On Tuesday, Inter & Co Inc. (NASDAQ:INTR) received an upgrade from Citi, shifting its stock rating from Neutral to Buy. The financial institution also raised the price target for the company’s shares to $5.30, a significant increase from the previous target of $2.00.
The upgrade comes after Inter & Co demonstrated a strategic move towards achieving a higher return on equity (ROE). This is primarily through the repricing of its credit portfolio and maintaining a tight grip on expenses. Citi's analysis of the company's second-quarter 2023 results revealed notable progress in this regard. The results also hinted at the potential for further improvements in the net interest margin (NIM) due to new initiatives and possibly lower rates.
Additionally, Citi anticipates a substantial improvement in the cost-of-risk for Inter & Co. This is expected to arise from increased restrictions on credit card origination, which should mitigate potential credit losses. These positive developments have bolstered Citi's confidence in the company's ability to deliver improved returns in the upcoming quarters.
Despite a recent surge in Inter & Co’s stock price from its lows, Citi believes that the stock still holds an attractive upside potential. This optimism is based on the anticipated new levels of returns that the company may achieve following its strategic adjustments.
In other recent news, Inter & Co reported a robust first quarter, marked by significant client base growth and increased revenue. The company achieved nearly 32 million clients and an improved efficiency ratio of 47.7%. The return on equity (ROE) was recorded at 9.7%, and the credit book grew by 28%, reaching over BRL 32 billion. The company also reported record-breaking revenue of BRL 2.3 billion.
Inter & Co also announced the appointment of a new Investor Relations Officer, Rafaela de Oliveira Vitória. Vitória, with a background in finance and economics, takes over from Santiago Stel, who will continue serving the company as its Chief Financial Officer (CFO). This transition is part of a strategic move to streamline the company's leadership roles and enhance its communication with shareholders.
In other developments, investment management firms Squadra Investimentos Gestão de Recursos Ltda. and Squadra Investments Gestão de Recursos Ltda. informed the company of a substantial equity sale. The firms now hold an aggregate of 32,082,939 securities issued by Inter & Co, equating to approximately 9.97% of the company's Class A Common Shares. Despite a slight increase in non-performing loans (NPLs), Inter & Co remains confident in its growth and profitability trajectory.
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