Prepared remarks
The operator provided standard conference instructions for participants and Q&A procedures. The conference is being recorded and a replay will be available on the company's investor relations website.
Hi, everyone. I'm Rafa Vitoria, IR Officer at Inter, and I would like to welcome all to Inter & Co's earnings conference call. First of all, some instructions. The operator provided standard conference instructions. This call is being recorded. A replay will be available at the company's investor relations website. With me today are João Vitor Menin, our Global CEO; Alexandre Riccio, our Brazil CEO; and Santiago Stel, our CFO. To start with the CEO overview, I would like to invite João. João, please go ahead.
Thank you, Rafa. Thank you all for joining us today to discuss our second quarter results for 2026. I want to start with something that is truly meaningful for Inter. Back in May at our Owners Day, we introduced the Rule of 50 as our long-term plan, proving that growth and profitability are not a trade-off, but a combination we can deliver together. And here we are just one quarter after announcing the plan and the Rule of 50 is already a reality. Total net revenue grew 32%. ROE reached over 16%. We are already executing the plan. The Rule of 50 does not stand alone. It is built on top of our 60-30-30 North Star, the goal of 60 million clients, 30% efficiency ratio and 30% ROE. That compass continues to guide everything we do. The trend on this chart reflects years of disciplined capital allocation, high growth and consistent execution, supported by a solid balance sheet. But results like these don't happen by accident. Delivering the Rule of 50 is only possible because of our Inter by design approach. It combines three reinforcing pillars: sustainable revenue growth, scalable distribution capabilities and unique cost efficiencies. And that compounding effect is what you see in our numbers. We tripled our revenue growth while simultaneously doubling our active client base, meaning we are getting more engaged clients. We are doing all of this while improving our efficiency ratio by 32 percentage points and expanding ROE by 18 percentage points as well. Growth and profitability moving in the same direction at the same time. That is what Inter by design produces. And when this flywheel runs at full speed, the natural consequence is market share gains across every product and segment. That is what I want to show you next. More clients bring more transactions. More transactions bring more data. Better data drives better products and smarter credit decisions. Better products attract even more clients and the cycle keeps compounding. That is what the flywheel concept means for Inter. And what makes our flywheel particularly powerful is the breadth of our ecosystem. The more products we offer across more verticals, the more entry points we create for clients and the faster the cycle spins. Whether you look at PIX, credit cards, investments or home equity, our market share numbers are climbing across the board, faster than many of the most important players in Brazil. We are not just growing. We are growing in every segment at the same time, but with discipline. That's the strength of our ecosystem, and it's only getting stronger. This flywheel guides not just how we grow, but also where we choose to grow. The opportunity in front of us is bigger than ever because we are actively deepening and widening our addressable market. Our core is secured lending. That was a deliberate choice from the start: mortgages, home equity and payroll, for instance. Nearly 82% of secured personal loans in Brazil are still concentrated in the top five players. That is a massive, underpenetrated market, and we have the distribution, the product experience, the data and the cost structure to keep gaining market share. But we're not stopping there. We are widening into unsecured as well, and we're doing it carefully with discipline and the results are already showing up. For the first time ever, we surpassed 2% market share in credit cards TPV in Brazil. We have never been more profitable in this product than we are today. In summary, secured loans remain our foundation, strong asset quality with stable returns, resilient through different credit cycles. And on top of that, unsecured credit such as credit card, PIX credit and buy now pay later are deepening principality and widening our addressable market further. We are seizing the opportunity in both, and that is what gives us the confidence to keep growing 30% or more for many years to come. And now to conclude, as you can see on Page 9, I would like to highlight three important milestones for our company. Number one, on gaining scale: for the first time ever, we reached over BRL 100 billion in total assets. Second, on expanding margins: for the first time, we crossed double-digit NIMs. And third, on creating value: for the first time, we surpassed capital neutrality, meaning our business now generates more capital than it consumes to grow even at a fast pace. These are not just milestones. They are proof that the model we have been building with discipline, consistency and ambition is delivering real results for our shareholders. Now Sandy and Santi will bring this story to life with the full numbers behind it. Sandy will walk you through the business update, while Santi will take you through the financial performance in detail. Sandy, please go ahead.
Thank you, João, and good morning, everyone. Let's now dive into our second quarter operational results. We reached 45.3 million clients and over the last 12 months added 3.7 million new active clients. But the size of our base is not the main story here. The quality of it is. We have been deliberate about how we grow, being more selective, prioritizing clients that engage faster. That means a sharper focus on ARPAC growth, building a stronger and more profitable base. And the strategy is showing up directly in our numbers. Our new cohorts are starting with an initial ARPAC approximately BRL 10 higher than older cohorts. A key driver of ARPAC growth is credit penetration. As clients deepen their relationship with Inter and adopt credit products, their monetization increases significantly. Private payroll is a great example of this, and I'll explore this subject later. We also see evidence of engagement in the behavior of our clients overall. We averaged 22 million daily log-ins this quarter, up from 18 million a year ago. These clients are not only active, they're truly engaged and bringing primary relationships to Inter. And that engagement is translating directly into monetization while we keep our cost to serve flat. ARPAC goes up, CPS stays stable. The gap is what drives margin expansion, and the results speak for themselves. Margin per active client just reached its best level ever. This is the financial outcome of everything I just described: better clients, deeper relationships, higher credit penetration; it compounds quarter after quarter. This engagement we talked about also translates into transaction volume. Our cards and PIX TPV reached BRL 1.8 trillion on a run-rate basis. TPV is growing faster than our client base, evidence of deeper relationships. True market share numbers tell the story best. First, we now hold approximately 9% of all fixed transactions in Brazil, and we are still expanding, growing 31 basis points over the past year. Second, for the first time ever, we crossed 2% market share in credit card TPV, as João mentioned earlier. Our new cohorts are starting at an engagement level that's higher than ever before. The flywheel is not just working, it's accelerating. Now I want to deep dive into two of our hero credit products, credit cards and private payroll loans. Santi will cover the full portfolio performance later, but I want to give you the strategic view on both. Starting with credit cards and our reshaping strategy, the TPV is simple: shift our portfolio toward more interest-earning balances, more installment usage, better monetization, bringing higher revenues. Our interest-earning portfolio keeps growing as a share of the total and now stands at 26% of the credit card book. The interest income of this product grew 64% year-over-year. And here is the key message: interest income is growing faster than provisions. A larger interest-earning portfolio does come with more provisioning — that's expected — and we're comfortable with it. But the income is outpacing the costs and the margins are expanding. We'll maintain our discipline in this strategy, growing the right balances with the right clients at the right time. Now let me turn to private payroll loans. We maintain our confidence in the product and its fit to our platform. It generates strong revenue expansion. It scales through our own digital distribution, and it is efficient to originate and serve. That's exactly the kind of product we want more of. In the second quarter, we surpassed 600,000 clients with private payroll loans. These clients have an ARPAC that's 3.7x that of our average, making it a true principality and monetization accelerator. There are operational improvements in progress, and we're managing through them with discipline. But we believe the product will only get better as DataPrev introduces new features such as automatic employee relinkage. We're growing, and we believe we're doing it at the right pace, building a proprietary portfolio that will be healthy and profitable for the long term and that will strengthen principality. The next step is already coming: insurance launches in August. We estimate that insurance adoption can reduce provisions and increase fee revenues, a meaningful improvement in the product's overall performance. I will now talk about business accounts, a significant opportunity we have in front of us. We reached 2.9 million business clients, growing 24% year-over-year. Our market penetration is already at 12% in these types of accounts. Business clients generate 2.8x the ARPAC of our average client. We have built a complete suite of products for businesses, including payments, investments, acquiring cards and credit. The electronic trade invoice as a collateral — the product to be launched by the Central Bank of Brazil — is currently in testing. And once live, it will deepen our product suite, drive higher ARPAC and compound directly into NII growth. The more products a business client uses the more they consolidate their financial transactions at Inter. This is the same flywheel we see on the retail side now on the business account side. Now let me shift to another important dimension of our business, fee income. Credit is a powerful engine of our results. But what makes Inter truly unique is that we have seven verticals that reinforce each other and together generate a fee income base that is diversified and resilient. We have two engines that will drive future growth. On the commission side, we're launching subscription plans, giving clients the opportunity to upgrade to our One, Prime and Win segments and unlock more benefits. We are also expanding our investment advisory services for higher-income clients. And we just launched Inter Ads, a new ads monetization layer in our app with significant potential ahead. On the credit-related fees, Inter Change is accelerating as our credit card TPV crosses the 2% market share for the first time and keeps outpacing debit. Inter Pag will resume growth as we mature the company and leverage the products among our business clients. And private payroll loans: credit insurance will add a meaningful new fee revenue stream to a product that is already profitable on the credit side. These are not just plans. They are initiatives already in motion. And together, they are what will bring fee income growth back to the pace we want to see. The reason we're confident that fee income will accelerate is not just because of the initiatives I just described. It is the distribution power behind them. As seen on this slide, multiple products across our seven verticals have already surpassed 1 million active clients. But what is even more remarkable is the speed. Each new product is reaching that milestone faster than the one before it. The curves are getting steeper. Adoption is accelerating. This is what distribution at scale looks like. When you have 26 million active clients who log in 22 million times a day, launching a new product is not starting from zero. It is dropping a new solution into one of the most engaged financial ecosystems in Brazil. Clients are ready to adopt, and they are doing it faster every time. That is the compounding power of our flywheel. And that's what gives us the confidence that the fee income initiatives will gain traction quickly. With that, I'll hand it over to Santi for the financial performance. Santi, please go ahead.
Thank you, Sandy. Good morning, everyone. I'll jump directly into the financial performance of the quarter. The Rule of 50 that we introduced in New York back in May is showing up directly here with revenue growing 32% year-on-year. Joao refreshed the framework, and this slide is exactly what it looks like in practice. What I find even more compelling than the level itself is the consistency behind it. For eight consecutive quarters, NII has been growing around 40% year-on-year, eight quarters in a row. That is the result of intentional execution, a portfolio that keeps growing, and NIM that keeps expanding, private payroll gaining traction exactly as Sandy described and a credit book that his team has been deliberately reshaping towards higher-yielding balances. Fee income had a strong quarter, growing alongside our client base. And with the initiatives Sandy walked through, we have a clear and intentional path to accelerate this revenue going forward. The result is a revenue base that is diversified, resilient and structurally built to keep compounding with strong momentum across every driver. And the consistency we just saw in NII has a direct driver: NIM. This quarter, our NIM reached 10.1%, the highest level we have ever recorded and the first time that we have crossed the double-digit mark. This is a milestone worth pausing on. Three factors drove the expansion this quarter. The first is structural and ongoing: the continued deployment of capital into high ROE products quarter after quarter. This is the compounding effect of disciplined capital allocation. The second is strategic: our hyper-personalization pricing approach, which we outlined on the Owners Day, is working. On the asset side, we repriced buy now pay later, PIX Credit and private payroll. On the liability side, we reduced interest rates on LCIs. This is not a one-time adjustment. It is an active ongoing strategy that will continue to support our NIM expansion going forward. The third is one tailwind from our inflation hedge, which as we flagged in the first quarter of 2026, we expected to flow through in this quarter. That is exactly what happened. The underlying trend supported this impact. Now I want to zoom out because there is a point that often gets overlooked. Since the 60-30-30 announcement back in January of 2023, our NIM 2.0 has expanded 30% from 7.8% to 10.1%. Our capital structure also changed significantly over the same time period with our leverage going from 6.7x to 9.7x today. When you normalize for that and hold the capital structure constant through time, the true NIM expansion is closer to 50%. That is a number that reflects the real depth of the improvement in our core banking economics. Taken together, these results reflect exactly what disciplined capital allocation and consistent execution of our banking business looks like in practice. And that capital deployment we just described is showing up directly in the loan growth. Our expanded loan portfolio reached BRL 55.4 billion, up 5% quarter-on-quarter and 29% year-on-year. You will notice that we introduced a new concept this quarter, the expanded loan portfolio, which now includes our private securities book, FIC, debentures and similar instruments. We are bringing this into our core credit metrics because treasury optimization is one of the ROE drivers we committed to at the Owners Day as part of the Rule of 50. We ask ourselves the question: is deploying capital here a truly franchise-accretive business? We think that the answer is yes. These are client deposits being deployed into market-originated credits, generating strong returns that we then reinvest back into our business. We should expect this business to continue growing. Within the portfolio, each product line is pulling its own weight. Private payroll keeps gaining share and is progressively absorbing the natural runoff of the FGTS book. On credit cards, the reshaping strategy described continues to deliver strong performance with interest income from this product growing 64% year-on-year. Real estate remains a standout. Mortgages and home equity have grown at an average 40% since the second quarter of last year — not a single strong quarter, but sustained compounding growth in one of the most important and most secured products in our portfolio. And one number ties all this together: loan balance per active client, which reached our highest level ever. Credit penetration, one of the key pillars of our Rule of 50 execution is not a future ambition. It's a reality that continues to move forward. This diversification across products is what allows us to grow at pace without concentrating risk, neither credit nor regulatory, with revenue, NIM and loan growth expansion all moving in the same direction by design. Loan growth, NIM expansion, revenue consistency — all of that has a credit strategy behind it, and this slide is where we show it. Before going into the numbers, let me frame how we think about asset quality strategically. Our goal is not to minimize NPL in isolation; it is to maximize risk-adjusted NIM, efficiency and ultimately returns. That means that we deliberately take more credit risk in certain portfolios, and those same portfolios are becoming an increasing driver of our profitability quarter after quarter. This is an intentional trade-off and one we are making with full conviction. You'll also notice this page is busier than usual as we introduced the expanded loan portfolio concept in the prior page; we apply the same lens here, showing NPL and Stage 3 formation and they both expanded in prior methodology side by side. This allows investors to see both views clearly during the transition. Now within the portfolio, there are three distinctive stories. The first is our secured portfolio, excluding private payroll, which is roughly about half of our loan book. Asset quality here is stable and performing well with strong ROE dynamics. This gives us confidence to keep deploying capital and growing this product accordingly. The second is on credit cards. NPLs performance here reflects a deliberate strategic choice: a growing interest-earning portfolio in an unsecured segment that still faces a challenging macro environment. But here, the key point is that revenues are growing significantly faster than provisions in this book. That is the metric that matters for us and is moving in the right direction. With our disciplined niche approach and interest rates on a downward trend, we expect NPL performance to improve in the coming quarters. The third component is private payroll. I will cover that in the next page. As the NPL bridge shows, this product is the largest contributor of the NPL movement, responsible for over half of the yearly increase. We're not going to look past this number. We'll address it here. Delinquency has been running higher for longer than we planned, not because the product deteriorated, but because operationally, maturity is taking more time than expected. We're actively working on it. Our own relinkage solution is underway, insurance launch is in August and further DataPrev improvements are expected this month, as Sandy walked through. But here is what keeps our conviction intact: even at current delinquency levels, the ROE on private payroll loans remains at around 30% — so the economics are compelling for our clients and for us, and it fits very well in the Inter by design approach. And when you look at private payroll and credit cards together, these two portfolios have been delivering strong returns, ROE holding strong even before the operational maturity of private payrolls and NIM expanding very strongly. This is intentional execution and our confidence continues to grow stronger as the results come in. Now let me turn to funding, one of our most important competitive advantages. Our total funding reached BRL 77.2 billion this quarter, growing 24% year-on-year. This growth reflects the trust our clients place in us as their primary financial platform. The composition of that funding tells an equally important story. On the transactional side, deposits grew 17% year-on-year, and we generated nearly BRL 1 billion of nearly free funding just this quarter. This is a direct result of clients choosing us for their daily financial lives. On the higher-yielding deposits, time deposits grew 27% and securities issued grew 42%, reflecting the continued diversification of our funding base in an environment of high interest rates. We are attracting funding across the full spectrum and doing it efficiently. Lastly and most importantly, deposits per active client reached BRL 2,000.80, growing 6% year-on-year. And this is where our funding franchise truly shines. Our cost of funding stood at 66% of CDI this quarter, one of the lowest and most stable in the industry. And I want to emphasize the word stable here. Market rates have moved a lot over the past few years, and our cost of funding barely moved. This is by design. It comes from the depth of our transactional deposit base. These clients see us as their primary bank, as Sandy mentioned. And this advantage compounds over time. A lower, more stable cost of funding means we can price loans more competitively, protect our NIM through the cycle and generate better risk-adjusted return than peers. It's one of the most durable competitive advantages that we have built and honestly, one that is the hardest to replicate. Now let me talk about expenses. There are three factors playing out here. The first is personnel. Headcount is stable at around 4,000 employees, which is the same number that we had four years ago when we announced the 60-30-30 plan. Costs grew 18% and the main driver here is profit sharing, which we can think about as actually good news. It means the team is being rewarded for stronger profitability that we are delivering. Second, D&A came in 44% higher year-on-year, the amortization of prior investments in our Super App. This line will keep growing as we launch new projects. But importantly, the ratio of intangibles to total assets continues to decrease. And third, administrative expenses grew just 15%, broadly in line with the natural growth in clients and transactional volumes. We're handling significantly more scale without a proportional increase in costs. That is a digital model doing exactly what it's supposed to do. And this is what makes all of that sustainable: revenue growing at 32% year-on-year, expenses growing at 19%. That gap of 13 percentage points is operational leverage flowing directly to the bottom line. When we look at the client chart since 2023 when we launched the 60-30-30 plan, the picture is clear. Revenue has compounded, expenses have grown in a controlled manner and the gap between the two keeps widening. That is the digital banking model at scale: no branches, no legacy systems, no linear cost growth as we add clients and products. The efficiency ratio reached 42.1% this quarter, a new record low. That reflects years of consistent cost discipline, combined with the scaling dynamics of our model. There's more room to run on efficiency, and we're committed to continue delivering returns. Revenue, NIM, loan growth, asset quality and now operational leverage, all moving in the same direction. That is the financial picture of Inter this quarter. And everything we walked through comes together right on this page. Net income reached BRL 421 million this quarter, a new record. And ROE, also a record, reached 16.3%. But honestly, the quarterly number alone does not tell the full story. If we look at the trajectory of this chart, we have 13 consecutive quarters of net income growth. Quarter after quarter, year after year, net income and ROE keep moving in the same direction, up. That is not a quarter story. It's a compounding track record. ROA also hit a record this quarter, now in line with some of the most established traditional banks in Brazil. If you think about it, a platform that is growing at 30% plus, delivering returns comparable to institutions that have been around for decades. Everything we have built — disciplined capital allocation, risk management and cost control — shows up here. Growth and profitability moving together: that is the Rule of 50 in action. And finally, I'd like to close with capital. For the first time, our business is generating more capital than it consumes to fund its own loan growth. Inter is now self-sustained from a capital perspective. We grow and we fund the growth ourselves through growing profitability. Additionally, at Inter&Co level, we hold EUR 2.3 billion in excess capital, capital that sits ready to be deployed in the bank whenever we need. When you factor that in, the Basel ratio at the holding level reached 19.3%, a position of real strength. With that, I'll turn it over to Rafa to open the Q&A questions. Thank you all.
Now we open the Q&A session. Our first question is from Eduardo Rosman.
Questions and answers
Congrats on the numbers. I would like to follow up on the NIM and asset quality. I think Santiago explained well the three main drivers, and I think we're going to continue seeing improvement in the next couple of quarters. But this quarter specifically, NIM was a little bit too strong, right? So I wanted to understand the magnitude of these three main drivers in this quarter. Trying to understand if we should assume that NIMs would still improve in the third quarter or if maybe in the third quarter it should adjust a little bit and then continue moving up in the following quarters, right? And then also on asset quality, I think early NPLs moved up again. I assume that that matters more for provisions than 90-day NPLs. So what are your expectations for the next couple of quarters? I know you are taking a little bit more risk, and that's part of the plan. But I'm just trying to understand here probably the trends for risk-adjusted NIM, how we should think about it throughout the next couple of quarters? That's it.
So starting with NIM, let me back a quarter. What we said then when we explained the first quarter performance is that we had an inflation dynamic playing out in the first quarter of around BRL 30 million of lower inflation hitting in that quarter, but that would have an effect flowing into the second, which is what we're seeing now with 10.1%. So the prior NIM was a bit lower than what it should have been on a normalized basis and the current one has a bit of that embedded in it as a consequence of inflation. I'll walk you through that. We have approximately BRL 11 billion of inflation-linked exposure, which we hedged around BRL 6 billion of, and that gives us a net long exposure of around BRL 5 billion. With that, we have the timing mismatch where around BRL 30 million of lower revenues in the prior quarter are hitting positively in this quarter. With that factored in, you should adjust around 15 basis points lower in this quarter and 15 basis points higher in the prior quarter. Now that will be a smoother performance, and that will reflect a bit more what really happened if inflation had been constant through time and we wouldn't have hedged. But what I would like to highlight is that when you look at the overall long-term curve of our NIM and our risk-adjusted NIM, it has performed quite stably and has become quite predictable despite inflation moving widely throughout the year and also with the movement in CDI. We're able to manage that volatility. We'd like to have the NIM more predictable and stable, but we do see some dynamics throughout the year playing out, particularly in this first half. And on an annual basis, we said last quarter we expect a 40 basis points increase in the annual NIM from the prior year into this one. We continue to think that will be the case considering the loan mix that we're originating. 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 internal — the additional growth that we're taking in private payroll and the credit card mix reshaping that Sandy commented on — and then the external one, which has to do with higher interest rates and seasonality. On the internal drivers, private payroll continues to gain traction and we remain very excited about it. Sandy can touch upon more detail, but this product fits perfectly well in Inter by design. Credit cards have been our stellar P&L product internally. We are monetizing it a lot more, as you saw, with a 64% interest income increase in the last 12 months; that comes together with more delinquency. But we're not solving for lower delinquency; we're solving for higher returns. So the evolution or the shape of the delinquency curves going forward will depend on the mix. But the guidance that we gave last time was cost of risk at around 6%. We continue to think that's the case. This quarter, we were a bit better than that. And the outlook for the rest of the year remains unchanged, both on the NIM side as I mentioned and with the asset quality.
Our next question is from Henrique Navarro. Our next question is from Mario Pierry.
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, debt service ratios are very high. We have an uncertain environment in the second half of the year with the elections. And then there's a perception that next year fiscal spending in Brazil is going to have to decline because the government has been very populist this year. So can you discuss how you are seeing the operating environment in Brazil and key concerns you have about asset quality going forward?
Mario, João Vitor speaking here. Thanks for the question, and I'm going to take this one. Look, we IPO-ed the company back in 2018. So it's been about eight years that analysts and investors have been following Inter. We have always been very, very careful in approaching credit risk and credit underwriting. That said, we have a strong tailwind that has 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 Sandy just mentioned, we will adjust accordingly. So we might expand unsecured portfolios in a good credit cycle and we might reduce them in a bad credit cycle. But the opportunity ahead of us is large. When we see on the page the growing opportunity — the BRL 2.7 trillion portfolio, the BRL 1.3 trillion column and the BRL 2.6 trillion addressable market — we have, as I mentioned, the tools to attack all of these addressable markets. Even with inflation pressure and elections, we can still grow at a roughly 30% pace for maybe a few years to come, doing the right risk-reward approach. This is very important. We are in a business of taking risks. We need to manage that. We need to use all the tools that we have, and we have been doing that carefully. But again, because we are still a small loan portfolio platform, we can keep growing at that pace ahead without putting the balance sheet at risk. So that's the overall view from my side on how Inter will perform in this current credit cycle in Brazil. And when you think on the mid- to long-term, we have all the tools on the platform to keep gaining momentum and to produce enough. So again: the best cost of funding, the right distribution channel and a very efficient business model by being digital. We see a very good opportunity for Inter to keep compounding our loan portfolio, both on secured and unsecured portfolios ahead.
Let me ask then a second question really quick. You guys didn't mention anything about the debt renegotiation program in Brazil. So, I just wanted to know: did they have any impact on your asset quality ratios? Were you active renegotiating loans?
So Mario, the Central Bank (BACEN) program was better than what we saw in the first wave. What we saw was, first, renegotiations of BRL 100 million, a decent volume driven by BACEN, with an overall impact in the P&L of around BRL 40 million, although we believe that half of this we would have realized in other ways, for example using collection companies or using our internal team, which is very strong and doing many actions to control delinquency. So we can say that BACEN brought BRL 12 million of EBT impact. When we look at delinquency metrics, we had minus 10 basis points in NPLs, minus 15 basis points in cost of risk and about 15 basis points increase in Stage 3 formation. And why Stage 3 formation? Two factors: first, as we renegotiate, we're also renegotiating credits that are past due beyond 360 days or were written off. We bring them back into the balance sheet and place them into Stage 3. Sometimes we renegotiate credits that are between 90 and 360 days; when we do that, we move them to Stage 3 and increase that proportion. The good news is that Stage 3 is highly recoverable given that it has FGO backing it. João will give some additional comments.
So Mario, just going back to the first question about addressable market and how Inter will grow ahead. One thing that's important to mention and to give you some color on is how big the opportunity is. Connecting to Page 8, where we have the BRL 1.3 trillion plus BRL 2.7 trillion plus BRL 2.6 trillion addressable market: we are today pretty much only on the central column, and we are widening to the left and to the right. And one thing to factor is that we have public information from the Central Bank on the credit exposure that our clients have in the system. It's interesting that clients who have a primary relationship with us — PIX, salary and everything — we have less than 5% of their credit exposure. So within our own clients who already use our platform, we can penetrate a lot more. That's how I put some numbers and color on this large opportunity and the fact that we're still, from a credit perspective, a small platform. We're a big platform from a transactional perspective but still a small credit platform in Brazil. I see that as very good news for us.
Our next question is from Tito Labarta.
A couple of follow-ups, both on NII and provisioning. On NII — Santi, you explained a little bit about the inflation impact — but just looking at the financials, the big jump came in income from securities, derivatives and FX, which is almost BRL 200 million quarter-over-quarter. If you look at just interest income, it was less than BRL 100 million increase. So going forward, can you still do the 10 to 20 basis points NIM expansion per quarter? Should we consider this higher income from securities as the right level? I know there are adjustments quarter-to-quarter, but think about that incremental NIM expansion given this movement in income from securities. And then on provisions: your coverage ratio came down. I know part of the NPL increase was more mix. But given the current 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 macro concerns? I want to think about provision levels and coverage given the credit cycle that the market is somewhat concerned about.
Tito, I'll take that question. Starting with NII, we provide in the Investor Relations detailed Excel where we break down interest income (tab #6, NII). There, you can see that income from securities includes proper income from the securities themselves as well as income from the derivatives. The income from the derivatives that come from the portfolio needs to be added to the interest income from the loan portfolio. From the delta this quarter of BRL 186 million in income from securities, approximately BRL 130 million of those were from the portfolios themselves. So you need to add that back to interest income; the reconciliation is available in the Excel on the IR website. Regarding provisions: you saw an increase in coverage ratio in prior quarters in anticipation of the seasoning of the private payroll product. Historically we ran around 130% coverage. During early growth of private payroll we took it up to 146% as the product was seasoning and delinquency hit earlier. As the product matures, that consumption happens and we're now around 134% coverage. That explains the past. Looking forward, the coverage ratio will ultimately depend on the loan mix as growth of private payroll and future reshaping takes place. There are some moving pieces, including the pace of real estate growth which has a lower coverage ratio due to high guarantees. But to give you a sense, we think a range around 130% to 135% coverage for the coming quarters is something safe to assume.
Our next question is from Neha Agarwala.
I have two questions. First, can we discuss the write-off policy change you made this quarter? What drove that decision? What is the new write-off policy? I understand it's only on the credit card segment, or were any other segments impacted? I believe the benefit on the 90-day NPL ratio was about 30 basis points, as you called out in your release. But can you give more color on that?
Neha, I'll take that. Yes, we migrated the write-off threshold for credit cards from 360 days to 330 days in line with Resolution 4966 best practices and our ongoing commitment to align our accounting methodology with industry standards. Our data shows that beyond 330 days the recoverability of credit cards is very low and trends to zero, so it's more accurate to move to 330 days. In terms of financial impact, there is no effect on the cost of risk as this was fully provisioned by day 330 (100% provision). And yes, on NPLs, as the product lives a shorter time on our balance sheet, it has an impact of around 30 basis points on the reported NPL ratio.
On the overall NPL ratio, right?
Correct. We report the overall impact.
The other question is on the private payroll segment. You mentioned you recently started doing the relinkages on your own because the DataPrev linkages are taking longer than anticipated. How should we think about delinquencies with that new connection being made? What are the early results you're seeing? I believe it started in the last month or two, so why didn't it start earlier, which would have made delinquencies better in this product?
This is Sandy speaking. I'll take private payroll. It's useful to talk about three dimensions: growth, credit quality and profitability. On credit quality: we are operating at 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 targeting 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. Since the beginning we were running at a marginal ROE perhaps a little higher; it came down with the delinquency, and we're managing it, but it's important for everyone to understand we manage the process to deliver a marginal ROE of 30% in the product. We have actions in process. You mentioned relinkage: relinkage is now being done with discipline and it's helping NPLs. This action is already in place, and we have more coming. For example, credit insurance is about to be launched in the next few days. We're implementing features to do easier renegotiations with clients at scale, which is important for clients who have a new job with a lower salary and need renegotiation. We're also doing credit policy tune-ups that help cost of risk. The idea is to keep bringing credit risk down to levels closer to the low teens; that's the view and what we're working toward. On growth: we're very confident in the market size; we've been vocal about believing in between BRL 200 billion and BRL 300 billion in the relatively short term. We're confident that will convert. Today our market share in terms of portfolio is about 2.5%. External factors can adjust underwriting volumes, for example the interest rate caps, though we see some positive effects there. Overall, we're positive. We're moving 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 from the rate caps on your origination? I believe you're originating with the higher rate cap and without the FGTS guarantee, right?
Neha, there were two movements. In the first movement we had a very small change because it moved from being free to having a 4.99% cap — so we had a reduction of less than 5% since a small percentage of our loans went beyond 5%. In the second cap we had a slightly stronger movement in volume, but now it's under adjustment. As I mentioned, we're going to keep adjusting the underwriting process. As we put credit insurance in place in the next few days, it will help profitability and could allow us to increase underwriting again.
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 to the audience and everyone who joined us. I'd like to share how happy and confident I am with Inter: happy because, as you can see, we delivered our best earnings ever; we have 13 consecutive quarters growing our net income; and confident because we still have a big addressable market to go after across secured, unsecured and fee income. We can still bring many clients to deepen their relationships with us. Second, I'd like to highlight that Inter has been mastering UX, UI, technology and platform since we launched the first digital bank in Brazil back in 2016. Back then we were still consuming capital and had not yet deepened our credit underwriting with clients. Fast forward to 2026, we are able to manage and improve credit underwriting, grow our loan portfolio and turn from capital consumption to capital generation in our balance sheet. This is very important. We have been executing the fundamentals of good banking operations. When you combine good banking operations with the best-in-class UX, UI and digital platform, it takes us to a very good future. Thank you all, and mostly I'd like to thank our employees for helping us on this journey. I'm sure the best is yet to come. Thank you very much, and have a great day.