Inter&Co's Record 2025 Growth Reinforces Strengths but Leaves Core Risks Unaddressed

What happened

Inter&Co announced record 2025 results, with 36% credit expansion and 45% net income growth, highlighting its ability to drive rapid loan growth and profitability. This performance builds on recent trends of improving efficiency and client base expansion, as noted in prior deep-value analysis. However, the deep-value report cautions that such aggressive growth may exacerbate underlying risks, including a declining capital adequacy ratio from 24% to 15.2% and elevated cost of risk around 5-5.35%. These factors could necessitate future equity raises or lead to credit losses in a late-cycle Brazilian market, threatening shareholder returns. Despite the positive headlines, the stock's fair valuation and persistent balance sheet concerns suggest limited immediate upside from current levels.

Implication

The record growth confirms Inter&Co's operational execution but does not mitigate the capital adequacy and credit risk issues flagged in the deep-value report, which remain critical for sustainable returns. Capital ratio erosion could force dilutive equity issuance, while high cost of risk may compress earnings if asset quality deteriorates in a slowing credit cycle. The 'WAIT' rating and base scenario value of $8.50 indicate the stock is fairly priced, with better entry points likely around $6.75 or after evidence of ROE exceeding 16% with stable NPLs. Monitoring upcoming quarters for capital adequacy trends and NPL stability is essential to assess if growth can be self-funded. Thus, maintaining a cautious stance and avoiding new positions at current prices aligns with the deep-value thesis until these risks are resolved.

Thesis delta

The record results do not shift the core investment thesis, as they reinforce growth expectations but fail to address the key downside risks of capital depletion and elevated credit costs. The thesis remains unchanged: investors should wait for a pullback to more attractive levels or clear evidence of sustainably higher profitability with stable balance sheet metrics before considering an increase in exposure.