Inter & Co Inc

NASDAQ:INTR

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, and thank you for standing by. Welcome to Inter Fourth Quarter 2021 Earnings Conference Call. Today's speakers are Joao Vitor Menin, CEO; Alexandre Riccio, VP of Finance; and Helena Caldeira, CFO and Investor Relations Officer. Please be advised that today's conference is being recorded, and the replay will be available at the company's IR website.

[Operator Instructions] Now I would like to welcome one of your speakers for today, Mr. Joao Vitor Menin, CEO. Sir, the floor is yours.

[João Vitor Nazareth Teixeira de Souza, executive]

Good morning. Thank you, everyone, for being with us. We're going to start our 4Q 2021 results for Inter. Just to highlight, it's our first time that we're doing this presentation in English. The reason for that, as of today, we have more than 50% of our shareholders being foreign investors, so we're going to try to make that in English to accommodate everyone, but also we have the translation for the Portuguese or the Brazilian investors as well. So again, thank you very much.

Myself, Helena and Alexandre, we want to speak about the main highlights of 4Q 2021 and also for the 2021 year-end results. As usual, I'd like to spend most of the time here, myself, talking about some strategic things that were achieved on 2021. Later on, Alexandre is going to talk about the financials. And later on, Helena is going to talk about the AR.

So I'd like to talk about 3 things, 3 topics, on this first minutes. First of all, I'd like to talk about our people. I would say that we have the earnings release and the financial statements available for everyone, and so I'd like to spend most of the time here talking about intangible assets and our people are probably the best asset that we have here at Inter.

On 2021, we were able to close the gap on some very strategic positions here at Inter, such as investments, risk, credit analysis, accounting and data. On these 5 important positions, we brought very talented people to help us, and we're starting to see the results on that. I'd say that this is not as spending, but think as investment. And therefore, I would say that we get to 2022 well prepared to grow more, to grow in a sustainable way, as we always highlighted on our previous earnings call. We have a good balance between other verticals here, and therefore, we can grow despite a challenging macro environment for 2022.

The second topic is about our revenues. I'm very proud that we were able to grow almost 3 folds on our revenues from 2020 to 2021. The reason for that is because we have been working for a while on our revenue, revenue stream diversification. As of today, we have 10 big groups that generate revenues for us. We can split them on credit and service. We have 5 different credit portfolios. We have 5 different service fee generation products. I'd like to say just to do -- to use a very Brazilian thing, we are like a flex card. So we can grow faster on the credit. We can go faster on the service. We can grow more on the collateralized credit. We can grow less on the collateralized credit. So this ability to really drive our earnings, it's very important for us, mostly in a very tough macro environment as 2022. So we are prepared to keep growing our revenue, so we should be growing a lot as well in 2022 in a very safe way, in a very balanced way.

The last thing I would like to highlight is about innovation and growth. We are still growing a lot, not only in number of clients but also in number of products, CSI, revenue, deposit base and so on. But also, as you know, we used to have 5 big verticals, and I'm very proud to announce that, as of today, we were able to put in place our sixth avenue, which is the remittance business. And for us to achieve this very good, very strategic new vertical, which is the remittance, we need to buy USEND business on the last quarter of 2021. I'm very proud of this project, of this initiative.

We know that there are some skepticisms on the market about this initiative. Some investors say about losing the focus, ourselves not being able to compete in the U.S., but I disagree. As in 2019, when we launched our Inter Shop, most of the market was also skeptical about our chance to compete and to prevail, and we were able to do that. And as of today, most of the digital banks are trying to mimic ourselves on this initiative. So very excited with the USEND business. I'm sure that's going to be a very important vertical, the sixth vertical for Inter going ahead, and very excited with the diversification of the revenue and very excited also with the talent, people that we brought on 2021.

I believe that these 3 key things we can keep growing our business, keep innovating, keep improving the revenues, keep diluting our expenses and very excited and prepared for 2022, again, despite of the tough macro environment that we might face ahead of us.

With that, I'm going to hand over to Alexandre, which is going to -- who's going to deep dive on the numbers for our quarter end of 2021 full year results. Thank you very much, Alexandre. It's with you now. Thank you.

[Alexandre De Oliveira, executive]

Thank you, Joao, and hello, everyone. So good morning, and thank you for participating in our results conference call. So as Joao said, first time we're doing it in English and very good to be with everyone.

I'll now go through the highlights of the fourth quarter end of last year. So to start, the fourth quarter did not bring news in regards to the macro scenario uncertainties. So the environment in Brazil is still turbulent, and we experienced several Selic hikes, so the interest rates keep coming up in Brazil, putting it as a challenging scenario, let's say. But despite that, we had once again a very strong execution in a business of high growth, scalable and resilient. We reached our goals in revenue per client, which is the ARPUs for 2021 with very good margin, showing the power of our execution and capacity to cross-sell in our customer base. The key drivers of long-term value creation in our business, such as client growth, app log-in engagement, revenue growth, amongst others, continue on the right path as we keep improving our platform and our Super App.

Getting to the numbers. I will start with some growth highlights. We reached 16.3 million clients last year, 17% growth quarter-on-quarter and 93% year-on-year, adding more than 8 million new clients to the base in 2021. Our ARPU, which I mentioned earlier, reached BRL 218, an 8.7% growth year-on-year, making us very proud about the number, especially in a year with still such a high net adds on clients. So again, 93% growth in the client base, and we are still able to grow by 8.7% on our ARPUs.

Our customer acquisition costs stayed healthy on the quarter at BRL 28.79 with a 6% reduction over the last quarter. Cost to serve was stable on an annual comparison with a light increase on the fourth quarter if we compare to the third quarter. Although this metric does have some impact of inflationary pressures, we believe that this increase is temporary. Our CTS has a lot of room to decrease. We have several opportunities that are already known and will tap on some of them during our execution in the year 2022. Our cross-selling index maintained a positive trend, reaching 3.44, with a good evolution when we look at individual cohorts. So we're also happy there. So cross-selling is happening as we need. And finally, our NPS, the Net Promoter Score, stayed at the excellence level right at 84. We're also happy with that.

Moving into our business avenues. I'll start with day-to-day banking. So in day-to-day banking, we reached BRL 9.9 billion in demand deposits, very good growth, 8.3% quarter-on-quarter and about 50% year-on-year. We transacted in cards about BRL 14.2 billion in the fourth quarter, that was our GMV in the fourth quarter; 22% growth quarter-on-quarter, and we did almost BRL 43 billion in the year, 93% growth year-on-year; and we were able with that to increase our revenue base in cards for BRL 453 million, that's 113% growth over the year. And we're happy that this evolution is materializing everything that we've been talking about when it comes to the card business. So we've talked about all the evolutions that we have promoted in the platform, and when this comes with numbers, that's really good.

Moving into Inter Shop, our marketplace. We had that tremendous 2021. We transacted BRL 3.5 billion in GMV. That's a growth of 200%, and we're very proud about all the team as we had at this goal, which is almost like a dream because of the size of it, moving from just above BRL 1 billion to BRL 3.5 billion. So we're very happy that we were able to reach, and again, motivated to keep executing there. Our revenues in Inter Shop went to BRL 246 million in the year, 281% above 2020, and we reached a take rate of 7.75% in the fourth quarter, 1.5 percentage points above the take rate a year before. So good there as well, with the net take rate on the fourth quarter at 1.2%. So a lot of people ask us about our capacity to have a positive net take rate, and it's happening. So 1.2%, very happy with that, that's 0.5 percentage points quarter-on-quarter.

In investments, we also had very good highlights. So we increased our revenue base by 101%, reaching BRL 100 million, that's a big highlight for the year. We reached 2 million clients with investments with us of some sort. And we finished the year of 2021 with BRL 57 billion in assets under custody, a growth of approximately 30% in the year despite what we saw in the equity markets that could put some pressure on it. We became the most complete investment platform in the country, being that the only -- with international online brokerage hosted in our app and we also launched structured products, trading robots and many other features that make our Super App the best one for investments.

In insurance, we reached 839,000 active clients in the fourth quarter. That's 229% growth, very proud about that. Our revenue base achieved BRL 88.9 million, and we sold during the year, 864,000 policies (sic) [ BRL 864 million ]. So very good there. Our execution of what we call contextualized sales and premium are really paying off as we go.

Going to our final avenue here, which is credit. We reached BRL 18.6 billion in our total credit portfolio, growing 97% year-on-year. Our origination reached BRL 5.8 billion in the fourth quarter, so best quarter of the year, totaling almost BRL 20 billion in 2021, that's 124% higher than 2020. Our loan loss provision reached 2.7% of the portfolio, while the NPLs stayed at 90 -- so the NPLs over 90% -- overdue over 90%, stayed at 2.8%. We're confident that it's very important to have a diversified portfolio of credit to have a good credit journey in Brazil, and we've been able to deliver it again in 2021, including a lot of collateral every time that's possible.

Some final numbers. We grew our revenue base by 130%, reaching BRL 3.2 billion. Very nice to see a company that can have this type of growth on a revenue base that's already large. So we went from less than BRL 2 billion, much less than BRL 3.2 billion. We reached -- we grew more than 140% in our fee income, reaching BRL 1.3 billion, with a mix that, as Joao Vitor mentioned earlier, really differentiates us from all the comparables, 7 groups of revenues within fee with the most relevant one with only 35% of the total, that's something to be proud about and something we must keep working on.

We finally -- final remarks, we improved our cost-to-income ratio by 6.1 percentage points in the year, showing that in terms of operations, we've been -- we're starting to get operating leverage. The cost to income finished the year at 82.8%. And finally, we finished the year with a net profit of BRL 78.4 million in the adjusted, with the Basel ratio, Tier 1 ratio, at 44.3%, giving us a lot of room to grow and to keep executing our strategy.

To finish, I would like to thank our stakeholders, including our clients, shareholders and mainly our team, so close together, as we execute. I'll pass the word to Helena for some final remarks. Thanks, everyone.

[Helena Caldeira, executive]

Hello, everyone. Good morning. Thank you for joining us in this earnings call. Before we go into the Q&A session, the idea here is just to quickly go through to actually highlight that as disclosed on a material fact that we did in December, we continue working on a new design for our corporate reorganization. As soon as possible, we will communicate to the market about the next steps, and we are excited to design something that we believe that we'll work for all our different stakeholders. We really appreciate your participation on these earnings calls with us.

And we believe we can now go into the Q&A session.

[Operator]

[Operator Instructions]

And our first question comes from Otávio Tanganelli from Bradesco.

[Otávio Tanganelli, analyst]

I wanted to get a little more color on the losses related to the credit assignments that you mentioned in the press release. According to our estimates, it's generated a loss of something close to BRL 70 million in the quarter. So I wanted to understand a little bit the rationale on that if there are any specific lines? Was this related to credit cards or mortgages? And for us to understand how recurring should this be when we think going forward?

[João Vitor Nazareth Teixeira de Souza, executive]

So Joao Vitor speaking here. Actually, what we did on 4Q '21, we sold credit card portfolios, so we're talking only about credit card here, okay? We sold credit card portfolio that was classified as HH&H also, to a company called Meu Acerto. As you might recall, we bought this company maybe 1 year ago. We're very excited with the digital collecting capability of this company. So we are trying to do our AB test here to see how more efficient Meu Acerto will be in collecting our credit portfolio that are classified as H, not as HH. So for the first time, we sold H credit card portfolio. We believe that the performance for Meu Acerto is going to be higher than the performance of our internal collection product here at Inter.

As of today, we do a collection when you come from H to HH of about 10%. We think that we will be able to get more close to 15%, 20% with Meu Acerto doing the digital collection process. So that was the reason for us to sell the H credit card portfolio. If it works well -- we believe if we work well, we will keep doing that. Of course, it do depends on the size of the credit portfolio classified on H, and that's the reason why you did that.

About the losses, we didn't have a loss on selling this credit portfolio. It's just the way that KPMG put on the statement because actually, it was -- we already past the BRL 70 million, as NPL, as provisions on our income statement, so it's just a managerial way of looking. So there were no sales -- no losses of BRL 70 million on this credit card portfolio assignment, okay? So that's the reason why, and that's how we should read the correct way for the assignment. So there wasn't a loss of BRL 70 million on the credit card.

[Alexandre De Oliveira, executive]

Joao, may I just touch one quick point. Just reinforcing, Otávio, this -- the expense itself is usual cost of risk, so business as usual. But it -- but there is the disclaimer of the sale. Okay? So cost of risk, business as usual, that's what it was.

[Otávio Tanganelli, analyst]

If I can just one follow-up, and sorry for my ignorance here, but if those credits were already written off, should they flow through the P&L anyway? I didn't quite get that.

[Alexandre De Oliveira, executive]

So there is -- so basically, if you look there, we did 2 credits that were on Level H, that's before writing off, and on HH, which is after write-off. The ones that were on this level H, they are the ones that caused this impact. That's the reason why.

[Operator]

And now the next question comes from Tito Labarta.

[Daer Labarta, analyst]

I guess do you have any color, outlook or guidance that you will be providing on your revenue per client and how that should evolve, whether it's for 2022 or longer term outlook? And how you think you'd be able to monetize the clients, also similarly in terms of a long-term profitability outlook that you're thinking about, just to kind of help us think on how this can evolve, not just for this year but over time, as you continue to monetize your clients?

[João Vitor Nazareth Teixeira de Souza, executive]

Tito, Joao Vitor speaking here. Yes, we see a good outlook for monetization. And just to recall, as I mentioned earlier, the reason why we're confident with monetization is because we have 10 big groups, 10 big verticals to monetize our clients, either on credit or fee income. And if you break that down, 5 different ones for our fee income and 5 different ones for credit. This balance, I have been stating that for a while. It's very important for the business because we can face a bad macro environment. We can face a change in the regulation, for instance, from the regulator, from the Central Bank, suppose that they want to increase the Tier 1 requirements for payroll-lending frames so we don't rely only on payroll lend.

Having said that, I believe that we're going to keep growing the monetization, both on fee income and credit going forward. Also because even having a bad macro environment ahead, as we mentioned also many, many times before, we do have a big chunk of our credit portfolio as a collateralized one. So it's safe. So we can keep growing that fast. Of course, we're going to adjust that. So for instance, on credit card, we're going to be more conservative this year. Actually, we have already start being more conservative on credit card on the last 2 months of 2021. So very excited that our ARPAC is going to keep improving. And also, as I always have been stating, we want it to be a good balance, good breakdown between fee income and NII.

If you take, for instance, our monetization, the investment platform on the floating, on the interchange and on the Inter Shops, we printed very, very good numbers for 4Q 2021. So the outlook for us, not only for 2022 but for 2023, 2024, is very positive from the monetization. I do think, Tito, that one thing that differentiates amongst our competitors, it's this very unique platform that we build that have this many levers for us to pull to speed up monetization.

So very good outlook for monetization ahead for next 2, 3, 4 years, whatever, and also again with another vertical, the remittance business, had a big, big market, a big addressable market. So very excited with the monetization going ahead. And again, pretty confident that we're going to keep diluting our costs and improving the ARPAC and keeping the CTS stable or even decreasing, we can improve the earnings for the business ahead. So that's my view for the next, may be, couple of years.

[Daer Labarta, analyst]

Great. That's helpful. Maybe a follow-up, if I can. You grew your loan portfolio close to 100% in 2021. And you mentioned you'd like to be a little bit more conservative, particularly on credit cards this year. Any color on how fast the loan portfolio would grow this year? Should we expect this year that you have faster growth on fees relative to loans because of that? And within the segments, as you mentioned, you probably grew more, even more collateralized than credit cards? Any color in terms of the different growth rates in the different loan portfolios for the year?

[João Vitor Nazareth Teixeira de Souza, executive]

Okay. Good. Yes, I do think and I cannot assure you that, but I do think that for 2022, our growth is going to be more robust on the fee income than on NII. The reason for that are two: first, as I mentioned, we're being more conservative on credit underwriting, mostly for our credit card and also for the secured credit portfolios, mortgage and payroll loan. It's a matter of the market being more appealing to contract credits. We see that the trend for -- not only for Inter but for the whole market, for mortgage business and for payroll loan business -- payroll loan business for 2022 is not very strong.

Having said that, we have a small market share on these 2 segments, so we have room to grow faster than the market. So when you combine ourselves being more conservative on credit card and a worse outlook for credit origination for mortgage and payroll loans, our credit portfolio growth for 2022, for sure, is going to be smaller than it was on 2022. How much smaller? Hard to say. Let's see, we have a credit package that might be implemented in March. There were some reports on the newspaper today. So it's very hard to say. But for sure, we're not going to grow in the same pace that we did in 2021. But again, we have the 2 pools, we have the funding. We have 5 different verticals to keep growing and to keep gaining market share on the credit business amongst the Brazilian banks. So that's the outlook for that.

[Operator]

And the next question comes from Henrique Navarro from Santander.

[Henrique Navarro, analyst]

My question is on breakeven. I understand this is not a guidance, but maybe a soft guidance that eventually. The breakeven, with sound profitability, was going to be a 2023 story. Do you believe that with the U.S. initiative and things like that, do you believe there is the risk of postponing this breakeven beyond 2023? And also if you can comment on the U.S. initiative, how it's going? Anything you can share with us, I would appreciate.

[João Vitor Nazareth Teixeira de Souza, executive]

Okay, Henrique. No, I don't think that the U.S. initiative and other things that we're putting in place here, as I mentioned, last year, put many important as a key executives to help us with investments, risk, credit and so on. I don't think that these things they are going to postpone the breakeven or the profitability beyond 2023. I think it's the opposite. I think that the business -- the remittance business, which we call today our sixth vertical, it's not a business that we need to put a lot of CapEx and also OpEx. I mean, it's a cash call business. It's running. It's profitable. So I don't see that jeopardizing our earnings ahead. So it's the opposite of that.

I see a good trend also despite the macro on Inter Shop, Inter Invest, in a lot of our initiatives here flowing. So I think that, again, not as a guidance but as a soft guidance, we see breakeven on 2022. Actually, we see an improve on the ROE despite ourselves having a low, low ROE in 2021, but I see improving for our budget here, improve our ROE on 2022 despite the new initiatives.

And also just to comment on the U.S. initiative. I do believe, and again, this is my belief, that it was one of the most important things we did, that it was to acquire Houston business. And I'd like to remind when we launched Inter Shop, and it was something different, something that the market was skeptical about, but -- and I would say that it's about our intuition here, about this business. I believe that we need -- it's not a matter of should or should not go. But we need to go there to start with the remittance business as a cash cow, and later on, starting to put another layer of monetization of engagement on our app, besides -- which, by the way, is going to be one single app mostly on the second half of the year, maybe third quarter of this year.

So it's going to be like an Uber app. You will see only Inter app. You might choose to use that in the U.S., in Brazil. We're going to have different products in U.S. and Brazil, like having Uber for instance, but it's going to be one single app. So -- and having this initiative that made us this unique Super App in Brazil, mimic to our app in the U.S. I believe that's going to be a very compelling story, not only for the market but mostly for the clients. We do have also soft guidance of having 1 million clients by year-end in the United States. And with this single app, and if you get 1 million clients there with one single app, that's called the Uber app UX. Just to emphasize, I would say that we're going to be very well positioned to really have a global account running with scale.

So again, very excited with the USEND acquisition. I would say that I believe it's going to change our business as Inter Shop did when we launched that 2 years ago -- 2.5 years ago. So that's my views -- that's my view for that. And actually, it's starting to get good traction amongst the U.S. residents, not citizens, immigrants and also amongst Inter clients in Brazil, willing to have a global account where you can save in dollars, you can use our debit card. So again, very excited to the outlook for this new vertical.

[Operator]

And now the next question comes from Flavio Yoshida from Bank of America.

[Flavio Yoshida, analyst]

So my question is -- I actually have 2 questions, if I may. The first one is on Inter Shop. So we saw a higher net take rate in the last quarter of the year, even considering higher cash back levels. So what was the main reason here for the increase in the gross take rate? And can we consider this trend of a higher net take rate going forward?

And my second question is on the client base. So the client base increased strongly in the fourth quarter. And at the same time, the customer acquisition costs reduced. So was there anything different on the strategy here on the client growth strategy? Or can we assume that competition is somehow becoming smoother?

[João Vitor Nazareth Teixeira de Souza, executive]

So thank you for the question. Let's start from the last one. I do believe competition is getting tougher, for sure, and it's quite easy to see that. Anyone can just download -- for instance, app and platform, and you see many of the competitors dropping strongly in terms of instance from 3Q to 4Q. I could mention one big one, but I want to be polite here, but we have a guide that dropped dramatically. So I do believe competition is going smooth, yes.

But not only that, I would say that we have built a very good team here to engage the clients, to bring new clients with a decent CAC. We have been stating for a while that our CAC is not going to blow through the roof and it didn't happen, and I believe that's not going to happen in 2022 and it's not going to happen in 2023. And the reason for that, not only we have this talent team working on that but also it's the value proposition, ourself in this -- and I'd like to say this word, this amazing, unique Super App helps allow us to engage to bring clients through referrals. So it's really better than the other competitors, our app, and this makes a lot of difference for the customer right at the end of the day. So this is one thing.

Going to the Inter Shop question, I'm very excited with Inter Shop. When we launched Inter Shop 2 years ago, our vision was: we want to be a gateway between the buyers that have their credit, their payment capability at their finger and the merchants. We do know that this connection between merchants and buyers was always, I would say, supported by the banks because at the end of the day, you need to have a credit card limit and you need to have a payment capability for you to buy either online or offline.

What we wanted to do at the time, our vision was to improve the efficiency of this gateway. So for instance, when we do an end-to-end connection, we skip the juicy MDR rates that we see on the market, so we can be more efficient for the merchants, so they can pay us a higher take rate than they used to pay. And not only that, on the marketing cost for these retailers, we can be more efficient as well because they only pay on conversion. So they can pay us more.

So it's a more efficient way for us to drive sales, good sales for these clients, for these partners. And not only, for instance, when you have the end-to-end connection with these retailers, we don't have fraud, so they don't need to spend a lot with fraud. So some more intelligent, efficient way to connect with buyers and sellers, that's the vision for Inter Shop. And we believe that with this capability, we can, I would say, have the fair monetization for Inter, and not only for Inter but other banks that are mimicking our project. Because that's the right balance between what the banks can monetize on this type of sales and what the retailers can monetize on this type of sales.

And lastly, we see a big competition from Chinese companies and so on. And the outcome for that the Brazilian retailers, they are looking for us more and more and say, "Look, I want to really be our exclusive part of this vertical, for instance, shoes, sports and so on." Hence they realize that with us, they can really be our omnichannel initiative, and therefore, to compete with Chinese marketplace, for instance.

So I see a very good turn for Inter Shop in 2022. This [Technical Difficulty] competition amongst the retailers are positive for us. So very excited with the type of gateway that we built. And I would say that Inter Shop is going to help a lot of retailers to compete in a more efficient way ahead. So again, I really love Inter Shop initiative. So I believe that's something we drive a lot of activations to everyone. So it's a win-win, I would say, win-win situation, good for the client, good for Inter, which is the gateway and good for the retailer. So that's my job done.

[Operator]

And now the next question comes from [ Geoffrey Elia ].

[Unknown Analyst]

I wanted to come back to this assignment of credit impact, because I think it's something that's kind of confusing for a lot of us. Maybe just make it very simple, what would the NPL ratios have been, both total NPLs and credit card NPLs, if you had not carried out that transaction in the fourth quarter?

[Helena Caldeira, executive]

So Jeff, so the NPL ratios for the credit cards, they would probably be something around 6.5% to 6.6% if we had not done this nonperforming loan sale. So this is like -- this would be like what would still be on balance. This was something that instead of going to write off, we did the sale for the Meu Acerto. Alexandre, do you want to complement?

[João Vitor Nazareth Teixeira de Souza, executive]

Actually -- sorry, Joao Vitor here. I'd like to just complement that on top of Geoffrey asking. So the NPL for credit card would go up slightly. But on the average, the NPL for our credit portfolio wouldn't change materially. The reason for that, again, a good diversification between credit cards, mortgage, payroll loan, agri business, SME and so on. So just to emphasize that the change on the NPL for the credit portfolio in a whole, it's not material at all. So just to emphasize that.

[Unknown Analyst]

And then just stepping back in terms of credit trends that you're seeing in cards, in particular, clearly, a more difficult period for the Brazilian economy growth slowed down a bit. You've mentioned you've become more conservative. But can you discuss the early indicators that you're watching on that portfolio and what they're showing?

[João Vitor Nazareth Teixeira de Souza, executive]

Very good question, Geoffrey. As I mentioned earlier, we improved a lot the quality of people here in 2021 in terms of risk management and credit management. Both [indiscernible] joined us last year. And I would say that as of today, we have more tools, more, I would say, KPIs or metrics that we follow day after day in terms of credit performance, mostly on the unsecured ones because on the margin payroll we don't -- I would say, we don't care a lot about that because it's a different approach.

But on a credit card, for instance, we -- and 2 of them, I would say that's the first [indiscernible]. So which with this one we can try to sterilize the impact of growing the credit card portfolio or also decreasing the credit card portfolio. So we have the right view on the trends and realize that, as I mentioned, for the last 2 months of 2021, these metrics, they had a deterioration. Not big one, but they had.

So for instance, we active reduced the underwriting for credit cards for one of the ratings that we have here in our model. So I would say that we have been more active and with more managerial tools to really try to be ahead of the trend on the market. But I see a not-so-good trend for NPL overall on the market. But again, ourselves [Technical Difficulty] small credit card portfolio, we can be more assertive and we can skip a big NPL formation on this segment.

So we're very confident that despite the macro and with these tools, and ourselves being more conservative for the past 2, 3 years on the credit card business, we can keep having our NPL on this 6%, 5%, 7% ballpark going forward. So we -- I would say that we have good tools today to do our best. Of course, we cannot control the environment, the macro environment, which I believe is going to be harder ahead, but we have the tools to make sure that we have a good NPL information for credit card.

[Operator]

And now the next question comes from Jorg Friedemann from Citibank.

[Jorg Friedemann, analyst]

Sorry for that. I was on mute and I didn't know. So I'd like to follow up on the question on credit assignment still, and a second question. So first on the follow-up, that part of active credits that was in H, I understood the explanation that there was no real loss. However, I do not understand why was that booked against P&L. If it was on H, since the previous quarter, it would have already been fully provisioned. So the assignment should be booked against provisions, not against the P&L. So the question is, Part of that was not previously booked in the category H, and that is why you had such an effect in this quarter. So this is the first question.

And the second question is -- just if you could provide a bit more color about the cohort changes that took place in this quarter, what were the reasons and what really changed on those classifications?

[Alexandre De Oliveira, executive]

Jorg, thank you for the question. So on the question -- the first question, the credit assignment, so it's just a matter of compliance with the rules. So what happened is, let's say, 90% or more of the expense was already done as provisions. But when you do the sale, the final sale of this credit that is in H, you have to reverse revenues and then imply a new expense on a different line. So the net effect is about the same, but you do have to -- we did give the disclosure of the entire amount that's leaving the balance sheet, okay? So it's, in the way, we look at it managerially, it's cost of risk just like a provision. But in the way we publish it, we wanted to make it clear and obviously follow all the guidelines that we have to follow, okay?

[Jorg Friedemann, analyst]

As I said, if I understood correctly and please explain to me if I'm not, but what you're mentioning is that there were changes within lines, but the net effect was pretty much 0, but because you removed provisions on the one line and you book at these losses against P&L in the other line, correct?

[Alexandre De Oliveira, executive]

That's it, Jorg. Imagine if you have like, let's just say you're going to do the sale of BRL 70 million. And you do have an outstanding balance of provisions of BRL 70 million, right? Once we do the sale, we do like -- we reversed that BRL 70 million, which is like revenue and expense of BRL 70 million again under a different name, let's say, which is the credit assignment. So zero net effect.

[Jorg Friedemann, analyst]

Okay. Perfect, clear.

[Alexandre De Oliveira, executive]

Yes. And on the cohort, -- we've been doing a lot of work internally with our -- with databases and with our data lake and we've done some improvements. And once we were going to publish the numbers using this data lake, we just thought we should adjust all the trends so that everybody is on the same page on some changes that happened, okay?

[João Vitor Nazareth Teixeira de Souza, executive]

This is Joao Vitor. Let me just -- this is important, because we have been putting a lot of energy, a lot of cash, people, time, everything on improving our data lake. And I'm very proud that as of today, we have a fair good data lake here at Inter. And with this data lake, when we start pulling the data from the system, and in the past, we used to do something manually, we have different cohorts.

And what we did, we published everything with the past cohorts, so everyone will have the comparison of engagement from cohort to cohort on the same basis that we have from now on. That's it. So better data information for us to have exactly the precise number of active clients and active products and so on in the same base from first Q 2020, 4Q 2021, for instance. So that's it. That's going to be the new trend and the new metrics going forward for the cohorts in terms of engagement and cost.

[Jorg Friedemann, analyst]

No, that's perfect. And had the USEND acquisition have anything to do with the reclassification or not really?

[João Vitor Nazareth Teixeira de Souza, executive]

No, no, actually not. I mean, we do have, of course, clients there with only one product, for instance, it's a reality. But that's not the point that we're talking about 150,000 clients on top of 60 million. So that's not material. The reason why we changed -- that's not because of the new sense. The new way of us pulling the data from our data lake and having a very accurate numbers for engagement and cross-sell, that's it.

[Operator]

And now the next question comes from Pedro Leduc from Itau BBA.

[Pedro Leduc, analyst]

Thanks also for clarifying this assignment thing. I'm going to ask a little bit on top line and operating leverage, okay? We saw in terms of the NII composition, a significant acceleration in gross interest revenues, about 30% Q-on-Q twice as fast as the portfolio. Can we read into this as you are already repricing up credit or testing the elasticity on your product? And when it began, if it was late 4Q, and we should see more of this impacts throughout 2022. So that's the first there on the NII acceleration that we saw. Just trying to pick your brains if this is a trend and just really begun in 4Q.

[João Vitor Nazareth Teixeira de Souza, executive]

Okay, Leduc. More or less, I would say that we have been repricing our credit portfolio. But it takes a while, first, to start collecting this, I would say, this extra revenue from that. Because we do have most of our monetization coming from the current credit portfolio in the x rates, for instance. So -- when we change, that takes a while for us to start collecting for I would say maybe 1 year or 4 Qs or 6 another quarter for us to start to see that. But we're doing this new reclassification of the credit underwriting. So this is one thing.

But what we see in terms of the revenue, which is very good as I keep always saying that we have been growing at the initiatives such as a new business that you put in place. The agri business, it's quite good. Credit [indiscernible] is today growing a lot. We have been improving also not only the NII but we have fee income as well. I know that's a different pass for that [Technical Difficulty] the fee also on the floating -- on the PPD for credit card, shop-to-shop and investors.

So the beauty of the business that we might have some decrease on the NII going forward because the credit market environment is not as good as it used to be on 2020, 2021, but we have the levers to keep growing our revenue. That's the -- I would say that's the main thing I'd like to highlight on this earnings call. I mean, we have prepared ourselves to have many different levers to pull, more or less, depending on the market, depending on the regulation, depending on whatever we want to do. So we have been able to keep growing our revenue from BRL 1.1 billion to BRL 2.2 billion, and our budget for these is also a very good growth on revenue because we have all these levers ready for us to pull.

So that's maybe the most important thing that we'd achieved on this past maybe 2, 3 years. And not only to mention the quality of our deposit base, so when you have a lot of real deposits because we don't need to pay 200% CDI to bring deposits. We have -- the demand deposit is cost free, and then we can monetize as well, which is NII by the end of the day, with floating. And with the rise of Selic, it's also positive for us. So again, we're very well balanced and prepared to keep growing the revenue in a sustainable way in a diversified way for 2022 and beyond, I would say. So that's a little bit of the soft guidance for 2022, 2023 on revenue increase.

[Pedro Leduc, analyst]

Perfect. Thank you very much. And going down also to the operating leverage part of the question, you have leverage to pull on revenues. You have been heavily in reinvesting these admin, personnel, client acquisition. How should we see that going forward in 2022 vis-à-vis the pace of revenues? Can we expect operating leverage to finally filter its way down to a positive one-one?

[João Vitor Nazareth Teixeira de Souza, executive]

Yes. We do, Leduc. Just to give you a good example, most of our expense here as of today is personnel. So we came from, I would say, maybe 2,000 employees, 2,200 employees on beginning of 2021 to almost 4,000 by year-end, 2,500 to almost 2,800 on year-end. So it's a big increase. For sure, we're not going to do the same pace of growth on 2022, but we had to bring this team on 2021. It's important first, again, to have this reliable, sound, state-of-the-art platform for our clients. So I don't regret of that. It's actually the opposite to -- we brought team talent to propel the business, but it's not going to repeat on 2020 to 2023.

So on top of our May expenses, which is personnel. We -- it's almost automatically. We're going to have operational average because we're going to have a very timid growth, but our revenue, as I mentioned earlier, is not going to grow in a timid way, it's going to grow in a very decent way. So it's a very good operational leverage ahead, only in terms of thinking about personnel with our higher expenses and revenue. So yes, you're right.

[Operator]

And now the next question comes from Yuri Fernandes.

[Yuri Fernandes, analyst]

I have 2 questions, actually. First one is regarding the active clients. We saw a small decrease this quarter on -- not the number of active customers but the penetration, right? I guess this ratio used to be 57%, 58% of total clients in this quarter. It's dropped to 54%. So can you comment a little bit what drove this decrease? Do you think this is temporary? Do you think this is because of tougher competition? Maybe the clients know they have, I don't know, more accounts, and it's harder for you to keep the active clients as engaged as in the past. So basically, just to understand the trend a little bit there, Joao?

And a second question, if I may, regarding loan growth, I know you don't provide guidance on that. But if you can just give a range for us to think about like how fast should loan growth grow in 2022 that would be important. And how do you think about deposits? Because you have a very strong deposit base, we always say that. And I guess, all the investors they know about how strong your deposit base is. But it has been some time that your deposits are growing slightly below loan growth, right? It was growing, I guess, 8% quarter-over-quarter.

So my question is, do you see deposits as a limiter for the pace of growth for 2022, 2023? And again, 80% quarter-over-quarter, it still implies a 35% to 40% total growth with the deposit base you have. But I would like to understand a little bit more, right, the funding side versus loans and if loans should grow 50% or should grow 80%, what is your perception on the loan growth for 2022?

[João Vitor Nazareth Teixeira de Souza, executive]

Okay. So let's go step by step. So first question about engagement, we do not see a problem in engagement. I would say that that's also the other way around. And we might have some slightly increase or decrease quarter-over-quarter, that's normal. It's not something material, so we might have plus 1%, more 1%.

I would think that you're going to stabilize on this level of engagement, which is not a problem. Actually, it's a good engagement. But the good thing, Yuri, when I was answering the question from Leduc, we see a lot of upsell, cross-sell on the current clients. So how many more products, how many more revenue we're bringing from this, I would say, this very good clients. Of course, our the clients are good. But if you have maybe one client with only one, let's say, silly product, that's a single product, that's okay for him to churn. And he's going to churn because what's the reason for him to use a platform and that you have on maybe the top-ups for prepaid phone. So the trend is good. The revenue they have packed per client is very good, which answers about that. So that's what I was trying to address here with you. So that's about engagement monetization. So very comfortable with that.

The second, about the loan and deposit ratio, as I told you, we're going to see a change from quarter-to-quarter, from year to year, so for instance, quarter-to-quarter, first Q. And I think we had that question, first Q 2021, if I'm not wrong, and I remember speaking with Rafaela Vitoria, our Chief Economist. First Q, it's always not good for demand deposits for many reasons. Also, the macro -- depending on the macro, it is not good for demand deposits as well. So it's not something about Inter or not. It's for demand deposits, generally speaking.

But the good news is that we're bringing more engagement. We're bringing more deposits. We're being more and more for the main checking account for our individuals and for our business account. So we see a very good deposit quality ahead. And of course, sometimes we might have a higher Selic. People tend to maybe -- not the long tail, but more of the one back and win clients here at the end of the day might be willing to invest more instead of living in a balance. This is also a trend that might be higher or lower depending on the Selic.

But the good thing, because we have, I would say, a natural hedge. I mean, if the macro stuff, if the Selic is higher and our deposit base, either demand deposit or term deposits are not going to grow as fast as it was growing before, our credit portfolio is not -- is going to follow as well. It's not going to grow as fast as it was growing as I mentioned also earlier on the previous question.

So I would say it's -- we're hedged on that. We have engagement so we can bring deposits and fund credit origination. The macro is worse, we might not grow as fast as we wanted or should on deposits, but our credit underwriting is not going to grow as fast as well. So it's a hedged position. So -- and it's not easy to achieve that, okay, for us to achieve that. As I mentioned, we need to have the primary checking account for individuals and for business accounts. And for you to be the primary checking account for individuals and business account, we need to have a very good product and state-of-the-art product as, honestly, I believe we do have the best in Brazil. So that's how we get engagement and good.

[Yuri Fernandes, analyst]

No, perfect. And my personal opinion is that there is no problem you accelerating the growth in a more challenging year. Especially if you focus on monetization and operating leverage, right, if you are able to keep increasing the -- and I know you are doing increase the prices for all the loans. But we checked the date in January and the increase was good from most lines. So if we're able to deliver on monetization and operating leverage, I think it's -- you don't need to grow 100%. You can grow less than that, and it's great. So thank you very much for your explanations.

[Operator]

And now the last question comes from Thiago Bovolenta Batista from UBS.

[Thiago Bovolenta Batista, analyst]

I have 2 questions. One of them is a follow-up. Joao already mentioned about USEND. I have 2 questions here. The first one, what type of products do you expect to include in this platform? So is all the business that you have in Inter or no? We were focused more on, let's say, credit card or e-commerce. If you can elaborate a little bit more.

And also about the 1 million clients that you mentioned, do you believe that this will be more Brazilians, guys living in Brazil, that want to have money abroad or using the debit card, or more Brazilians that lives in U.S.? So how do you believe that this 1 million clients, potential, clients will be divided?

And the second one about delinquency ratio of the credit card business. You already mentioned that you were a little bit more concerned about this portfolio and a little bit of the expansion. But are you seeing any big difference in terms of, let's say, income of individuals. So -- this increase in delinquency ratio is much more concentrated in the low income, low income individuals or no, is in all type of individuals. So if you can elaborate a little bit more on where this concern over the credit card business -- what type of segment is considered more Inter in the credit card business?

[João Vitor Nazareth Teixeira de Souza, executive]

Okay, Thiago, so let's start from the last question. Yes, it's more concentrated on the worst rate -- so I'd say, at [indiscernible], for sure. And that's what I mentioned earlier if you were on the call. We need to be very fast and very accurate to try to improve credit card limits, underwriting on different segments in order to have a balanced NPL formation going forward.

So I mean, I need to have a good TPV, a good transactor chunk of our portfolio on A and B, for instance, in order to provide revenues to face the NPL formation as the trends are not good because of the market, whatever, [indiscernible] -- whatever, it doesn't matter. We need to start reducing the credit underwriting on the specific ratings. That's what we did on the last -- actually in December last year. So this is one thing. So yes, it's different from each type of segments. And we need to measure that, to make sure that Thiago is A or Joao Vitor is C and Helena is H. So this is very important for us to have a very good model to make sure that we know exactly what's the rating for this type of new clients. So this is one thing.

About USEND, I'm going to use the second part of your question to answer the first part. We see that for us to be competitive, we need to have a flagship product for us to compete and to have a lower CAC and a best referral rate, and to have 2 different -- 2 specific products here to use the USEND. So let's first talk about the U.S. residents, not U.S. citizens, okay? We're talking about immigrants. For these specific pool of clients, the flagship product is the remittance business. So we're focusing a lot on the remittance business for these guys, Brazilian, Mexicans and so on. So that's how we're going to bring more clients to generate more revenue on top of this.

For the Brazilians, the 16-million, 17-million plus Inter account holders, our flagship product is the global count. So how convenient is it for you, Thiago, to have a checking account. You need have one single app and to have some savings in dollars. It's like a mini contract to dollar. You can have your dollars in our global accounts. You can buy more dollars. If the dollar is getting close to 5, you can go back to 5.50 and you can sell. Even if we're not traveling abroad, and you are going to use that, so we're going to be using our debit card. It's a global comfort in Brazil.

So we believe that on 2022, you'll drive more clients from the Inter channel, okay, so the guys that are going to open their global accounts. And a lot of guys and not -- and many, but a lot of guys from the first channel, the immigrants in the United States. But if you think 2023, for instance, I believe that we're going to change this trend because, therefore, we're going to have better products over there to serve the immigrants, the U.S. residents, and as I mentioned before, the Uber app. So we're going to have most of the products at Inter also there.

So I believe that's going to start to bring more clients from the U.S. residents and less from the Inter client, because on 2022, we're going to try to make sure that we were able to get as many clients from the 17 million to 20 million plus clients here. So that's the 2 main products that's going to drive attention from these 2 different pool of clients, okay? So that's the deal for how we engage with clients ahead.

[Operator]

And this concludes our Q&A session. I would like to turn the conference back over to Mr. Joao Vitor Menin for his closing remarks.

[João Vitor Nazareth Teixeira de Souza, executive]

Okay. So thank you very much, everyone. Thank you, my colleagues, Helena and Alexandre, helping me here with all these questions -- good questions, by the way. Thank you, everyone, for the audience. I hope that the foreign investor appreciates we did our best here in English. So -- but anyway, very, very happy with the quality of the discussions here and also very excited with what we achieved in 2021.

And again, despite of elections and macro and whatever, we're very excited and very happy here, working a lot at Inter to make sure that we're going to deliver another good year. It's going to be 2022. And with all these initiatives of going abroad, USEND, global account, investments, all the verticals, all the tools that we have, the leverage to be again, the best digital player in LatAm and who knows in Americas in a couple of years.

So that's it. Thank you very much, and see you soon on our next earnings call around May or whatever, something like that. So May or June, I don't know. Thank you very much, and see you soon. Bye-bye.

[Operator]

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