consumes to self-fund growth.
- Private payroll loans are causing over half the yearly NPL increase as they take longer to mature.
- A recent change in the credit card write-off policy provided a cosmetic 30 basis point benefit to NPLs.
A better bank, if new credit behaves
Inter is trying to turn a huge Brazil app user base into a more profitable bank. The good sign is operating leverage. That means revenue is growing faster than costs. In Q2, the efficiency ratio fell to a record 42.1%, and ROE rose to 16.3%. The company also reached capital neutrality, meaning it generates enough capital to fund its own growth.
The growth story is centered on loans that can earn strong returns. Private payroll loans and FGTS loans continue to scale. Inter is also reshaping its credit card book by moving more clients into interest-earning products, lifting net interest margin.
The bear case is clear. Brazil rates remain high, and borrowers are under pressure. NPLs are rising, and the pain has shifted. Private payroll loans are now responsible for over half of the yearly NPL increase because they are taking longer to mature. Furthermore, a recent change to the credit card write-off policy artificially improved the reported NPL ratio by 30 basis points.
The key question is whether the credit trouble can be contained. Management is rolling out credit insurance in August to help reduce provisions. If the new loans season well and insurance works, earnings can keep compounding. If private payroll ages poorly, the growth case weakens fast.
A super app that sells more per client
Inter makes money by offering banking, credit, investments, insurance, shopping, loyalty, foreign exchange, and merchant services in one app. The basic idea is simple: get clients in with a low-cost digital account, then sell more products over time.
Credit is the main profit lever. Inter funds itself with deposits and other funding, then lends through products like credit cards, FGTS loans, home equity, PIX financing, Buy Now Pay Later, and private payroll. The model works best when Inter can lend to existing clients it already understands.
Fees also matter. Inter earns service and commission revenue from cards, investments, insurance brokerage, Inter Shop, and acquiring through Interpack. Interpack gives the company more reach into small and midsize businesses and lets Inter offer payment processing and working capital.
Global is the newer option. After securing a US branch license, Inter can move away from paying partner banks for key US products. That should lower costs and let the company use US deposits more directly to fund US credit. The open question is whether Inter can build scale outside Brazil without taking on new credit or compliance risk.
Where the app earns
Banking and cards
Checking accounts, debit, credit cards, deposits, and payments keep clients active. The card book is being reshaped toward more interest-earning balances.
FGTS and private payroll loans
These are the current loan growth engines. Private payroll is scaling fast but facing recent maturity delays.
Home equity and secured credit
Home equity gives Inter a more secured lending base. Management has highlighted meaningful market share in home equity, but credit classification remains a watch item.
Investments
Inter offers brokerage, custody, securities distribution, and fund services. This brings fee income and helps clients keep more of their financial life inside the app.
Insurance brokerage
Inter sells partner insurance products and earns commissions. The company is launching credit insurance for private payroll to help control provisions.
Inter Shop and loyalty
Inter Shop earns commissions from purchases through the app. Loop loyalty and the Forum community are meant to raise engagement and make the app stickier.
Global accounts and US products
Inter offers USD accounts, USD credit cards, US mortgages, and is expanding to Argentinian clients through Bind. The US branch license could improve unit economics.
Seven AI platform
Seven is a new multi-agent AI tool inside the app. It may reduce service costs and improve client journeys, but the earnings impact is still unproven.
Mostly banking revenue
The mix uses Inter's 2025 Form 20-F revenue by reportable segment for the year ended December 31, 2025. The four reportable segments shown equal 98.0% of consolidated revenue before Others and eliminations.
What could break the story
New loan cohorts season badly
High impact · Medium oddsPrivate payroll loans are now the largest contributor to the NPL increase. Fast loan growth can look great early because losses often show up later. If these loans move into Stage 3, Inter may need higher provisions.
Accounting changes mask credit pain
Medium impact · High oddsInter recently changed its credit card write-off policy from 360 days to 330 days. This cosmetic accounting change provided a 30 basis point benefit to overall NPLs. Investors must adjust for this when comparing historical credit quality.
Old card losses last longer
High impact · Medium oddsWhile attention shifts to new loans, older 2021 credit card cohorts still carry high costs of risk. If those cohorts do not run off cleanly, earnings may stay under pressure.
High Brazil rates squeeze demand
Medium impact · High oddsInter is exposed to the Selic and CDI rate cycle in Brazil. High rates can raise funding costs, reduce credit demand, and make defaults worse. That slows the path from client growth to profit growth.
US expansion disappoints
Medium impact · Medium oddsThe US branch license should lower partner costs and let Inter fund credit more directly. But new markets bring compliance, credit, and execution risk. If global products do not scale, the license may help costs but not change the growth path much.
In one breath
What does Inter & Co do?
Inter runs a digital financial app, mainly in Brazil. It offers bank accounts, cards, loans, investments, insurance, shopping, merchant acquiring, and global USD products.
Why are investors watching Inter's credit quality?
Inter is growing loans fast, but private payroll loans are facing maturity delays and driving NPL increases. A recent credit card write-off policy change also artificially masked some credit pain.
What is the bull case for INTR stock?
The bull case is that Inter keeps adding clients while costs grow more slowly than revenue. In Q2, the company hit record ROE and achieved capital neutrality.
What does the US branch license change?
It lets Inter rely less on partner banks in the US. That can lower operating and funding costs, and may let Inter offer more direct banking and credit products outside Brazil.
