NASDAQ:INTR
Market cap: 2.4 billion USD
Price: 5.30 USD
Brazil is one of the most exiting Emerging market in the world valuation wise. I reviewed companies like Sendas Distribuidora, Pics, and Brookfield corporation lookalikes such as Patria and Vinci.
All these companies are quality financial businesses with growth and deep discounts to global peers.
Today, I want to review Inter&Co, a another Brazilian Fintech, similar to the company reviewed two weeks ago, Pics NV.
Brazil latest IPO - 70% growth, 6 times earnings.
An exciting new IPO was launched this year in Brazil fintech.
As a prelude to this review, at emerging value, I focus on valuation first rather than narrative. I don’t hype companies that have XX% growth and extrapolate this growth infinitely in the future. I try to have a cautious view and take into consideration bearish arguments. I look for investments where the growth is the extra bonus that provides optionality.
Inter&Co is one of many that have these characteristics in Emerging Markets at the moment. While everyone looks at “1999 tech bubble 2.0 stocks”, the rest of the market in quality, growth and quality growth in Emerging markets is incredible. I don’t invest for anything else than shareholder yield and these yields only are bargains.
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History
Inter&Co was started in 1994, which is old for a fintech. This is because it was not a fintech but a financial institution that was originally part of a larger group. It started offering business loans, payroll credit.
In 2002 it left the larger group, and in 2008 it received a bank licence in Brazil.
In 2012 it formed Inter Group with the company Inter Seguros (insurance).
2015 was a milestone when Inter launched the first digital checking bank account in the country.
in 2016 the app was launched, and branded cards appeared.
in 2018 Banco Inter was IPOed in Brazil.
It raised money again in 2019 and 2020 and moved towards a super app.
in 2022, it moved to the Nasdaq and started offering services in the USA.
Along the way, there have been small tuck in acquisitions to acquire assets and product offerings.
This historical development was successful in terms of active clients additions.
In terms of financials, it is only since 2024 that Inter&Co reached the scale to enable full profitability.
Business overview
Similar to Pics, Inter&Co is a Brazilian fintech, an online bank.
It offers accounts for buyers and merchants, together with credit cards.
It also offers savings and investing products, and generates interest income from credit given to customers.
A home page could look like this (they are personalised for the clients), with Pix (P2P payment network in Brazil), Pagar (Pay), Cartoes (cards), some news feed with social features, an investing tab, a shopping tab.
Inter&Co intents to become a super app.
The app is personalised based on client activity, asset base and product activations.
Now that we know the basics about the business, let’s review the historical revenue development. Inter&Co shows strong growth quarter on quarter.
Net interest income is 77% of revenue, and fees are 23% of revenue. In the interest income side, that includes revenue from customer loans and revenue from investments held by the company.
For example in Q1, it held 46 billion in loans to customers and 27 billions in securities, as well as 4 + 4 billion in cash and funds due from financial institutions.
Inter&Co claims to focus on what they call sustainable lending: loans with lower interest rate than Card revolving credit and personal loans that can carry outrageous 100% and more interest rates in Brazil.
Like Pics, it is now turning more more on Secured loan markets: car loans, payroll and mortgages.
Beyond the positive self description of the business, we can look at the latest financials (Q1 2026) to see the composition of the loan portfolio:
Mortgages are 24.5%
Home equity is 10.3%
Payroll+Personal loans : 25.6%
Credit Card: 31.3%
Small and Medium businesses: 8.3%
Together, 67% of the loan portfolio is secured.
The company is moving towards a super app strategy, with shopping, insurance, investing and many other functions. It has an integrated loyalty program.
Like Pics, the extra products carry frequency, offer monetisation opportunities, and the Inter&co customer base is still not fully penetrated (44 million clients).
None of these Fintech super apps are very differentiated. All the Brazilian players are trying to become superapps and I don’t see Inter&Co becoming a monopoly or a duopoly. Nevertheless, even if no winner takes all, Inter&Co and other fintech can take marketshare away from traditional banks and offline financial services.
Strategy
The main focus is to increase the client base, and to sell more products to the existing client base. For example it has only 9 out of 44 million clients who have credit products.
There remains ample potential to convert the other 35 million clients to credit products, as well as onboard new clients.
However, the Brazilian customer is reported to already be over leveraged, and this is going to be the difficult to fill that gap.
The plan to increase the credit penetration is supported by the following products:
The ROE is at 15.5%, but they plan to improve this ratio to 28% by 2029, notably by improving underwriting, increasing leverage, cost efficiency, growth, etc.
(Pics plans to get the ROE to 30% in comparison - this shows that similar business models can aim for similar profitability targets and to me validate their targets).
International expansion: Inter expanded to the US first because there was a need from their clients to have a USD global saving account and investing account. 5 million customers already use this account. Brazilian expats in the US also use it, and Inter got the naming rights for a Orlando MLS club (soccer) stadium and is actively expanding across the Miami region with sponsorship activities.
In the mid term this global account capacity can attract customers in neighbouring countries, as heard in a recent CEO interview.
Capital allocation: Inter is focusing on growing its loan portfolio, but still pays a fast growing but small annual dividend.
Management and shareholding
This is another family owned company. Here, the Menin family.
The controlling group controls 26% of economic ownership, and 78% of voting power. Softbank has 13.70% of economic ownership but only 4% voting power.
The other investors own 56% of the company but only 17% of voting power.
We have here a company completely controlled by Costellis International Limited, the (Controlling Group).
Costellis International Limited is an investment holding company incorporated in the British Virgin Islands (BVI). It serves as a primary corporate vehicle for the Menin family (founders of the Brazilian real estate and construction firm MRV Engenharia) to hold their equity interests and voting shares in the global financial super-app Inter & Co
Before being led by Joao Vitor Menin, it was led by the Co-Founder Rubens Menin. The Menin family ownership led the large growth in revenue and net income over the past decade and it’s fair to say that they have been excellent in execution.
There is no recent insider buying.
Risk
Risk 1-credit losses
As with any credit institution, the risk is that non performing loans -NPLs- eat the net income and make the bank loss making.
And we saw in Q1 2026 the NPL increase a lot, especially 15 to 90 days. It was officially driven by private payroll growth and seasonality. Seasonality that we can confirm on the chart.
Cost of risk if nevertheless rising: “Cost of Risk -- CFO Santiago Stel said, “we are expecting something closer to six percent [for the year]” compared to previous guidance of “five percent–five point five percent.” The company adds that this increase of cost of risk is also caused by a voluntary push into some products.
Read more on risk here:
Risk 2-macro economy: here is a copy and past of my section on Pics reviewed two weeks ago: note that macro economy is not what I view as my specialty as it is widely unpredictable, according to the GOAT Warren Buffett.
-Macro economic view: I view the Brazilian interest rate as too high for the past two years, caused by a public deficit and to defend the currency. However, this is causing a slow down in the economy and a wave of stress for companies and customers. I am expecting some stress to continue until the central bank decides to cave in an reduce the central bank rate or SELIC rate.
The central bank has indeed started cutting rates in 2026, but the war on Iran is hurting this normalisation route. In any case, a worsening of default rate and economy would lead to rate cuts. Rate cuts in the USA would also impact.
Net interest margin is very high because interest rates are high in Brazil. I expect that rates could go down, or stay high depending on war on Iran and public spending. Brazil has a leftist president with Lula.
However, funding costs will also decrease when interest rates go down and net interest margins should decrease but not that much. Credit losses should also decrease when rates are lowered to 10 or 5%.
A lower interest rate should make savings accounts offered by Inter less interesting, which is a negative. I see in reviews of Inter and competitors, that Brazilians are very focused on earning high interest rates. In Europe here nobody cares about earning 2% and focus on the stock exchange more. On the other hand, a lower interest rate will send all Brazilian stocks higher due to a search for yield.
Quipus Capital discussed the macro economic impact of Fintech in Brazil of interest rate changes, in an interview I posted on the newsletter in February. I really like this clear summary from the interview, from someone who has studied Brazilian economics extensively. I recommend his publication.
Regarding interest rate cuts, their effect will depend a lot on the credit cycle. Bank spreads do not move much with moves in interest rates, because Brazilians are used to using time deposits and other remunerated forms of banking. However, if rates decrease because the economy is cooling, and credit is tightening, then some of these banks may face higher delinquencies. If, on the contrary, the lower rates help the economy accelerate a little, then banks will continue growing credit, potentially even more aggressively.
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Risk 3-Competition
What I wrote about Pics also applies here: this is a very competitive industry in Brazil.
This is a very competitive area when Pics is a small player in terms of revenue compared to NuBank, MercadoPago and Inter&Co. MercadoPago especially has the advantage of having MercadoLibre.
The offerings are not especially going to be differentiated and showing strong moat for Pics and the other players, something classical in an industry with 4 or more major competitors. This was the same when I reviewed Chinese E-commerce which had major players such as PDD, JD, Alibaba, and new entrants. This means that we will still have good margins but that they will tend to compress over time, and that it will be compensated by efficiency, scale and new products.
I am expecting PICs customers to also have a Nubank and Mercado Pago account, so keep in mind that some price wars are expected
Valuation
Let’s review the Brazilian Fintech peers and some regional banking peers: (June 20)
The whole sector appears undervalued. Nu Holdings is standing out as the clear leader in Brazil and Latam fintech. The price to book reflects the superior profitability and the price to earnings a premium.
In my opinion Inter&co and Pics Nv represent a much more interesting opportunity due to the large undervaluation.
Valuation for a growing online bank like this could be on P/E ratio, but there is a certain cyclicality in the business.
I like to look at price to book, and at 1.2x, it is reasonable.
looking at P/B is a way to normalise earnings, avoid over earnings, and look at a cycle neutral valuation.
Price to book = ROE * P/E
A price to book of 1 is implying a ROE of 10% and a P/E ratio of 10.
That would be a 10% earnings yield.
Now with P/B of 1.2, the implied P/E could be 10 with a ROE of 12% for example. But our ROE is at 15% already!
I explained how a company with credit card loans like Capital one, although not perfect, is an interesting financial peer, because we see that in a stress scenario, ROE drops to 0% but for a very small time period before recovering.
I expect the ROE to touch the 29% goal and even go higher, but with temporary crisis in between when there are non performing loans.
Therefore, I view the long term conservative ROE for Pics (And Inter) conservatively in the 20% range and the corresponding valuation should be 20 times earnings and two times book value: This should be around 9$ for the price to book or 15$ for the price to earnings, since the price to earnings (Forwards) is at 6.5.
Looking at projected earnings growth, earnings per share are planned to grow 40% in 2026, then 30% in 2027. In 2025, it grew 45%.
I am not certain that the fast earnings growth we saw in the past five years can continue very far after this, due to the macro economic situation and the market saturation with fintechs, but this represent extra bonus upside.
Conclusion
I am not here to take some earnings slides that show 40% growth and be over enthusiastic and tracing a trendline into infinity.
I want to have a more nuanced view. After reviewing the company, I am only able to project that type of growth for 1-2 years due to market and credit saturation hitting soon, default risks, and a potential for a lower interest rate in Brazil.
However, I think that the risks are pretty priced in at low price to book, while the opportunities are completely ignored by the current price: future credit growth, customer expansion, international expansion and continued gain of marketshare versus legacy banks. A double in long term earnings totally possible, followed by lower growth.
At 6.5 times forward, it is a bargain.
Long Inter, Pics
Note: this is not financial advice, but my opinion on the company. Anyone should do their own due diligence to confirm a company thesis presented and form their independent opinion.
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What are good explanations for the Brazilian fintechs being so cheap?? What are the bear cases?