Good afternoon, and thank you for standing by. Welcome to Inter & Co's Second Quarter Earnings Conference Call. Today's speakers are João Vitor N. Menin, Inter Global CEO; Alexandre Rico, Brazil's CEO; Santiago Stel, Senior Vice President of Finance and Risk and CFO; and Rafaela de Vitoria, Chief Economist and IRO. Please be advised that today's conference is being recorded, and a replay will be available at the company's IR website. Please note that there is an interpretation button on your screen where you can choose the language you want to hear English or Portuguese. Throughout this conference call, we will be presenting non-IFRS financial information; these are important financial measures for the company but are not financial measures as defined by IFRS. Reconciliations of the company's non-IFRS financial information to the IFRS financial information are available in Inter & Co's earnings release and earnings presentation appendix. Today's discussion might include forward-looking statements, which are not guarantees of future performance. Please refer to the forward-looking statements disclosure in the company's earnings release and earnings presentation. Now I would like to yield the floor to Mr. João Vitor N. Menin. Sir, the floor is yours.

Thank you, operator. Hello, everyone. As usual, I will begin with a brief overview of our strategy before handing over to Shanji and Sanji who will cover operational and financial metrics. But before we begin, I want to express my gratitude to Shanji, our new Brazil CEO. Shanji, I'm confident that you will continue to do an amazing job in your new role, leading our business in Brazil into a bright future. Now let's deep dive into second quarter results. I'm very happy with our deliveries in our growth plan this quarter. I can affirm that the combination of growth and profitability is propelling us to new heights. Once again, we are demonstrating our ability to deliver remarkable results by focusing on execution day after day, while constantly pursuing innovation and new ideas. We also delivered strong financial performance, ensuring that our business is here to last. I would like to stress my gratitude and admiration for our group of 3,800 employees. We are very proud to see that our company is producing alpha in the Brazilian banking market. A clear way to see this is in the pace of growth that we have in very important portfolios. We are growing multiple times faster than the industry, such as 8 times faster in individual accounts and 4 times faster in FGTS loans. This reflects the strength of our financial super app and our great ability to attract clients and cross-sell our products within the platform, thus maximizing our market share gains. To really understand what I'm trying to say, let's spend some time on Page 7. We can see here the opportunity we have to capitalize on our own acquisitions. We have scaled at the most difficult part, getting clients on board and building the product offering. Now if we keep growing at the same pace for the following years, we can reach greater market share simply by leveraging our existing clients, meaning getting more business from them. Obviously, in addition to that, we will continue bringing new clients as we have done consistently for many years. As you know, we have one of the most complete product offerings in the market, serving multiple client profiles in one single app. To maximize conversion of our products, we rely on a strategy based on hyper-personalization, best-in-class UI and UX, and a unique digital journey for every moment experienced within that. Shanji will present the details later, but just to give you a little sneak peek, our insurance vertical had its best quarter ever, thanks to the extraordinary impact of integrated data, targeted campaigns, and the strength of our connected platform. What I mean by that is we are seeing incredible results by leveraging our data effectively and constantly pushing the boundaries of innovation. I'm personally passionate about client experience and driving innovation. We will continue to enhance our UX and UI and introduce new features to provide the best possible experience. Moving to Page 9, we can see our seven verticals working powerfully together. As an engineer myself, I like to say that all cylinders are working in perfect coordination. And this makes me confident about the continued success of our platform. By providing a complete range of personalized products to each client, we observe amazing outcomes across all verticals, which Alex will deep dive into on the next page. Alex, please go ahead.

Thank you, João. Good afternoon, everyone, and thanks for joining us today. First of all, I'm extremely proud to assume the role of CEO of Brazil and lead our operations. Having been part of Inter for 11 years, I can say that I have a deep passion for everything we have built so far and what lies ahead. João, once again, thank you for your support and trust, as well as your forward-looking vision that constantly pushes us to be innovation pioneers. Going into the results, I'll start by focusing on the most important topic: our clients. We're happy to announce that once again, we welcomed one million new active clients this quarter. This figure has led to a sixth consecutive quarter of increasing activation, now standing at 55.3%. Throughout the second quarter, we achieved a total of 33 million clients, successfully increasing our client base by 1.6 million. This demonstrates our ability not only to increase activation among existing clients but also to attract a new pool of qualified clients who are activating faster and engaging more with our platform. In addition to the total clients, I would like to introduce everyone to some details of our business clients. We currently have over 2 million business accounts growing at a fast pace of 21% year-over-year. These 2 million clients are highly engaged, with an impressive activation rate of 80%, along with higher deposits, TPV, and interchange levels. Last month, we announced the closing of the acquisition of Granito, which has been renamed to Interpack, our acquiring business. We're excited about this transaction as we now will be able to fully integrate the business into our ecosystem. The transaction brings a long list of opportunities. Three examples are, first, cross-selling our banking products to all of Interpack's merchant clients; second, cross-selling acquiring services to our existing base of merchants and individuals, hundreds of thousands of whom already flow their acquiring receivables into our account; and third, building powerful bundles of banking and acquiring services to address retail clients that are currently underpenetrated in our base. In summary, we see opportunity ahead of us and are already moving to capture it. Turning our attention to Page 12, the total TPV has shown a remarkable increase of 47% year-over-year, reaching BRL 290 billion. Specifically, when we consider transactions made through PIX, we transacted over BRL 266 billion in a single quarter, capturing 8% market share of the total number of transactions. Also important was that for the second consecutive quarter, volumes and growth from credit cards have surpassed debit, resulting in higher interchange revenue and further improving the TPV mix. Moreover, as we have consistently seen in the past few quarters, we're continuously increasing TPV levels among both new and existing cohorts. This demonstrates the growing engagement of our customers with our product offerings, ensuring continued success. Moving to the credit side, I want to provide a brief update on our new credit lines expansion, including PIX financing and our other unsecured lines. In the quarterly comparison, we had an impressive increase of almost 90%, reaching BRL 330 million in our portfolio. This is one more important step in bringing our unsecured products to their full potential. In the beginning of the third quarter, we expanded our PIX financing offering to the entire credit card base, one more element to sustain growth. Moving to Page 13, in the e-commerce vertical, we have achieved the best growth level since the post-pandemic base. In the annual comparison, we increased our GMV by more than 50%, surpassing BRL 1.1 billion in the quarter, with more than 3 million clients making purchases during this period. Regarding loyalty, a vertical that completed one year in June, we achieved an impressive 8 million clients, demonstrating our strength in launching and growing new products that strategically fit within our platform. These clients are highly engaged, spending 2.7 times more than non-loyalty clients and generating an RPAC that is 1.7 times higher. Moving to Page 14, on the insurance front, we are very happy to report one of our best quarters ever. Our sales have exceeded one million for the first time, far exceeding what we experienced in the previous quarter. We have seen a 39% quarterly increase in the number of active clients. As a result, we now have 2.6 million active insurance clients, an amazing number. We are also proud to have successfully launched new products in this vertical, such as the FGTS loan insurance. This product integrates seamlessly into the FGTS loan product user experience. This is a great example of our hyper-personalization strategy, as previously highlighted by João. Turning our attention to the investment vertical, we had a quarter of encouraging growth. Within a year, we have increased the number of active clients by around 60%, reaching 5.7 million. Furthermore, we have surpassed a significant milestone of BRL 100 billion in AUC for the first time and are already close to BRL 110 billion. This achievement showcases our cutting-edge product offering in this vertical and the evolution of our distribution capacity. Moving to the next page. Last but not least, on the global front, as mentioned by João, we are continuously advancing and replicating one of our key competitive advantages in the U.S., our robust deposit franchise. We're excited to report that our assets under custody and deposits in U.S. dollars have reached the milestone of $516 million, reflecting an extraordinary 133% year-over-year growth. This achievement underscores our strong performance in the U.S. market. Within this vertical, we have successfully acquired 3.3 million clients, comprising higher-income Brazilian clients who frequently travel and invest in the U.S. This indicates a higher quality customer profile in terms of spending, engagement, and ARPAC levels. This growth and engagement in our global operations encourages us more and more to dedicate ourselves to expanding our reach and delivering valuable financial solutions to our clients, regardless of geographical boundaries. With that, I'll pass the word to Santi, who will cover the financial performance section.

Thank you, Alex, and congratulations once again on your promotion. Now let's delve into our financial performance for the second quarter. Starting with our loan book, we delivered 35% growth compared to the same quarter of 2023, resulting in a portfolio of BRL 35.7 billion. Once again, FGTS and home equity continue to be key drivers of this credit growth, with impressive year-over-year increases of 93% and 50%, respectively. As João said, our focus on hyper-personalization has opened up new opportunities to optimize our distribution capabilities. Great examples of these improvements in distribution through hyper-personalization include our FGTS and PIX financing, with our fully digital products showing remarkable growth and profitability profiles. Now regarding the implied rates on the top of the page, the stability we can see is attributed mainly to two factors. The first is the overall lower interest rate environment in the entire banking system compared to a year ago when the Selic was much higher, and second, the lower inflation in the quarter, which mainly affected our real estate loans. We believe that the performance in terms of deals was very strong, with an all-in loans rate of 21%, which is twice the CDI rate and the highest we've had at Inter in the last four years. We'll go deeper into the full impact of rates on the NIM pages. Let's go deeper into our loan growth by product, reflecting our continuous commitment to deploying capital efficiently. Our top-performing credit products such as FGTS and home equity have experienced remarkable growth and now represent 15% of our loan book. Regarding credit cards, we remain focused on allocating new limits for existing clients with strong risk-adjusted profiles. This strategy has resulted in nearly 40% growth in credit cards over the last year. Both SMBs and real estate loans grew around the yearly average of our loan growth of 35%, while personal loans, which mainly consist of payroll loans, had a small negative growth. However, when excluding the portfolios acquired nearly two years ago, meaning looking only at the internally originated portfolios, we had positive growth of 4%, with nice acceleration towards the end of the quarter, reflecting the success of the new digital initiatives ongoing in this product. In terms of asset quality, we observed stable trends across metrics. Both NPLs 15 to 90 days and 90 days plus presented slight improvements in the quarter. However, we experienced a slight increase in the metric regarding NPL and Stage 3 formation, as a result of the second quarter 2023 credit card cohort, which presented higher than average delinquency. We believe that this effect is specific to this cohort and will reverse in the coming quarters. Now moving on to Page 20, we can observe that our cost of risk metric improved by 20 bps to 5.0% or 10 bps to 5.3%, excluding anticipation of credit card receivables. These levels are the lowest we have seen since 2022 and reflect our continued improvement in the quality of our underwriting model and our collection practices. In terms of our coverage ratio, it remained stable at 130%, indicating that we are provisioning in line with the NPL formation trend. Moving to Page 21, we are pleased to highlight the robustness of our funding franchise, which reached BRL 47.8 billion. A key highlight is how retail and fragmented our funding base is, with more than 17 million clients trusting us with their savings. Another key highlight, which I have mentioned many times before, is the mix of transactional deposits accounting for 32% of our total funding base. In terms of growth, we experienced a remarkable 9% and 34% increase quarterly and annually respectively. Specifically in terms of transactional deposits, we grew BRL 1.3 billion in this quarter alone. Moving to Page 22, as we mentioned before, we firmly believe that our funding mix sets us apart from other financial institutions in Brazil and provides us with a notable competitive advantage in terms of cost of funding. In this particular quarter, we reached a cost of funding of 6.8%, the lowest since I joined Inter at the beginning of 2022. We are thrilled to report another great quarter in terms of revenue, breaking previous records for the second consecutive quarter. We achieved gross revenues of BRL 2.4 billion with a net revenue of BRL 1.5 billion. These numbers reflect a substantial 29% year-over-year growth and a solid 7% quarter-over-quarter growth in total net revenues. Both fees and NII experienced robust growth, further validating the effectiveness of our hyper-personalization and marketing efforts. Let's now turn our attention to the unit economic metrics highlighted on Page 24. We are pleased to report that our ARPAC increased to BRL 30.4 per month, a result of further engaging and monetizing our clients through our broad suite of high-value products. On the cost side, we continue to make significant improvements in our cost-to-serve metric. This positive trend has been consistent over the last five quarters, reaching a record low level of BRL 11.1. This demonstrates our ability to efficiently monetize our customer base while capturing economies of scale. Let's now delve into our interest income, specifically focusing on NIMs as presented on Page 25. Starting from the top of the page, both our NIM 1.0 and 2.0 with and without the noninterest accruals of credit cards, known as Avista in Portuguese, are showing a positive upward trend compared to the prior quarters. It's important to note that we faced a negative impact from IPCA this quarter due to inflation, which contributed to slower growth this quarter, particularly in real estate loans. When we consider the risk-adjusted NIM, which deducts the cost of risk, the performance is even stronger, highlighting consistent positive trends and reaching record levels. Maximizing the value of our capital allocation is a key priority, and we are consistently seeing visible results quarter after quarter, with continued repricing and new consumer finance initiatives underway. We are optimistic about continuous improvement in the coming quarters. As seen on Page 26, we experienced modest 5% growth in expenses this quarter, following a 0% increase in the prior one, netting a 5% increase in the first half of this year relative to the fourth quarter level of 2023. More importantly than the growth levels themselves, we can affirm that our marginal spending is strategically allocated to investing in three main areas: people, technology, and branding. This reflects our mindset of creating long-term value for our franchise by investing more in these specific areas. Another noteworthy aspect is our marketing expenses. We launched a targeted campaign aimed at increasing brand awareness. Since this campaign was launched, we have seen a notable 25% increase in searches for Inter and a 20% increase in our app downloads. Regarding personnel expenses, we strategically increased hiring in key areas such as IT and commercial teams. We continue to see significant opportunities to achieve operational leverage, as highlighted on Page 27. On the left-hand side, you can see that we have successfully increased the gap between the growth of our net revenues and the growth of our expenses. As a result, our efficiency ratio on the right side reported at 47.9%, primarily ahead of our 60-30-30 plan. These charts reflect the benefits of our digital banking model, where we can scale our business significantly while maintaining a controlled cost structure that services our clients in a state-of-the-art digital manner. To conclude, I'd like to highlight our strong performance in terms of profitability, as presented on Page 28. This quarter, we achieved another record-breaking ROE, surpassing the double-digit mark and reaching 10.4%. Our pretax income reached nearly BRL 300 million, and our net income reached BRL 223 million. This performance exemplifies our commitment and discipline in driving sustainable profitability. Now I will pass the floor to João for his closing remarks. Thank you.

Thank you, Santi. For my closing remarks, I would like to reiterate three important topics from the last quarter. First, the execution of our growth plan; second, the recent additions to our senior management; and third, the launch of our latest product, our social platform. The 6-30-30 plan is on track with consistent growth in total clients and ROE and a stable efficiency ratio. To help us with our plan, we recently announced updates to our management team. As mentioned before, Shanji is now our Brazil CEO, and Rafaela Vitoria has taken over as our new Investor Relations Officer. Additionally, over the past few months, we have welcomed several new members to our team, such as Juliano, Monica, Fernando Bakken, and Marcelo Dando. All of them bring extensive market knowledge from top financial institutions in Brazil and abroad, and they will add strong value with fresh perspectives in their respective fields. On the board front, we announced Jen Allen as our new independent board member, bringing decades of experience to our board. Lastly, but certainly not least, as part of our commitment to stay ahead of the market, today, we launched our social platform. Through this platform, our clients will have the opportunity to engage in discussions, share their experiences with our products, and invest collectively, all within our financial super app. Thank you very much, operator. Let's move to the Q&A session.

Our first question comes from Mr. Gustavo Schroden from Bradesco BBI.

First of all, congratulations to Shanji on the new role; well deserved. I wish you all the success in this new role. So my question is regarding the NIM adjusted by risk, right? We could see an improvement quarter-by-quarter, but the increase was mainly driven by the lower cost of risk, while the NIM was stable quarter-on-quarter. I'm trying to understand how we should perceive this in the coming quarters. In my understanding, looking at the implied interest rates that you are charging in the credit, which is at 200% of CDI, while the security gains are at 100% of CDI. So I believe that this potential increase in NIM would come from improving capital allocation, increasing exposure to credit. So my question here is, is this right? My point is to correct me if you think that as you improve capital allocation, this NIM should improve in the coming quarters. And the NIM adjusted by risk will remain on this improvement track, considering both sides: cost of risk under control and the NIM with credit improving. So this is my question.

Thank you for the question. I'll break down the question into two parts: on the NIM part and then on the cost of risk, as both parts affect the risk-adjusted NIM. On the cost of risk side, we believe that we should continue to operate in the range of 5.0% to 5.5%. We continue actively managing credit card exposures and improving that performance on a cohort-by-cohort basis. We have some portfolios that tend to improve that ratio, like FGTS and home equity, and on the other hand, there are others that tend to increase that cost of risk ratio, such as PIX financing and other unsecured products. Altogether, we believe that these will balance out, and we should continue operating within that range. Obviously, quarter-by-quarter, we may experience some volatility, but it will be within that range. Now moving to the NIM side, before considering cost of risk. We have several dynamics playing out. We still have payroll loans, which haven't grown yet, and real estate loans, which have significant upside potential regarding increasing the average rate of those portfolios. We have a better mix playing out, as we have stated many times that FGTS and home equity are gaining share in the portfolio. Jointly, they represent 15%. As for the two new products, PIX financing and BNPL, we will see how much they will represent in the future. We have high expectations, but still uncertain on how much they will grow. Furthermore, we are experiencing a situation we like to call a good problem where a significant amount of liquidity is flowing into our system. Now we grew BRL 4 billion in deposits, and the loan book grew partially as a result. So when this additional liquidity comes in, it yields temporarily at 100% of CDI. Therefore, it does not necessarily boost the NIM until we deploy these funds into the loan portfolio, which typically takes some time. So together, we do see potential upsides in the NIM before considering the cost of risk. However, it won't be linear every single quarter. Still, we have mentioned consistently that around 20 bps per quarter is what we see over the coming quarters, while the cost of risk stays within the range I mentioned at the beginning.

Perfect, very clear. If I may, just a follow-up here, especially on the PIX finance and BNPL segments. You reached BRL 330 million this quarter, representing a 90% growth quarter-on-quarter. Even if we assume some deceleration in this space of growth, I think that at least, based on our estimates, it is possible to reach around BRL 900 million to BRL 1 billion in this segment. Do you think it is reasonable to work with that number?

Thank you for your message in the beginning, Gustavo. As we think about the PIX financing portfolio, we are more focused on growth in all unsecured lines, right? So PIX financing, bill pay, cash financing, buy now, pay later, and overdrafts; we're looking for something close to BRL 1 billion, maybe a little under that, but that's what we are working towards. However, one message I think is important to convey is that it's not solely about portfolio size, but also about revenue formation, especially with the credit card portfolio. Today, our mix is about BRL 1 in interchange fees for every BRL 1.20 in revenue from credit cards. If we look at the competition, they are about 1 interchange to 3 on credit. So the goal is to close that gap. We aim to move from this 1 to 1.20 to 1 to 2 as quickly as possible while maintaining our risk appetite under control and keeping delinquency levels manageable. Just to add on Santi and Shanji, one thing that is very important regarding this new portfolio in consumer finance is what we have been emphasizing for some time. We are improving the risk/reward equation. So when we do the PIX financing and the BNPL, we maintain the same risk that we used to have with credit cards, but now we are achieving more yield with PIX financing and higher take rates on the BNPL operations. Thus, the changes in the economics are significant. The goal, as Shanji mentioned, is to grow both the volume and the profitability of these new portfolios. This is a positive development: better risk/reward.

Congratulations on the numbers. I have a question for João Vitor, right? Because Inter has been very successfully improving its ROEs. However, these improvements will not necessarily appear in a straight line, right? From time to time, the company will need to invest in medium- to long-term projects, including the U.S. expansion. I think João, you talked about this in a recent interview where you referred to it as a cheap call option, right? My question is how to balance growth investments and profitability, right? And how can you help us understand what's truly maintenance OpEx, and what is CapEx for the future?

Thank you for the question, Rosman. In the interview, I mentioned that when you're genuinely innovating, you produce value without excessive CapEx and OpEx. So, in the past, most of the initiatives we undertook at Inter didn't require substantial spending. Take the Inter Shop, for instance; we conceived that idea out of the blue and utilized the same components within our app, allowing us to generate significant revenue. We are always trying to raise the bar. The focus is on how we can innovate in our platform, how to cross-sell and upsell without the burden of significant investment. When you think about balancing ROE and growth, it's crucial to highlight that when we launched the growth plan back in January 2023, we stated that it was, and still is, a plan for both growth and profitability. I want to make it clear that we are a growth company. We're not an incumbent company. Our aim is to grow the business and revenue. But the fortunate thing, Rosman, is that we can achieve both growth and enhanced profitability, as we are demonstrating now in 2024. Of course, it won't always be linear. We don't expect to see ROE improve faster and faster quarter after quarter. However, in the long term, we can see how operational leverage kicks in. By adding more revenue, we dilute our fixed costs. This trend is set to continue. Therefore, we are very comfortable with both growing and innovating while delivering profitability. That's a good balance. At the end of the day, this is my role as CEO—to strike the right balance at the right time. We need to consider the context of the market, and I believe we've executed this well in the past and will continue to do so in the future.

Congratulations Alexandre on the promotion. I have a follow-up regarding the margins on the implied rates. I know that hedges tend to introduce some discrepancy in the numbers. But when we look at personal loans and credit cards, we note a decrease in the quarterly implied rates, right? I guess PIX is among the cards, and maybe I'm wrong, but I think overdrafts and similar lines fall within personal loans. So my question is, shouldn't we see those lines start increasing as you continue along this path towards more profitable products? I was surprised to see a decrease, so what happened?

Santiago here. Thank you for the question. Regarding personal loans, the improvements will be gradual but steady. Relative to a year ago, we are now 140 basis points higher in the rates we disclosed today. If we measure that related to CDI, we see even more improvement—we have a majority of that portfolio in consignado or payroll deductible loans, and we've had a series of portfolios acquired from retirees that had higher interest rates. Those are expiring and maturing, which has caused a slight dip in that rate. However, overall, we expect to see a continuation of improvements in the coming quarters. The ongoing digital initiatives, along with more portability in a lower rate environment compared to a year or two ago, will facilitate growth in that portfolio, and repricing should escalate moving forward.

Okay. And regarding the dynamics, I assume a similar approach. Shanji, should we anticipate continued recovery and an upward trend? Are we gaining traction there?

Yes. The primary driver in card changes is indeed PIX financing. As I mentioned in the previous question, we've been accelerating from the beginning of the year. But since it's a newer product, it's challenging to model its growth levels. It's a very short product, so we are running and trying to extend it to our client base, but we need more time to assess how much it will grow. However, as it gains share within credit cards, interest rates on these cards will obviously increase. The average interest rate for these loans is 6% per month.

I have a couple of questions if I can. First, regarding hiring in the quarter—do you think that was more of a one-time occurrence? Do you expect to hire more? I know you're still on track for the longer-term 30% efficiency; however, in the short to medium term, how should we perceive efficiency and any additional hiring plans you may have? Secondly, congratulations to Andy on the promotion. With that promotion, your focus has shifted more towards a global perspective. In the past, you've mentioned that the U.S. could constitute 50% of the business. Those plans may not necessarily apply today. Nonetheless, do you expect to devote more time assessing the U.S. or other potential geographies? How do you approach other potential markets and their contribution to earnings or profitability in the coming years?

João Vitor here. Let's address the last question about expansion. As I also talked about in the interview I gave to Brazil Journal, it's not solely about the U.S. business, but about having our global account initiative available for other countries, as we've mentioned. Currently, only Brazilians are utilizing that feature. We believe that we can extend this fantastic product, which is highly successful among Brazilians, to other individuals across the globe as well. On top of that, considering Inter's future positioning, I have been focused and excited about integrating solutions covering UX, UI, and technology behind the scenes. To stay ahead of the competition, we must consider what we will launch next—whether we will engage with clients solely through an app or whether we will use our applications on the back end to integrate directly with our clients through voice, PIX, or WhatsApp. I'm working closely with Gillian, our CTO, to align all these facets together. Regarding hiring, as I've mentioned previously, we are strategizing for the medium to long term, more so on the long term. I aspire to grow our workforce to millions; there is no issue there. However, we must ensure that they create value for our company. We are particularly focusing on technology and commercial roles, where we are investing for additional hires. To give you an idea, we engaged 195 new hires last quarter—we implemented a significant recruitment program in Brazil. I believe we have drawn in very talented individuals to enhance our IT capabilities. These individuals will assist us immensely in developing new products and evolving our current offerings. Additionally, we are hiring significantly on the commercial side, as these individuals generate revenue for our platform. However, we remain committed to our 6-30-30 plan, aiming for a 30% efficiency ratio. Therefore, our platform won't see an influx of new hires without also generating revenue. Our approach involves investing in technology and market initiatives alongside recruiting while ensuring we achieve at least double the revenue relative to the expenses. This is the equation we are using.

Regarding service revenue, we observed a substantial increase—especially from the insurance line. If you could talk a bit more about this; did this quarter witness any specific boosts, or is this level a new run rate you're reaching for services? Also, concerning the loan book, we noted a significant increase in credit card anticipation. Is this related to Granito’s integration yet, or not yet?

Santiago here. Thank you for the question. On commission and brokerage fees, which grew from BRL 146 million to BRL 189 million, indicating nearly a 30% quarter-over-quarter increase, we did not experience any one-offs. This was purely organic growth. The main drivers were Inter Shop, which saw a 50% GMV growth relative to the same quarter last year, achieving BRL 1.1 billion, and there was also a notable acceleration beyond that. This does not include BNPL, which has also scaled up nicely. Secondly, regarding the credit card participation on the loan book, as I mentioned, we have the fortunate reality of a strong influx of deposits from our clients. As stated earlier by João, this is a good problem to have. The aim is to deploy as much of this as possible into our loan portfolio—which is the most accretive long-term strategy. However, temporarily, we allocate some of that cash into short-term opportunities to yield a bit more than just CDI, which includes purchasing portfolios of anticipated credit card receivables. We gain a margin over the CDI here. These are short portfolios, yet we park the cash there to attain some extra yield until we can deploy it into our more lucrative loan portfolio.

Hello, João here. I would like to comment on Granito, which we have now renamed to Interpack. We do not have an active connection with Granito just yet. However, I am thrilled about this integration. To be honest, it has exceeded our expectations. I believe we can excel in working with SMEs and acquiring. Just by changing the name, we have seen a surge of clients inquiring about the acquiring product at Inter. As Santi mentioned, we have a solid cost of funding from our demand deposits, which will support our strategy effectively. Of course, we still have a lot of integration to complete. For example, Granito currently has its own app. We are now integrating that app into our business app, and I am excited about the potential we will have with SMEs down the road. However, as of now, most of our activities center around other players in the market, allowing us to buy the receivables, and we haven't fully leveraged the new platform yet, but I am very optimistic about what we can do with this embedded super app.

I have two questions. First, could you elaborate on your aspirations regarding SMEs? We observed robust growth in the number of SME accounts you hold, and you're speaking about good uptake from Interpack’s acquiring solutions—so we recognize that the SME sector is under-penetrated and lacks focus from many digital banks. So what opportunities do you see there, and how would you position the bank for SMEs? My second question pertains to the BNPL product. Can you provide some details on the BNPL product available through Inter Shop? What percentage of GMV are you financing for your clients now? What is the take rate you receive from the BNPL product? Additional color on that would be appreciated.

Neha, this is João speaking. I'll start with the SME aspect. In terms of positioning, we have almost two different strategies converging now. First is SME lending that we've been executing for many years and experiencing considerable growth, while the second revolves around the SME accounts that have gained popularity significantly. We currently have about 2 million clients with diverse profiles: nearly 1 million are micro-entrepreneurs, around 600,000 micro businesses, 200,000 small businesses, and the remaining, slightly over 100,000, are larger businesses. This accounts for roughly 10% of the companies in Brazil that have opted for our services. The profile of these customers leans heavily towards services, as our offering thus far was largely limited to a digital bank. We did previously sell the former Granito product, but it wasn't integrated within Interpack. Thus, we lacked a robust offering for retail. Therefore, we see significant opportunities for gaining new clients, enhancing existing offerings, and, in tandem, increasing our wallet share by promoting high-value-add products. This is where Interpack steps in, and we envision the potential for tremendous growth. To that end, we believe we're equipped to execute effective cross-selling strategies to systematically bundle our offerings. Our capacity to create a valued single-client experience across different products will enable us to meet the retail needs across all scales. So again, we have the balance sheet, we have the credit products, and now we’ll have the bundled offers, which stimulate our enthusiasm for expanding in the SME sector. André will address the second part regarding BNPL.

Thank you, Shanji. I’d like to touch on BNPL now. As I have mentioned for a while, I'm very excited about this product. We launched it through Inter Shop back in 2019 to enhance our customer engagement, connecting their interactions with the offerings presented. Great news! With some small tweaks to the product, we've observed growing volumes, moving from about BRL 100,000 per day to now nearing BRL 2 million and BRL 3 million. So we're approaching a considerable percentage of our GMV at Inter Shop, and these developments indicate excellent risk-reward metrics. I believe the future of consumer finance in Brazil involves providing these products in conjunction with excellent UX, UI, and finance embedded within. We see this vision applying to both goods and services. So we're expanding toward new categories—travel tickets, large purchases, and more—across the customer base. Regarding PIX financing, these initiatives, including BNPL, are progressively replacing traditional credit products, which is encouraging news not only for us but for all digital players in Brazil’s consumer finance trace.

That sounds exceptional. Just to follow up with André on the SME sector—do you believe you are acquiring SMEs by attracting them towards your banking products, and then cross-selling the acquiring? I assume that’s the route you’ll take since your banking offering likely surpasses your competitors. Who are you garnering these clients from—do you think it’s primarily from incumbents or possibly newer players like Stone and others?

Thanks, Neha. The natural strategy for us is indeed cross-selling, as you noted. We attract clients based on the quality of our business accounts, which are very popular due to excellent UX, both on the web and app platforms. In fact, we executed a large project across the past two to three years, merging the experiences—which attract customers rapidly, as we’ve been witnessing. The majority share of revenue that we currently obtain from these clients relates to transactional business, which is the heart of our product offering. As we grow with Interpack in our acquiring solutions, we can expect tremendous growth in our share of wallet and also in the exploration of new products we’re launching internally rather than depend (for instance) on M&A activities. I’m excited to note that with new credit products being launched, such as FGI, which is a significant portfolio in Brazil, there is substantial potential to explore this avenue, subsequently improving our reach in the SME market. Thus far, we’ve seen the most significant flow from major banks, highlighting dissatisfaction among customers from traditional banks that have faced high fees, which has funneled clients in droves to us since our rollout of free accounts back in 2019.

Let me ask three quick questions. The first one concerns Page 22 where you reported your cost of funding at 6.8%, the lowest level since the second quarter of 2022. However, as a percentage of market rates, it has increased to 64%. In the first quarter of 2022, you were closer to 55%. Therefore, are you experiencing pressure in raising deposits, which might explain the higher cost of funding compared to market rates? My second question relates to your marketing expenses, which saw a notable increase. Could you clarify whether this is a level you expect to maintain going forward? Are these marketing expenses solely focused on increasing the client base or enhancing engagement? And lastly, concerning your insurance sector, we noted the number of policies rose approximately 2.5 times quarter over quarter, yet revenues only grew by 10%. Does this imply that the policies are of a much lower ticket size? How should we make sense of this significant disparity between the number of policies and revenue generation?

Mario, I will address all three questions. Regarding the funding—this directly correlates the right-hand side of the balance sheet with the left side. On the liability side, we are quite fortunate to have had the quarter with the highest growth in deposits, excluding the fourth quarter, which traditionally shows positive seasonality. This quarter, we raised BRL 4 billion in deposits, out of which BRL 1.3 billion were transactional deposits that bear no cost. However, we also accrued BRL 1.9 billion in term deposits and an additional BRL 0.8 billion from other instruments. Most of this excess funding, as I mentioned earlier, is primarily allocated into liquid assets that yield close to 100% of CDI. Until we can deploy these into the loan portfolio, they compress the NIM somewhat, yet they are accretive. We believe that as we enhance our client relationships, prompting them to trust us with their savings while using more transactional services, their integration into our platform will benefit us, regardless of the cost of funding level. We consider our cost as a percentage of CDI to be a competitive advantage, and we will retain this ahead of the competition. That said, there will be fluctuations depending on the pace at which we gather deposits and the mix involved. On marketing expenses, we recognize the need for investment in this area; it is not merely spending. We want to establish a stronger brand presence because we believe an excellent product coupled with enhanced branding will ultimately generate favorable outcomes. It’s challenging to determine how it will evolve over time, but the intention is to test higher levels of marketing expenditures and adjust based on achievable results. We pay close attention to metrics regarding our upselling and cross-selling activities to assess how effective this investment appears. Lastly on insurance, yes, you anticipated the answer correctly. FGTS is relatively small ticket insurance, which drove the main growth trend in that business line, and the average size of these policies declined this quarter. Nonetheless, we welcome the growth with over 2 million clients using FGTS coverage; we capitalize on that opportunity to fully digitalize both the loan and insurance sectors, yielding satisfactory results, so far.

That's clear. Santi, returning once again to the deposit question—how do you perceive the competitive environment regarding raising deposits? In addition, given your already healthy deposit base and a pretty low loan-to-deposit ratio, what would necessitate a focus on growing deposits amid a seemingly competitive landscape?

João Vitor speaking. I must express my pride in our deposit franchise. I began at Inter as an intern focusing on securing deposits for our bank tech in 2004. I've been closely monitoring this aspect for years. As Santi anticipated, we're facing a good problem; clients are choosing our platform not only to transact but to save. In the past, we distributed many third-party CDs, bonds, and other financial instruments. Now, clients want to see those options coming from Inter. We could begin reducing the percentage of CDI that we pay, but that might not significantly affect profitability. Nevertheless, we could lose clients to competitors. We ensure that we maintain that at 100% of Selic. Our demand deposits are growing rapidly, and when you compare the growth of the loan portfolio against that of demand deposits, you'll find they are in tandem. Therefore, any new deposits we gather—even at 100% of Selic—can still yield 12%, 13%, or 15% yields in securities, which ultimately accrues to our net interest income. Hence, our deposit franchises are continuously becoming more efficient as we advance. I'm very proud of that and confident it will offer a strong differentiation against our competitors. That's how we manage our cost of funding here at Inter.

This concludes our question-and-answer session. I would like to yield the floor back to Mr. João Vitor N. Menin for his closing remarks.

I want to thank our team; our employees are working hard every single day to raise the bar at Inter. I also want to express gratitude to our shareholders for their support and our business franchise. Furthermore, I appreciate the analysts on the sell side, who posed very insightful questions. We value this interaction greatly, and we’re delighted with our business. We hope to see you again in a few months for another strong quarter. Thank you very much, and have a great day. Goodbye.

This conference is now concluded. Inter's IR department is at your disposal to answer any additional questions. Thank you for attending today's presentation. Have a nice day.