Inter&Co Stock Plummets 7.9% Despite Record Profit on Fears Over Credit Risk

Inter&Co, Inc. (INTR), the Brazilian digital bank often held up as a growth engine for the financial technology sector, saw its shares fall sharply today, dropping 7.87% to close at $5.27 on the Nasdaq exchange. The decline is the latest in a downward trend that has erased a third of the company’s market value this year, despite Inter&Co reporting its most profitable quarter to date last week.

The precipitous drop in the Nasdaq-listed stock is a direct reaction to the complexity underlying the digital bank’s second-quarter earnings report, which was released on August 5th. Inter&Co, whose shares are traded directly by US investors without the need for a Brazilian Depositary Receipt (BDR) or an American Depositary Receipt (ADR), delivered record net income of R$421.11 million (approximately US$81 million), a 34% increase from a year prior. The company also achieved a Return on Equity (ROE) of 16.3%, showing improving operational efficiency and profitability in its core business.

However, the market’s focus has centered on two key areas of risk that have overshadowed the strong headline numbers. First, the company’s total net revenue of R$2.61 billion fell marginally short of the R$2.62 billion analyst consensus. More critically, investors are concerned about the quality of the bank’s rapidly expanding loan book. Inter&Co’s 90-day delinquency rate—loans more than 90 days overdue—rose to 5.3% of the gross loan portfolio, up from 5.1% in the first quarter of the year and 4.6% a year ago. The increase in these bad loans is concentrated in high-yield products like credit cards and private payroll loans.

The ongoing debate on Wall Street revolves around whether the market is overreacting to the credit cycle or if the bank’s aggressive expansion is generating growth that is too risky to sustain. While the company touts its strategic "60/30/30 plan"—aiming for 60 million clients and a 30% ROE—the market is currently voting that the pressure points are outweighing the high growth targets. The price action suggests that investors fear that the cost of covering these rising delinquencies will eventually eat into the record profits.

What it touches The steep decline directly impacts investors holding shares of Inter&Co, Inc. (INTR) on the Nasdaq Global Select Market. The company's Brazilian Depositary Receipts (BDRs) are also traded on the B3 stock exchange under the ticker INBR32.