Gustavo Schroden

Focused on the bank's strategic business composition, asking if the emphasis on high-income clients means the strategy for lower-income retail has been exhausted. He sought to understand the future balance between different client segments and if this reflects a broader industry transformation.

Answer

The executive clarified that while the high-income strategy is now well-positioned, they are actively rethinking their offerings for mid- and low-income segments. The biggest challenge is low-income, where profitability can only be achieved by drastically lowering the cost-to-serve. He agreed that the old, highly profitable model for the low-income segment is unlikely to return for the industry, as clients became over-indebted, necessitating a new, more efficient approach.

Gustavo Schroden questioned the sustainability of financial income growth in offsetting weaker transaction volumes and asked if the 30% ROE for continuing operations is a new sustainable level.

Answer

CFO & IRO Mateus Scherer Schwening advised focusing on overall gross profit growth, which is outpacing TPV growth due to pricing and engagement. He indicated that the 30% ROE for the financial services segment is likely on the 'lower bound' of its potential, as it is currently being dragged down by the company's excess capital position.

Gustavo Schroden asked for commentary on the company's '60/30/30' plan (60M clients, 30% efficiency, 30% ROE by 2027), presenting his own projections based on the current run-rate and asking if they were reasonable.

Answer

Global CEO João Vitor Nazareth Teixeira de Souza affirmed the company's commitment to the plan, stating that while there are macro uncertainties, the platform's network effect is accelerating progress. He expressed confidence in achieving the goals and confirmed that Mr. Schroden's projections were 'pretty much in line' with the company's internal expectations.

Gustavo Schroden asked about the potential to increase the loan-to-deposit ratio from its current 75% level toward that of incumbent banks. He also requested an outlook for the cost of risk in 2025, which stood around 5% in 2024.

Answer

Executive Santiago Stel responded that while the loan-to-deposit ratio could rise toward 80%, strong deposit growth continues, driven by the app's transactional nature. He expects the cost of risk to remain stable in the 5.0% to 5.2% range for 2025, as the benefit from growth in secured lending is balanced by marginal risk-taking in new, higher-margin unsecured products.

Gustavo Schroden asked if Inter plans to be a counter-cyclical player regarding risk appetite, given other banks' conservative views on consumer finance. He also inquired about the expected impact of Central Bank Resolution 4966 on capital and provision expenses.

Answer

Executive João Vitor Nazareth Teixeira de Souza reiterated Inter's historically conservative stance but stated that its small market share and strong funding position allow it to maintain its ~30% growth target for 2025 without changing its risk appetite. Executive Santiago Stel explained that Resolution 4966 will primarily affect reporting metrics like NPL formation due to longer 'healing periods' but will not impact cost of risk, provisions, or Tier 1 capital, as the company already reports under IFRS. He emphasized that the risk-adjusted NIM is the key metric and is expected to continue improving.

Gustavo Schroden asked about the outlook for loan growth acceleration amid the current macro environment and sought clarification on the factors causing a decrease in net ARPAC (Average Revenue Per Active Client) despite a rise in gross ARPAC.

Answer

Executive Alexandre De Oliveira projected 25-30% loan growth for the year, boosted by the new private payroll product, and noted the Consumer Finance 2.0 portfolio could reach BRL 1.5 billion. Executive Santiago Stel explained the net ARPAC decrease was primarily due to a BRL 100 million sequential drop in fee revenue, caused by seasonality (BRL 40M), one-off factors (BRL 40M), and the deferral impact of the 4966 accounting rule (BRL 20M).

Gustavo Schroden of Citigroup Inc. asked for clarity on XP's revenue guidance, noting that Q1 growth of 7% was below the full-year target of at least 10%, and inquired about the drivers for the lower consolidated tax rate observed in the quarter.

Answer

CEO Thiago Maffra reaffirmed the 10%+ annual revenue guidance, stating that H1 was expected to be slower and that growth will accelerate in H2, driven by retail fixed income and new verticals like credit cards and insurance. CFO Victor Mansur explained the lower tax rate resulted from a favorable business mix, with less revenue from higher-taxed Issuer Services and more from lower-taxed secondary market activities.

Gustavo Schroden sought clarification on the strategy to enhance IFA productivity by replicating internal adviser tools. He also asked about the outlook for the take rate in 2025, questioning if it would face pressure from the increasing share of fixed income products.

Answer

CEO Thiago Maffra confirmed his 2025 focus is on deploying the successful sales management technology and techniques from the B2C channel to the B2B (IFA) channel to boost productivity. Regarding the take rate, he stated it has been stable for three years and the company's 2025 growth forecast assumes a flat take rate. While the mix shift to fixed income has been a headwind, he believes that cycle is nearing its end but is not yet projecting a recovery in the take rate.

Gustavo Schroden of Citigroup asked about the 'Recomeço' debt renegotiation plan, questioning if it was related to the Pix financing product and whether it could create a moral hazard. He also inquired about the program's evolution and its expected impact on the P&L, balance sheet, and asset quality.

Answer

CEO David Velez-Osomo clarified that the program is new, had no impact on Q1 results, and is not related to Pix financing. He emphasized that it is carefully designed to avoid moral hazard by selectively offering a fresh start to customers, often with small, secured credit lines, and excluding those with a history of recidivism. The goal is to incentivize healthy credit behavior and is expected to have a small but positive impact in Q2.

Gustavo Schroden expressed concern about the deteriorating macroeconomic environment in Brazil and asked why Nu appears to maintain a positive outlook on credit growth when other banks are becoming more conservative, questioning the risk of adverse selection.

Answer

President and COO Youssef Lahrech responded that Nu's underwriting model is inherently conservative and designed to withstand economic cycles. He emphasized that they always underwrite with the assumption that the future will be significantly worse than the past and that their portfolio is 'battle-tested' from previous recessions. Lahrech stated they do not try to time the market but instead rely on a resilient, through-the-cycle underwriting framework, while also reflecting worsened economic forecasts in their loan loss provisions.

Gustavo Schroden from Citibank inquired about the profitability of the mass-market segment, asking if it has improved to a level that would justify a more aggressive growth strategy.

Answer

CEO Milton Maluhy Filho confirmed a significant improvement in retail profitability, which rose from 16.4% in Q3 2022 to 25% currently, with both individual and corporate segments running above the cost of capital. However, he acknowledged a large opportunity remains in the low-income segment, which will be unlocked by optimizing the service model through the bank's ongoing digital transformation.

Gustavo Schroden asked for details on the composition of the strong treasury results (Market NII), questioning if there were any non-recurring items and whether the BRL 1.4 billion level is sustainable.

Answer

CEO Milton Maluhy Filho clarified that the quarter's result was an atypical outlier, driven by strong trading and banking book performance within existing risk limits, with no non-recurring artifacts. He stated that the expectation is for this line to normalize towards a more reasonable BRL 1.1 billion threshold in future quarters, rather than sustaining the current high level.

Gustavo Schroden asked about management's confidence in growing the loan portfolio amid a challenging macroeconomic environment with high inflation and interest rates, and how the bank would mitigate these external risks.

Answer

Executive Marcelo de Noronha stated that while the bank maintains a moderate risk appetite, he sees significant opportunities for growth in secured and collateralized loan segments. He specifically mentioned payroll deductible loans, rural loans, and receivables-backed financing for SMEs (FGO/FGI). He expressed confidence that focusing on these high-quality, secured lines will allow the bank to grow and maintain asset quality regardless of a broader economic slowdown.

Questioned the economics of the LMEC segment, asking if the marginal TPV is at or below breakeven given the flat pretax earnings. Also asked for a target loan-to-deposit ratio to better understand the monetization strategy for their fast-growing deposits.

Answer

The company asserted that the LMEC segment is profitable and accretive in absolute terms, and the flat pretax earnings were a result of a conscious decision to reinvest in growth. They do not have a specific target for the loan-to-deposit ratio because deposits are used flexibly to fund both the credit portfolio and the acquiring prepayment business, based on daily capital allocation decisions.

Sought clarification on the change in ALLL guidance, asking what differed from initial expectations. He also questioned the higher trends in credit renegotiation and recovery and whether ALLL would be in the lower part of the guidance in the second half of the year.

Answer

The unexpected factor was farmers deliberately delaying payments in the agribusiness sector. The bank is now using the new crop plan to normalize payments. Higher renegotiations are a result of strategic programs. Credit recovery will remain above historical levels. For the second half, they are targeting the middle of the ALLL guidance, around BRL 8-8.5 billion per quarter.

Asked for clarification on the Allowance for Loan and Lease Losses (ALLL), specifically questioning the BRL 800 million impact from a specific case on NPL creation and its implication for the full-year guidance. He also inquired about the rising NPL in the corporate segment and whether it was driven by SMEs, a high-growth area for the bank.

Answer

The executives confirmed the BRL 800 million impact on NPL creation from a specific large corporate case in both Q2 and Q3. They stated that the focus for the last quarter is on recovery to stay within guidance. Regarding SMEs, the NPL increase is seen as a normalization post-pandemic, and it's noted that 30% of the growth comes from lines with risk mitigators like government guarantees.