Citi upgrades Inter & Co (INTR), expects strong earnings growth on improved NII performance

Citi upgraded Inter & Co Inc (NASDAQ: INTR) to a Buy rating (From: Neutral) and increased their 12-month price target on the stock to $5.30 (From $2.00) as the digital finance platform signals its intention to reach a higher ROE via the repricing of its credit portfolio and keeping expenses under control.

Analyst, Rafael Frade wrote in a note, “We believe that 2Q23 results show good advances in this direction, with potential further improvements in NIM coming from new initiatives and lower rates, while cost-of-risk could present material improvement from higher restrictions on credit card origination.”

Frade is optimistic about the ongoing enhancement of Net Interest Income (NII) for several reasons. Firstly, there are incremental origination rates in payroll loans that surpass the recently recorded high rates of approximately 20% per annum. Additionally, the optimization of demand deposits is expected to align seamlessly with loyalty programs like "Conta com Pontos." Moreover, the bank's net liability sensitivity is poised to assist NII by reducing funding expenses as the easing cycle progresses.

Citi fully updated their numbers, raising income estimates by 9% and 29% for 2023 and 2024. Net interest income (NII) estimates were also revised upwards 4% and 11% for 2023/24.

“All in all, we expect INTR’s earnings power to improve due to significant improvements in NII,” Added Frade.

Shares of INTR are up 2.53% in afternoon trading on Wednesday.

By Michael Elkins | [email protected]

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