A. Reserved
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Summary of Risk Factors
Investing in our securities involves a high degree of risk. These risks are discussed in more detail below, and you should carefully consider these risks before making a decision to invest in our common shares. Additional risks that we do not consider material or of which we are not currently aware may also affect us. Our business, results of operations or financial condition could be impacted if any of these risks materialize and, as a result, the market price of our units could be affected. The following is a summary of some of the principal risks we believe we face:
•The neobank or digital banking sector in Brazil is in its early years and is highly competitive, and we may be unable to maintain our market position;
•Failures or breaches in critical processes or systems may interrupt our business, increasing costs and resulting in losses, which could materially adversely affect us;
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•Failure to protect against risks related to cybersecurity may result in a loss of revenue and materially adversely affect us, including hampering our operations or resulting in the unauthorized disclosure of information;
•Interruptions or failures in our technology systems or any lack of integration or redundancy of these systems may materially adversely affect us.
•Our use and provision of solutions powered by artificial intelligence could lead to operational or reputational damage, competitive harm, legal and regulatory risk and additional costs.
•Models, policies, procedures and methodologies that we have adopted to manage risks (including market, liquidity, credit, operational and environmental, social and climate risks) may not be sufficient to prevent exposure to unforeseen risks or the occurrence of known risks, which may materially adversely affect us;
•Adverse decisions in legal, administrative proceedings and investigations to which we, our subsidiaries or our directors and officers are or become a party may materially adversely affect us;
•We are subject to laws and regulations relating to money laundering, financing of terrorism, corruption and other illegal activities in the jurisdictions in which we operate and may be materially adversely affected by violations of these laws and regulations;
•Changes made by the Central Bank in the basic interest rate may materially adversely affect our operating results and financial condition;
•Disruption or volatility in global financial and credit markets could adversely affect the financial and economic environment in the countries in which we operate, most notably Brazil, which could have a material adverse effect on our business, financial condition and results of operations;
•The Brazilian government exercises significant influence over the Brazilian economy and government actions may materially adversely affect the Brazilian market and us.
Certain Risks Related to Our Business
The neobank or digital banking sector in Brazil is in its early years and is highly competitive, and we may be unable to maintain our market position.
The Brazilian digital banking or neobank sector is in its early years and is highly competitive. As such, large financial institutions, considered to be “incumbents,” have adopted strategies that focus on digital banking and therefore compete with newcomers in:
•consolidating a position in the digital bank accounts market;
•developing benefits programs to attract and retain account holders; and
•expanding the portfolio of digital products.
Many of our competitors, in particular traditional banks or competitors that are affiliated with traditional banks, have substantially greater financial, operational and marketing resources than we do. Accordingly, these competitors may be able to offer more extensive or enhanced products and services to clients, or offer such products and services at more attractive rates (including more attractive interest rates on deposits and loans) or on better terms. As a result, we may be forced to increase our deposit interest rates, or lower the rates we charge for loans or the fees we charge for other services or devote significant financial resources to our marketing efforts or developing customized products and services that clients demand, in order to maintain and expand our market share. If this were to occur, we would need to enhance cost control to maintain our margins, and, if we are unable to control our costs, our margins may be adversely affected.
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In addition, other financial institutions (including fintechs with digital credit platforms), have begun to actively operate in the digital banking segment in Brazil, further increasing competition. The fintech business model differentiates itself by the use of technology to reduce the bureaucracy related to financial services and products, focusing on efficiency and productivity to reduce costs and processes when compared to traditional financial institutions. Such business models oftentimes are also subject to lighter regulatory requirements. These advantages, which are created by the fintech ecosystem itself, pose challenges to the traditional banking business model, requiring constant adaptation to the industry’s innovations and thus allowing new players to enter the industry rapidly and in such a way that cannot be anticipated or immediately copied by its competitors.
In addition, some of our competitors in certain product areas and markets may not be subject to the same regulatory requirements that we are. For instance, certain fintechs in Brazil operate under licenses that provide lighter regulatory requirements when compared with our multi-service bank (banco múltiplo) license, such as sociedades de crédito direto and payment institutions. Regarding the latter, certain payment institutions are permitted to operate in Brazil without Central Bank authorization or compliance with the regulatory framework and the higher costs associated therewith until a certain threshold of transactions is met. As a result, such competitors are able to offer products and services at lower costs, which puts pressure on the pricing and terms that we offer our products and services and, as a result, on our profit margins.
If we fail to provide new and innovative products and services, we may not be able to implement our growth strategy and our results and financial position may be adversely impacted.
To be competitive and maintain and enhance customer experience and the quality of our products and services, we must continuously invest in the development of new products and features to keep pace with technological developments. Rapid, significant and disruptive technological changes have impacted or may in the future impact on the industries in which we operate, including changes in artificial intelligence and machine learning (e.g., in relation to fraud and risk assessment); payment technologies (e.g., real-time payments, payment card tokenization, virtual and crypto currencies, including distributed ledger and blockchain technologies, and proximity payment technology, such as near-field communication and other contactless payments); mobile and internet technologies (e.g., mobile application technology); merchant technologies, including for use in-store, online and via mobile, virtual, augmented or social-media channels; and digital banking features (e.g., balance and fraud monitoring and notifications).
Many of our competitors, especially large incumbent financial institutions and competitors affiliated with such institutions, have the ability to devote more financial and operational resources than we can to the development of new technologies and services and, if successful, their development efforts could render our services less desirable to clients, resulting in the loss of clients or a reduction in the fees we can generate. If our development efforts prove unsuccessful, or if we are unable to develop, adapt to or access technological changes on a timely and cost-effective basis, our business, financial condition and results of operations could be materially adversely affected.
Failures or breaches in critical processes or systems may interrupt our business, increasing costs and resulting in losses, which could materially adversely affect us.
As a financial institution, we are exposed to various operational risks, including risks of interruption of our business, failure of our systems or operations and fraud by our employees or third parties, such as failures to properly record transactions, equipment failures or mechanical or employee errors. There can be no assurance that our systems or processes will not fail or that fraud, errors, or operating problems will not materially adversely affect us.
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Moreover, we may be subject to significant operational process interruptions, including events that are entirely or to some measure beyond our control, which may materially adversely affect our operations, including but not limited to:
•the total or partial unavailability of systems that support back-office services;
•failures of our critical automated or non-automated systems; and
•interruptions in the supply of outsourced services on which our critical processes depend, such as processing interbank wire transfers, payment of public or private securities, settlement of purchase orders and/or sale of securities, among other processes.
Operational failures, including those resulting from human error or fraud, increase costs, and may result in losses, disputes with clients, damage to our image, lawsuits, regulatory fines, sanctions, intervention, the obligation to issue refunds or other damages. These impacts may also be long lasting and have irreversible impacts to the long-term prospects of the business. Any such operational failure may materially adversely affect us.
Failure to protect against risks related to cybersecurity may adversely impact our operations and result in loss of revenue, incurrence of material expenses and expose us to material liabilities
Our security structure is subject to cybersecurity failures, including cyber-attacks, which may include intrusion into platforms and IT systems (which includes servers, databases, networks, applications, software, services, partners’ services and anything considered a digital asset (e.g. which has bits and bytes) by malicious third parties, malware infiltration (such as computer viruses), contamination (whether intentional or accidental) of networks and systems by third parties with whom we exchange data, cyber-attacks designed to access, change, corrupt or destroy systems, computer networks, stored information or transmitted information, as well as unauthorized access to or breach of sensitive and or private data of clients by our employees, third parties or others. We have been in the past subject to cybersecurity incidents that resulted in unauthorized access and disclosure of client information, and we are constantly subject to cybersecurity threats.
We have strategic partners in infrastructure and systems, which also process information and operate critical services. These suppliers are subject to risks similar to those described above and may have a direct impact on us and our clients. We may be jointly and severally liable for any damage caused by third-party service providers involved in our operations. Also, some of our subsidiaries are not subject to the same controls procedures and cybersecurity systems as Banco Inter, which expose them to incremental risks.
Successful cyber-attacks may paralyze or make our services or systems unavailable for uncertain periods of time, resulting in losses, contamination, corruption or loss of client data and other sensitive stored information, a breach of secured data, dissemination of unauthorized information or loss of significant levels of liquid assets (including cash).
Cyber-attacks are constantly changing and being reinvented. Failure to effectively protect our systems and platforms (including systems and platforms from our third-party service providers) against cyber-attacks may result in losses, disputes with clients, damage to our reputation, lawsuits, regulatory fines, sanctions, regulatory intervention and other damages, each of which could materially adversely affect us.
We may not be able to upgrade our systems quickly enough to keep up with changes in cyber-attacks, or we may be required to allocate additional funds above the amounts originally earmarked to stop such attacks. For more information on our cybersecurity practices, see “Item 16K - Cybersecurity.” We are also subject to cyber-risk-management regulation. Failure to manage cybernetic risks or to comply with these regulatory requirements may adversely affect us.
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We are subject to risks associated with noncompliance with data protection laws and may be materially adversely affected in the event we are subject to fines and other sanctions under these laws.
Compliance with applicable data protection laws, including Brazilian Data Protection Law (Lei Geral da Proteção de Dados) and data protection statutes in various States of United States of America, requires us to continuously improve our practices, which may require additional investments and additional cybersecurity expenses, both of which may adversely affect our financial condition and results of operations.
Failure to comply with any of data protection law may subject us to legal proceedings (including class actions and claims from individuals and legal entities) seeking damages and penalties.
In Brazil, failure to comply with the Brazilian Data Protection Law, we may be subject to fines (on an individual or cumulative basis), warnings, disclosure obligations, temporary suspensions, an obligation to delete personal data and a fine of up to 2.0% of our Company’s, economic group’s or conglomerate’s revenue (excluding taxes) in Brazil in the year preceding the breach up to an aggregate R$50.0 million per infraction. In addition, we may be held liable for civil, moral, individual or collective damages caused by us or our subsidiaries in the event of a failure to comply with Brazilian Data Protection Law.
Accordingly, any failure to protect personal data processed by us or our subsidiaries to comply with applicable data protection laws, may result in significant fines, an obligation to disclose the incident to the market, an obligation to delete personal data from our records or suspension of our operations and may materially adversely affect our reputation and results of operations. As of the date of this annual report, some of our subsidiaries have chosen not to use the same controls procedures and privacy systems as Banco Inter. Therefore, the risk is higher in such subsidiaries.
Interruptions or failures in our technology systems or any lack of integration or redundancy of these systems may materially adversely affect us.
Our operations depend on the efficient and uninterrupted operation of our IT systems including the part of our technology stack which relies on cloud storage or processing services from third parties. For example, these systems are required to process a significant and constantly growing number of transactions efficiently and accurately, as well as enable the processing, storage and secure transfer of confidential data and other sensitive information. The software that we use to process these transactions is required to interact with third party software or operating systems. Accordingly, any incompatibilities or the unavailability of such software or operating systems, or any errors or limitations as to their use, may prevent proper processing of transactions made by our clients resulting in losses, disputes with clients, lawsuits, regulatory fines, sanctions, regulatory intervention, an obligation to issue refunds or other damages, each of which could materially adversely affect us.
In addition, the hardware and software that we use (including the cloud services we contract) may be damaged or be subject to complete or partial interruptions as a result of internal failure, natural disasters, failures in telecommunications services, computer viruses, physical intrusion, electronic intrusion and other events or similar occurrences. Any of these events may result in disruptions, delays and/or losses in the transmission of essential data, which may materially adversely affect us. System failures, bugs and version updates may also cause adverse effects, including service interruptions, data losses, data breaches and/or vulnerabilities.
Any failure in monitoring or improving our IT systems linked to our operation (including due to insufficient investments) could adversely affect our operations.
In addition, considering that our core business is intrinsically linked to the digital environment in which new technologies are developed daily, our ability to maintain our competitiveness and expand our business depends on our ability to improve IT systems and efficiently increase our operational capacity. As a result, we must continuously make investments in significant improvements in our IT infrastructure in order to remain competitive. There can be no assurance that we will have the funds available to maintain the levels of investment required to support improvements or upgrades to our IT infrastructure, which may result in a significant loss of competitiveness against our main competitors, and an inability to keep pace with the evolution of the sector and client needs, materially adversely affecting us.
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Our use and provision of solutions powered by artificial intelligence could lead to operational or reputational damage, competitive harm, legal and regulatory risk and additional costs.
We incorporate artificial intelligence (AI) into numerous aspects of our business, such as enhancing our customer service, credit analysis, and data analytics. Additionally, we apply established machine learning techniques in areas like fraud detection, anti-money laundering, sanctions screening, product personalization, and marketing. While AI holds great promise, it also presents evolving risks, challenges and uncertainties. There is no guarantee that the use of AI will consistently improve our platform or help make our operations more effective, efficient, or profitable. The AI models we use might not always be correctly designed or implemented and could rely on data that is biased, incomplete, or otherwise suboptimal. Our AI technologies could face issues due to unforeseen defects, technical challenges, data breaches, cybersecurity threats, or performance-related concerns. Consequently, our use of AI might unintentionally hinder our efficiency or produce outcomes that misalign with our business goals or values or do not comply with our policies or procedures, potentially affecting our brand and reputation or negatively impacting the performance of our business. There is also a risk of facing liabilities due to non-compliance with laws or contractual obligations.
Additionally, if any of our employees, contractors, vendors, or service providers input our confidential information while using any third-party AI technology related to our business, it might unintentionally expose this sensitive information. This could impact our ability to adequately protect our intellectual property rights or harm our competitive position and reputation.
We have utilized and may continue to explore generative AI, a novel technology still in its early commercial stages, in specific business areas like customer service and code analysis. While promising, generative AI poses additional risks and may produce outputs that are inaccurate, incomplete, or biased and which may not be easily detectable. Our established processes and controls, which include human oversight in AI training and monitoring of generative AI tools, aim to mitigate these risks. However, any deficiencies or perceived flaws in AI-generated content could negatively impact our reputation and business, potentially leading to additional costs, including in the form of damages or fines.
Additionally, the rapid evolution of artificial intelligence technologies has the potential to significantly alter the cybersecurity threat landscape. The increasing availability of advanced AI tools may enable malicious actors to more quickly identify vulnerabilities, automate reconnaissance activities and develop increasingly sophisticated attack methods or exploit artifacts. As a result, the time between the discovery of new vulnerabilities and their exploitation may shorten significantly, while our existing detection, remediation and patch management processes may not evolve at the same pace. This dynamic could increase our exposure to cybersecurity incidents, system intrusions, service disruptions or data breaches, any of which could adversely affect our operations, reputation, financial condition and results of operations.
Moreover, the use of artificial intelligence within our organization, particularly if not subject to appropriate governance frameworks, internal controls, access restrictions and usage guardrails, may introduce additional risks. Improper or unauthorized use of AI tools by employees, contractors or third parties — including the inadvertent disclosure of sensitive or confidential information, the use of insufficiently reviewed AI‑generated code or content, or vulnerabilities introduced into our systems — could result in data loss, data leakage, intellectual property exposure or cybersecurity incidents. Any such events could harm our reputation and expose us to regulatory investigations, contractual liabilities and additional remediation, compliance or legal costs.
In addition, the use of AI by us or by third parties may increase the likelihood of data breaches or cybersecurity incidents involving personal or other sensitive information. Such incidents could adversely affect our reputation and subject us to legal or regulatory risks, particularly with respect to privacy, data protection and intellectual property laws.
For further information on risks related to our use of artificial intelligence, see also “—As the regulatory framework for artificial intelligence and machine learning technology evolves, our business, financial condition and results of operations may be adversely affected.”
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As the regulatory framework for artificial intelligence and machine learning technology evolves, our business, financial condition and results of operations may be adversely affected.
The regulatory framework for artificial intelligence and machine learning technology is evolving and remains uncertain. It is possible that new laws and regulations will be adopted, or existing laws and regulations may be interpreted in new ways that would affect the operation of our platform and the way in which we use artificial intelligence and machine learning technology, including with respect to fair lending laws. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
In addition, an artificial intelligence bill is currently at an advanced stage of the legislative process in Brazil. This bill seeks to establish general national standards for the development, implementation and responsible use of AI systems. If enacted, this legislation may introduce new compliance obligations, liability standards and potential usage restrictions applicable to AI technologies. Such requirements could directly affect our operations and the manner in which we deploy AI systems. The enactment of this legislation may also impose additional compliance burdens and require the adoption of specific transparency, governance and accountability measures related to our use of artificial intelligence.
Models, policies, procedures and methodologies that we have adopted to manage risks (including market, liquidity, credit, operational and environmental, social and climate risks) may not be sufficient to prevent exposure to unforeseen or unknown risks that may materially adversely affect us.
The models, policies, procedures and methodologies that we use to monitor, measure and manage risks (including models to manage the credit risk of our clients) may not be sufficient to prevent our exposure to unforeseen risks or the occurrence of known risks, which may materially adversely affect us. The profitability of our banking operations also depends, among other factors, on balancing expected risks and returns from banking transactions, which introduces an additional layer of complexity to our models.
For example, statistical models and management tools used to estimate our exposure within a given time period may prove inaccurate in estimating the capital, controls or safeguards required to cover, control or mitigate unpredictable, unforeseen or erroneously quantified factors. Furthermore, stress tests and sensitivity analyses based on predefined scenarios may not identify all of the possible impacts on our results of operations.
We may incur losses resulting from failures, inadequacies or deficiencies in internal processes, systems, or human error. In addition, we may incur losses resulting from external events such as natural disasters, terrorism, theft, and vandalism, as well as events that are not properly identified and addressed by our models. The occurrence of any of these risks may materially adversely affect us. The existence of material weakness and the failure to maintain effective internal control over financial reporting may prevent us from accurately reporting our results of operations, meeting our reporting obligations, or preventing fraud or losses.”
We are subject to laws and regulations relating to money laundering, financing of terrorism, corruption and other illegal activities in the jurisdictions in which we operate and may be materially adversely affected by violations of these laws and regulations.
We are subject to laws and regulations related to the prevention and combating of money laundering, financing of terrorism, corruption, and other illegal activities. These laws and regulations require, among other measures, that we adopt and apply “Know-your-Client,” “Know-your-Supplier,” “Know-your-Partner” and “Know-your-Employee” procedures (including in all cases, politically exposed person, or PEP assessments, identification and qualification of the UBO's – Ultimate Beneficial Ownership), sanctions program, procedures to combat the financing the use of weapons of mass destruction and suitable internal policies to address our business risks. We must also provide training for employees in the prevention of all those illegal activities, as well as report suspicious transactions to the appropriate authorities.
Our subsidiary, Inter&Co Payments, Inc. is engaged in money transmission business in the United States. Money transmittal businesses are particularly exposed to money laundering risks, particularly in connection with international transfers involving low amounts, which may not be captured by monitoring procedures.
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These standards have become more detailed and complex, requiring that we continuously improve already sophisticated systems and use specialized personnel for compliance and monitoring all the clients and products. In the event that we are unable to fully comply with applicable laws and regulations to prevent and combat money laundering and the financing of terrorism, combating corruption or other related illegal activities, we may be subject to:
•administrative, criminal and/or civil fines and penalties;
•loss of our operating licenses;
•prohibition or suspension of our activities; and
•prohibition on entering into contracts with Brazil’s public administration and becoming ineligible for certain tax benefits or other programs which involve public funds.
Any such consequences may materially adversely affect our reputation, financial condition and results of operations. We may be materially adversely affected to the extent we, our controlling shareholder, affiliates, directors, officers, staff members or third-party agents are involved, or accused of being associated with, money laundering, financing of terrorism, corruption or other related illegal activities, or in the event that our operations, accounts or systems are used, with or without our knowledge, to further money laundering, financing of terrorism, financing the use of weapons of mass destruction, corruption or other illegal or improper purposes.
We may be materially adversely affected by damage to our reputation.
We depend on our image and credibility in the market to operate our business and attract and retain clients, investors and employees. Various factors may damage our reputation and result in a negative perception by our clients, counterparties, shareholders, investors, government agencies, the community and regulators. These factors include, among others, non-compliance with legal obligations, conducting unlawful transactions with clients, contracting suppliers that do not conduct their business ethically, unauthorized disclosure of client information, misconduct by our employees and failures in risk management. In addition, negative publicity relating to us may damage our business, while actions taken by third parties, including suppliers, such as engaging in child labor, slave labor, discriminatory practices, unlawful acts and corruption, activities contrary to health, work safety or environmental regulations, may indirectly tarnish our reputation in the market. Any failure to establish or preserve a favorable reputation among clients and within the banking industry may materially adversely affect us.
We may have insufficient capital to meet the capital requirements established by the CMN and the Central Bank.
Brazilian financial institutions must comply with the guidelines imposed by the CMN and the Central Bank which are similar to the guidelines of Basel III, related to capital adequacy, including minimum capital requirements. We cannot guarantee that in the future we will have sufficient funds or resources available to ensure adequate capitalization, and therefore we may be unable to meet the capital adequacy requirements imposed by the CMN and the Central Bank.
The Central Bank establishes a calculation method for regulatory capital held by financial institutions and other institutions authorized to operate by the Central Bank, and its main purposes are:
•to improve the capacity of financial institution to absorb shocks arising from the financial system and other economic sectors;
•to reduce the risk of contagion spreading from the financial sector to the real economic sector (systemic risk);
•to maintain financial stability; and
•to promote sustainable economic growth.
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Moreover, financial institutions (such as Banco Inter) may only distribute profits in an amount higher than that which may be required by law or regulations if this distribution does not jeopardize compliance with capital and equity requirements. Accordingly, any failure of Banco Inter to meet minimum capital requirements may negatively affect our ability to distribute dividends and interest on capital to shareholders, in addition to adversely affecting our operating and lending capacity. As a result, we may have to sell assets or take other measures that may materially adversely affect us.
In addition, Brazilian regulators may apply sanctions due to capital inadequacy, including administrative proceedings, fines, disqualification of management and even the cancellation of our operating license, which may materially adversely affect us.
Mismatches between interest rates, indexes, exchange rates, the maturities of our credit portfolio and our sources of funds may negatively affect our credit transactions and us.
We are exposed to mismatches of interest rates and maturities between our assets and liabilities. A portion of our credit portfolio is composed of loans at fixed or floating interest rates and the profitability of credit transactions depends on our capacity obtain funding at competitive rates. An increase in market interest rates in Brazil could increase our cost of funding, particularly the cost of term deposits, thus reducing the spread earned on our credit portfolio, materially adversely affecting us.
Any mismatch between the maturity of credit transactions and sources of funds, which in general are for shorter terms, may exacerbate the effect of any imbalance in interest rates, and pose a liquidity risk if we do not have adequate funding. An increase in the total cost of funding may result in an increase in interest rates that we charge on lending, which may consequently affect our ability to attract new clients. A decrease in the growth of our credit portfolio, or illiquidity arising from the lack of permanent funding, may materially adversely affect us.
The growth of our credit portfolio, including our credit card portfolio, may result in an increase in delinquency.
Our management has adopted a strategy of expanding our credit portfolio increasing origination and approving new loans, particularly non-collateralized loans (on which defaults are more likely). This strategy may result in an increase in our financial leverage and, potentially, lead to an increase in default risk and impairment losses on financial assets, which may materially adversely affect us.
Modifications to the rules and regulations governing the origination of real estate loans by financial institutions in Brazil may materially adversely affect us.
The origination of real estate loans by financial institutions in Brazil is subject to rules and regulations that may adversely affect the volume and terms of real estate loans in the Brazilian market. From time to time, the Brazilian government modifies these rules, including for the purpose of advancing public housing policy. There can be no assurance that modifications to rules and regulations governing the origination of real estate loans will not be enacted or that, if enacted, such rules and regulations will be favorable. We derive a significant portion of our operating income from our real estate lending operations. As a result, the suspension of, or significant modifications to, the rules and regulations governing the origination of real estate loans may affect our real estate lending, and as a result, may materially adversely affect us.
We may be unable to collect payments due from payroll deductible loans, or payroll loans.
A portion of our income is derived from payroll deductible loans, where our clients’ loan payments are deducted directly from their salaries, pensions, annuities. Our ability to make payroll deductions is governed by various federal, state and local laws and/or regulations that establish limits on such deductions, and requires certain licenses issued by public entities and agreements with private sector employers. The enactment of any new law, regulation or amendment, or the repeal or emergence of a new interpretation of existing laws or regulations that result in a ban or restriction on our ability to make these direct deductions could increase the risk profile of our credit portfolio, resulting in a higher percentage of loan-related losses.
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Our capacity to receive payments due on personal loans paid directly from payroll or from social security benefits also depends on the effectiveness and validity of the agreements we entered into with entities of the public sector, including the Brazilian Institute of Social Security (Instituto Nacional da Seguridade Social - “INSS”) and employers of the public and/or private sector, as well as on the continued employment or status as beneficiary of the borrowers. The discount of the installment related to the payment deductible loans must be expressly authorized by the clients (e.g INSS retirees and pensioners, employers of the private sector governed by the Brazilian Consolidated Labor Law and public servants (active, retired or dependents), as the beneficiaries of the salary, pension or annuity).
The agreement we have entered into with the INSS to be able to grant payroll loans to INSS beneficiaries has a fixed term and must be periodically renewed. There can be no assurance that this agreement will be renewed. Any failure to renew this agreement may materially adversely affect our payroll and payroll credit card operations. We may also be required to enter into agreements with or obtain authorizations from governmental authorities to provide payroll loans to employees of these entities. The Brazilian government or other government entities may alter the regulation of these authorizations. Currently, we do not have the required authorization to offer payroll loans to employees of certain municipal and State governments due to statutory restrictions which require such transactions to be authorized only for government-owned banks. Other government agencies may impose regulations that restrict or prevent us from offering payroll loans to employees.
Part of our loans are derived from lending through loans deducted directly from payroll, including the payroll card model, a credit card for which monthly bills are deducted from payroll. Repayments are deducted directly from the borrowers’ pensions, annuities, or salaries, and may be interrupted if the borrower (a retired person, pensioner, employee or official of the private or public sector) loses his or her job, if other deductions, such as alimony, take priority over the loan, or if the borrower dies. In the event of a borrower’s termination or leave of absence from his or her employer, the payment of the loan may depend exclusively on the borrower’s financial capacity. There can be no assurance that we will be able to recover loan amounts in these circumstances.
Our payroll loans are also subject to risks relating to the employer or payee. Any events that affect payments to employees, such as an employer’s financial condition, and failures or changes in the internal controls, may delay, reduce or prevent deductions from the employees’ earnings, and therefore, result in losses on our payroll loans portfolio, which may materially adversely affect us.
We may not be able to continue to grow our loan portfolio or effectively manage significant increases in our loan origination, both of which could negatively affect our reputation and business, financial condition, and results of operations.
A substantial part of our loan portfolio consists of loans to real estate buyers and refinancing existing loans. Historically, most of our real estate loan origination has been in connection with refinancing existing loans (including from other financial institutions) rather than granting new loans.
Additionally, our ability to originate loans is also subject to other market factors. Such factors include, for example, reductions in the overall level of refinancing activity, slow growth or less home financing activity or inadequate supply in the housing market. Any such factors, and others, can impact our ability to continue to grow our loan origination volume and may force us to accept lower margins in our loans in order to remain competitive, which could adversely affect our business.
Any deterioration in the credit quality of receivables that guarantee a portion of our credit portfolio and any inability to accurately estimate impairment losses may materially adversely affect us.
A portion of our corporate lending operations is guaranteed by receivables due to the borrowers from their respective clients. Any unfavorable change in the credit quality of these third-party debtors may negatively affect our ability to receive amounts owed by our clients, which may adversely affect us.
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Provisions for expected credit losses are based on current expectations related to various factors that affect the quality of our credit portfolio. These factors include, among others: the financial condition of borrowers and their payment capacity and intentions; the realizable value of guarantees; government macroeconomic policies; interest rates and the legal and regulatory environment. Because of the number of factors beyond our control, current (or future) provisions for expected credit losses may not be sufficient to cover the final unrecovered losses. We may be required to increase our provision for expected credit losses and may be materially adversely affected to the extent that our assessment and expectations regarding the aforementioned factors are different from actual events, if there is a deterioration in the quality of our total credit portfolio for any reason or if future actual losses exceed the estimates. We may be materially adversely affected if we are unable to control or reduce default rates or the incidence of poor-quality credit.
The effectiveness of our credit risk management is affected by the quality and scope of information available in Brazil.
In determining the credit capacity of clients, we use credit information available in our database, as well as public credit client information provided by the Central Bank and other sources. Due to limitations in the availability of information and the information infrastructure in existence in Brazil, our credit risk assessment associated with a particular client may not be based on complete, accurate or reliable information. In addition, there can be no assurance that our credit scoring systems collect complete or accurate information that reflects the actual behavior of clients or that their credit risk can be properly assessed. We rely on other publicly available resources and internal resources, which may not be effective. As a consequence, our ability to efficiently manage credit risk, and subsequently, our provision for impairment losses, could be materially adversely affected.
We may experience difficulty in the collection and foreclosing upon collateral for unpaid loans and financing
When borrowers default on loan and financing agreements, we take in-court or out-of-court measures to collect the amounts due. We may not be able to recover amounts resulting from defaulted loans by borrowers or seize assets pledged as collateral under these agreements, and such collateral, when seized, may not be sufficient to cover defaulted loan balances. For instance, all our real estate loans have the real estate in question as collateral (through a fiduciary assignment of property or mortgage). Foreclosure on such collateral requires us to observe specific procedures which may be time-consuming and may be further delayed due to circumstances outside our control (such as difficulty in locating the debtor). Judicial challenges by the debtor may also result in decisions requiring additional procedures to affect the foreclosure or even invalidating a completed foreclosure as a whole. Due to depreciation and other maintenance costs relating to the collateral, we may sell the asset within a short timeframe, which may require us to accept worse commercial terms for the sale. We may also be unable to sell the asset. We may also experience difficulties collecting defaulted loans or foreclosing on collateral if the debtor is in bankruptcy or in court or out-of-court reorganization. We cannot assure you that we will be able to collect defaulted loans, successfully and timely foreclose on the loan’s collateral or that the recovered amounts will cover the outstanding balance of a defaulted loan. As such, an increase in loan defaults or an increase in our loss resulting from defaults may materially adversely affect us.
Difficult conditions in the mortgage and residential real estate markets as well as general market concerns may adversely affect our real estate loan business.
A substantial portion of our credit portfolio is comprised by real estate loans, including mortgages in Brazil and in the US. Real estate loans may be materially affected by external factors in the residential mortgage market, the residential real estate market, the financial markets, and the local and global economy, including factors such as inflation, energy costs, unemployment, geopolitical issues, and concerns over the creditworthiness of governments worldwide, as well as the stability of the global banking system. Adverse developments in any such external factor may adversely affect our ability to originate and manage our real estate loans, as well as the credit quality of our real estate loans and our ability to recover on defaulted real estate loans. See also “― any deterioration in the credit quality of receivables that guarantee a portion of our credit portfolio and any inability to accurately estimate impairment losses may materially adversely affect us” and “―we may experience difficulty in the collection and foreclosing upon collateral for unpaid loans and financing.”
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We may sustain substantial losses as a result of our securities and derivatives transactions.
We trade securities and acquire debt and equity securities. These investments may result in substantial losses in the future given that securities are subject to significant price variations. We also trade derivatives. These transactions are subject to market, credit and operating risks, including credit or default risk and basis risk (risk of loss associated with the variation of the difference between the asset’s return and our funding cost/hedging cost) and default risk from our counterparties.
Derivatives transactions may cause significant volatility in our equity or lead to results of operations that are better than those that we would have achieved had we not entered into these transactions. There can be no assurance that our securities and derivatives transactions will not materially adversely affect us.
We may be materially adversely affected if key members of our management resign, or if we are unable to attract and retain specialized management and skilled employees.
Our ability to remain competitive and reach our growth target is dependent upon the success of our management and we may be unable to successfully attract and retain specialized management. We may be materially adversely affected if our key management personnel resign or if we are unable to continue to attract and retain specialized management.
Also, our business involves specialized functions and requires skilled personnel, with wide-ranging skillsets, experience and talent. We may face a market shortage of personnel and labor cost increases, and to maintain and grow our business, we will need to attract and retain highly skilled employees. We currently face and expect to continue facing in the future intense competition for talent. If we lose key members of our management or key employees, we may not be able to locate a suitable or qualified replacement, and we may incur additional expenses to recruit and train a replacement, which could severely disrupt our business and growth.
We may be unable to fully implement our management strategies, which may materially adversely affect us.
We intend to expand our share of the Brazilian domestic financial market, particularly by expanding our participation in the retail segment (including personal loans) and by diversifying and expanding our portfolio of products and services. Our actual productivity, investments, operating costs and business strategies may be substantially less favorable than originally projected. Difficulties may arise particularly in the form of financial, demographic, competition-related and/or technology issues, among others. There can be no assurance that we will be successful in implementing our management strategies, or that our concentration of activities in specific segments will not materially adversely affect us.
Adverse decisions in legal and administrative proceedings and investigations to which we, our subsidiaries or our directors and officers are or become a party may materially adversely affect us.
We and members of our management may be party to lawsuits and administrative proceedings related to civil (including, in particular, claims under consumer laws), tax, labor, antitrust, and regulatory claims and investigations arising in the ordinary course of business. Certain of these lawsuits and proceedings may involve sizable damages claims. For more information on our current legal and administrative proceedings, see “Item 4. Information on the Company ― B. Business Overview ― Legal and Administrative Proceedings.”
We cannot assure that the outcomes of these lawsuits will be favorable or that we have sufficiently anticipated the risks inherent to each claim. Provisions that we have recognized, or may recognize in the future, may be insufficient to cover the total cost of these lawsuits and proceedings. In addition, there can be no assurance that material legal, arbitral and administrative proceedings will not arise in the future in relation to contingencies that oblige us to expend significant resources.
In addition, under Brazilian law, a broad range of forms of conduct involving environmental, labor or tax laws may be considered criminal offenses. Accordingly, we, our subsidiaries and members of our management could be subject to criminal investigations and criminal proceedings in connection with allegations of violation of environmental, labor or tax laws.
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We may also incur costs with such proceedings, including attorneys’ fees. We may also have some of our assets frozen or otherwise subject to liens, which may affect our liquidity. We may also not have the funds to secure certain proceedings via judicial deposit or by offering some other form of collateral. Our failure to provide collateral on such legal proceedings will result in the amounts we are required to pay due to these proceedings not being suspended (that is, will be due). Such failure to provide collateral may also subject us to seizure of our assets and garnishment of our income, as well as make it difficult for us to obtain certain statements of good tax standing. Any such consequence may adversely affect our financial conditions and results of operations.
We may be materially adversely affected in the event of unfavorable rulings, particularly in lawsuits or proceedings involving material amounts or that impose restrictions that prevent us from conducting our business as initially planned, liability for labor debts and/or obligations resulting from outsourcing and debts resulting from labor claims filed by third-party seeking their employment reclassification. In addition, unfavorable decisions in proceedings involving our management may prevent them from continuing to serve as our officers or directors and/or materially adversely affect our reputation and business. See “Item 4. Information on the Company ― B. Business Overview ― Legal and Administrative Proceedings.”
Our insurance policies may be insufficient to cover possible claims and losses.
There can be no assurance that our insurance policies will be sufficient in all circumstances to cover all of the risks to which we, and our assets, are subject. The occurrence of a significant uninsured claim or loss, or a claim or loss not subject to indemnification, either in whole or in part, or any failure by our third-party service providers to meet their obligations to us, or to purchase insurance, may materially adversely affect us.
Certain risks may not be covered by insurers, such as war, acts of God, cyberattacks, data-breaches by our clients and third-party service providers, interruption of certain of our activities and human error. Additionally, natural disasters, meteorological phenomena, electricity shortage and other similar events may cause physical harm and loss of life, as well as interrupt our operations, damage our equipment and the environment, among others.
Our insurance coverage is also subject to timely payment of the premiums. Additionally, there can be no assurance that we will be able to maintain coverage under our insurance policies at reasonable rates or on otherwise acceptable terms. Any failure to maintain coverage may materially adversely affect us.
Third parties may prevent us from using the technology necessary to provide our services or subject us to intellectual property litigation.
We depend on intellectual property developed by third parties, including open-source libraries, to conduct our business, such as patents, computer programs and use licenses, among others. If our use of third-party intellectual property is considered illegal or irregular, we may be prevented, including judicially, from continuing to use such assets.
Additionally, if we fail to negotiate acceptable terms for licenses to use third-party intellectual property that is essential for our business, we may be compelled to stop using the intellectual property in question or discontinue offering services that incorporate such intellectual property. In these cases, we could be required to indemnify the third party or become involved in costly and complex litigation, which, regardless of the outcome, could materially adversely affect our business and results of operations.
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We may be materially adversely affected if we are prohibited from using the brand “Inter” in any of our core business verticals or if we fail to protect our intellectual property rights.
We believe the brand “Inter” and “Inter&Co” is an important distinctive sign that help distinguish us from our competitors. In 2025, we received approval for the trademarks “INTER”, “BANCO INTER”, and “INTER&CO” under class 36 in the Nice classification (international trademark classification), which trademarks are valid for the next 10 years in Brazil. Class 36 in the Nice classification generally applies to financial services. However, this approval did not grant us exclusive rights to the “Inter” element in our brands (which would allow us to prevent other entities of using this word as part of a financial services, so that no third party can have exclusive rights over the brand “Inter” recognized for use in connection with financial services). The existing lawsuit aims to reinforce the brand's position and will serve as the final resolution to any further discussions on the matter. In 2025, the Trial Court issued a favorable ruling confirming that INPI’s refusal should be overturned and that the INTER trademark (both word and design) should be granted registration in Class 36. As the proceeding was decided favorably to the Company, the risk of an adverse outcome and related loss is considered to be remote. This decision combined with the INPI approvals has broadened our trademark protection and strategic position in Brazil.
In any case, our trademark is composed of a term that may be considered as usual, and it is unlikely that we will be granted exclusivity. As a result, (i) our ability to protect the brand Inter and to prevent third parties from using this brand is limited, and (ii) there can be no assurance that competent authorities would not recognize exclusive rights of third party over the brand Inter in certain industries or jurisdictions, in which case we may be prohibited from using our brand in these industries or jurisdictions. If we are unable to register the brand “Inter” or “Inter&Co” in any of the jurisdictions that we have business or are prohibited from using the brand “Inter” in any of our core business verticals, particularly in our banking operations, our business may be materially and adversely affected. Internationally, we are seeking recognition of the trademark “Inter&Co” and “Inter”, particularly in the US and Argentina In the US, we have submitted our registration requests with United States Patent and Trademark Office - USPTO where we have some challenges to overcome and are closely monitoring the progress. See “Information on the Company―B. Business Overview—Intellectual Property.”
Furthermore, we may be unable to obtain intellectual property rights over our technologies and brands, and our existing trademark registrations and applications, and any trademarks that may be used in the future, may not provide us with competitive advantages or distinguish our products and services from those of our competitors. Also, our intellectual property rights may be contested, circumvented or found to be unenforceable, weak or invalid, and we may not be able to prevent third parties from infringing or otherwise violating them. We may have to litigate to enforce or determine the scope and enforceability of our intellectual property rights, trade secrets and know-how, which is expensive, could cause a diversion of resources and may not prove successful. Any failure to protect our intellectual property rights may materially adversely affect us.
A decline in our credit ratings may materially affect our liquidity and competitiveness as well as increase our funding costs.
Our funding costs and access to the debt capital markets are influenced by numerous factors, such as macroeconomic conditions, the regulatory environment for Brazilian banks, insufficiency of capital, failure to timely comply with our obligations to clients and suppliers, continuous availability of term deposits in the local market and failure to grow our credit portfolio. As a result, we are significantly dependent on our credit risk ratings. These ratings are provided by private ratings agencies that may at any time lower or withdraw our credit ratings or place us on a negative “credit watch.”
Any unfavorable change in the above mentioned factors may give rise to a negative impact on our credit rating, potentially increasing our lending costs and limit our access to the capital markets, which may, in turn, result in a decrease in our revenues and materially adversely affect our liquidity. There can be no assurance that ratings agencies will not lower our credit ratings or place us on a negative credit watch. Changes in circumstances, whether real or perceived, may significantly alter our credit ratings, which may, in turn, materially adversely affect our results of operations and liquidity.
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We may be unable to identify, complete, integrate or obtain the benefits of past and future acquisitions or commercial partnerships.
We have engaged in mergers and acquisitions and commercial partnerships in the past and may pursue acquisitions and other commercial partnerships in the future as part of our growth strategy. There can be no assurance that we will be able to identify and execute future acquisition or commercial partnership opportunities.
Our ability to successfully execute acquisitions may be limited by the number of acquisition targets available, internal demand for resources, our ability to obtain financing (to the extent necessary and on satisfactory terms) for larger acquisitions and our ability to obtain the required corporate, regulatory or governmental approvals. In addition, even if we are able to identify acquisition targets, third parties with which we have a commercial relationship may be unwilling to enter into agreements on commercially balanced terms for a particular transaction. We may experience significant delays in completing acquisitions, which may not come to fruition for a number of reasons, including failure to meet specified conditions or to obtain the required regulatory approvals. Unanticipated additional conditions for approval may also be imposed. The negotiation and completion of potential acquisitions, whether or not consummated, may potentially affect our current operations or divert substantial resources. As a result, our business, growth prospects, results of operations and financial conditions may be materially adversely affected.
Acquisitions may expose us to unknown obligations or contingencies incurred prior to the acquisition of the target or its assets. The diligence performed to assess the legal and financial condition of the target, as well as any contractual guarantees or indemnities received from the target sellers may be insufficient to protect or indemnify us for any contingencies that may arise. Any significant contingencies arising from acquisitions may materially adversely affect our business and results of operations. In addition, we may acquire companies that are not subject to independent external audits, which may increase the risks related to the acquisition.
We may also fail to identify or delay adjusting aspects of our acquire’s practices relating to, among others, cybersecurity, information technology or risk management which are not consistent with our standards. Any such failure or delay may increase our exposition to risks relating to, among others, cybersecurity, privacy, information technology or risk management.
As a result of a number of factors, we may be unable to benefit from completed acquisitions , including as a result of our inability to:
•implement our culture in the acquired companies;
•integrate our operating and accounting policies and procedures;
•expedite the consolidation of subsidiaries;
•retain existing management to the extent necessary or adapt the acquired companies’ operations;
•prevent the loss of clients of the acquired companies or our existing clients; or
•otherwise generate sufficient revenue to offset the costs and expenses of acquisitions.
Moreover, the closing and success of any transaction are, at least in part, subject to a number of economic and external factors that are beyond our control. Any combination of the factors mentioned above may result in our inability to integrate acquired companies or assets or achieve the expected growth or synergies of a particular transaction, which may materially adversely affect our business, results of operations and financial condition.
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Our international expansion efforts may not be successful or may subject us to increased risks.
Our operations are currently concentrated in Brazil, with an established presence in the United States. We have started to expand our operations internationally, notably to the United States and more recently to Latin America. We continue to evaluate opportunities to enter additional markets.
As part of our growth strategy, we may expand our operations by offering our products and services in additional regions, where we have no experience. We may not be successful in expanding our operations into these markets in a cost-effective or timely manner, if at all, and our products and services may not experience the same market adoption in such international jurisdictions as we have enjoyed in Brazil. In particular, the expansion of our business into new geographies (or the further expansion in geographies in which we currently operate) may depend on the local regulatory environment or require a close commercial relationship with one or more local banks or other intermediaries, which could prevent, delay or limit the introductions of our products and services in such countries. Local regulatory environments may vary widely in terms of scope and sophistication.
We also may not be able to recoup our investments in new geographies in a timely manner, if at all. If our expansion efforts are unsuccessful, including because potential clients in a given jurisdiction fail to adopt our products and services, our reputation and brand may be harmed, and our ability to grow our business and revenue may be adversely affected.
Even if our international expansion efforts are successful, international operations will subject our business to increased risks, including:
•increased licensing and regulatory requirements;
•competition from service providers or other entrenched market participants that have greater experience in the local markets than we do;
•increased costs associated with and difficulty in obtaining, maintaining, processing, transmitting, storing, handling and protecting intellectual property, proprietary rights and sensitive data;
•changes to the way we do business as compared with our current operations;
•a lack of acceptance of our products and services;
•the ability to support and integrate with local third-party service providers;
•difficulties in staffing and managing foreign operations in an environment of different culture, language, laws and customs;
•difficulties in recruiting and retaining qualified employees and maintaining our company culture;
•increased travel, infrastructure and legal and compliance costs;
•compliance obligations under multiple, potentially conflicting and changing, legal and regulatory regimes, including those governing financial institutions, payments, data privacy, data protection, information security, anti-corruption, anti-bribery and anti-money laundering;
•compliance with complex and potentially conflicting and changing tax regimes;
•potential tariffs, sanctions, fines or other trade restrictions;
•exchange rate exposure;
•increased exposure to public health issues and related industry and governmental actions to address these issues; and
•regional economic and political instability.
As a result of these risks, our international expansion efforts may not be successful or may be hampered, which would limit our ability to grow our business.
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We may not effectively execute on our expansion strategy with new products or business verticals, which may adversely affect our growth.
As part of our growth strategy, we may expand our operations by developing new products or business verticals with which we may have no experience. We may not be successful in expanding our business with such products or verticals in a cost-effective or timely manner, if at all. Various external factors, such as economic conditions, implementation of new laws or regulation and competition may also impede or restrict the growth of our new products and business verticals. For example, the Brazilian Congress is discussing certain bills to regulate mileage and loyalty point programs. Such statutes, if enacted could adversely affect our ability to develop our Loyalty vertical.
A significant increase in the number of our digital accounts in a short period of time may increase our exposure to operating risks, thus negatively impacting our business, results of operations and reputation.
Our client base has grown over recent periods, and we expect this growth trend to continue. The significant increase in the number of clients in a short period of time increases our exposure to a number of operating risks, including failures in our ability to register banking transactions, as well as the unavailability of systems that are crucial to our business operations, the processing of gains and losses on public and private securities, detecting fraud and the settlement of purchase and sale orders in the capital markets, among other operating processes that may be negatively impacted. The realization of one or more of these risks may materially adversely affect our results of operations, financial condition and reputation.
We and our subsidiary, Inter Shop, may not be able to maintain our strategies for the development and maintenance of our Inter Shop platform.
We and Inter Marketplace Intermediação de Negócios e Serviços Ltda., or Inter Shop, our subsidiary that operates our Inter Shop platform, perform e-commerce transactions through our digital application. If we are unable to maintain our strategies for the development and maintenance of our Inter Shop platform, including maintaining our contracts with certain suppliers on whom we depend to maintain our e-commerce operations, we will be impaired in our ability to effect e-commerce transactions and, as a result, our business may be materially adversely impacted.
Additionally, companies that sell their products on Inter Shop are free to leave the platform and are not bound by non-competition or similar agreements. If we are unable to retain enough companies selling their products on our platform, our e-commerce activities may halt, which could materially adversely affect us.
The retail sector in Brazil is highly competitive, which may adversely affect the participation of our subsidiary, Inter Shop, in the market, consequently affecting the net revenue of our operations.
Inter Shop faces intense competition. Some of Inter Shop competitors are retailers or marketplace operators that carry inventory benefit from a more beneficial tax treatment, as they obtain tax credits that are not available to e-commerce operators that do not carry inventory, like Inter Shop. In addition, it competes with a large number of multinational merchandise retail chains in general, as well as with hypermarkets that offer their clients durable goods. Some of these international competitors may have access to larger sources of finance at lower costs than Inter Shop.
Moreover, consumers’ purchasing decisions are affected by factors such as brand recognition, product quality and performance, credit availability, price and habits and preferences of each consumer. Some of our competitors may make marketing investments substantially larger than ours. If our advertising, promotional or marketing strategies are unsuccessful, or if we are unable to offer new products (and services) that meet market demands or changes in consumer habits, or if we are unable to successfully manage introduce new products or the profitability of these efforts or, if for other reasons, our end consumers believe that our competitors’ products and services are more attractive, then Inter Shop sales, profitability and operating results may be affected, which can have negative impacts on our results.
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Competition in e-commerce can also intensify. Other retail and e-commerce companies may enter into alliances or commercial agreements that will strengthen their competitive position. As the client portfolio grows and increases their loyalty in the various segments of the internet market, participants in these segments will be able to seek to expand their business to the market segments in which we operate. In addition, new technologies can further intensify the competitive nature of online retailing. This increase in competition may reduce Inter Shop sales, profitability and operating results may be affected, which may have a negative impact on our results. Competitors may come to provide more resources for technology and marketing development than we do. Additionally, as the use of the internet and other online services increases, retailers operating in this market may be acquired, receive investments, or enter into other business relationships with larger, more established companies with financial resources.
We cannot guarantee that our suppliers, business partners and shopping sellers of our Inter Shop platform will not engage in improper practices. We may be held responsible for the default and marketing of inadequate products by the sales partners registered on our Inter Shop platform, and may cause damage to our reputation, brands and financial results.
We and our subsidiary Inter Shop cannot guarantee that some of our suppliers and business partners of our Inter Shop platform will not present irregularities in their operations due to non-compliance with tax, labor, social and environmental and anti-corruption legislation. It is possible that partners may use outsourcing of the production chain, or even that these potential irregularities may be used to lower the cost of their products.
Through our Inter Shop platform, Inter Shop allows sales partners to register and offer their products within their e-commerce channels. Through this model, Inter Shop acts as an intermediary in sales transactions, and it is not under our control whether partners fulfill their obligations and responsibilities to their clients. If any of these partners do not meet their obligations to clients, we and/or Inter Shop may have our indicators of client service negatively impacted, suffer sanctions from regulatory agencies and find an increase in the number of civil and tax proceedings, among others, and be required to bear costs to clients who purchased their products through our Inter Shop platform. We and Inter Shop may still be held responsible for partners trading, or even registering and offering on our platform, counterfeit, illicit and/or illegal products. These aspects may subject us to reputational losses, consequently, loss of attractiveness to our clients, which could adversely impact on our net income and operating income, and to fines and/or sanctions to be applied by competent bodies. Any such events could adversely impact on the market value of our securities.
Additionally, we and Inter Shop may be jointly or severally liable if our suppliers and/or business partners demonstrate problems already described, in addition to default, by partners and clients of Inter Shop.
We control Inter Seguros, an insurance broker. Potential changes in the insurance brokerage regulatory environment could have a material adverse effect on our business, financial condition, operating results and prospects for expansion.
The activities of Inter Seguros are subject to supervision, especially by the Brazilian Bureau of Private Insurance, or SUSEP, and the Brazilian Bureau of Private Insurance, or CNSP. Changes in the laws and regulations applicable to the insurance and reinsurance market, and insurance brokers, could have a material adverse effect on the business of insurance companies. There is no guarantee that the Brazilian government, whether through SUSEP or any other instrumentality/government agency, will not change these laws and regulations, which may prevent or restrict the operations of Inter Seguros, adversely affecting our business, financial situation, operating results and prospects for expansion.
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We may incur financial and reputational losses due to our relationship with shareholders, suppliers, business partners and/or clients, whose activities may result in negative social environmental impacts that may materially adversely affect us.
We have a diversified client base that may be exposed to social and environmental risk factors. Social and environmental risk may materialize for our clients in a variety of ways and with differing degrees of intensity in relation to economic, social and environmental scenarios, resulting in financial and/or reputational losses that may impact on the relationship with us, and materially adversely affect us.
We may become a party to legal proceedings, receive infraction notices and fines, be accused of being involved in the business of our clients, suppliers, business partners or third-party service providers and, consequently, any environmental harm caused by them, any of which may adversely affect our operations and reputation.
Our controls to identify environmental risks in property offered to us as collateral may fail. Accepting assets with environmental risks may subject us to additional costs (such as repairing the environmental harm in the property in question) and fines, both of which may adversely affect our financial condition and reputation. Such assets (whether or not used) may become social and environmental liabilities due to contamination, deforesting and illegal occupations, among others. Such events may adversely affect our operations, financial condition and reputation.
Our holding company structure makes us dependent on the operations of our subsidiaries, which may impact our ability to pay any cash dividends in the foreseeable future.
Inter&Co is a holding company that holds controlling interests in our operational companies. Accordingly, our material assets are our direct and indirect equity interests in our subsidiaries and therefore our ability to make cash distribution is subject to the results of operations of our subsidiaries. Currently, all of our revenues are expected to be derived from our subsidiaries, including Banco Inter and its subsidiaries. We expect that we will continue to depend on our subsidiaries for a significant portion of our revenues for the foreseeable future, and any decrease in the revenue of our subsidiaries or any other event significantly affecting our subsidiaries may have a material adverse effect on our financial condition and results of operations.
Additionally, we have non-controlling interest holders in some of our subsidiaries or investees. These non-controlling interest holders may have the ability to vote on certain decisions of the subsidiary or investee and may also have economic interests different from ours and may act in a manner contrary to our strategy or objectives. If we are unable to obtain the non-controlling’ consent to approve the decisions we deem appropriate, we may not be able to implement, in whole or in part, the business strategy for these companies, which could adversely affect our results of operations.
Our holding company structure also means that we depend on the payments, dividends and distributions from our subsidiaries for funds to pay our holding Company's operating and other expenses and to pay the future cash dividends or distributions, if any, to holders of our Class A common shares. In addition, the payments, dividends and distributions from our subsidiaries to us for funds to pay future cash dividends or distributions, if any, to holders of our Class A common shares, could be restricted under financing arrangements that we or our subsidiaries may enter into in the future and we and such subsidiaries may be required to obtain the approval of lenders to make such payments to us in the event they are in default or they repayment obligations.
In addition, our company may face negative impact if the Brazilian government imposes legal limitations on the distribution of dividends by our Brazilian subsidiaries, as they have done in the past. We may also have tax costs in connection with any dividend or distribution from our subsidiaries, which may affect the amount available for us to distribute to holders of our Class A common shares. The Brazilian Congress is discussing a tax reform which could create a tax on dividends and increase the tax rates on other forms of distribution. Such new or increased tax burden may adversely affect our and our subsidiaries’ ability to pay dividends or make distributions.
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The declaration, payment and amount of any future dividends or distributions to holders of our Class A common shares, will be made at the discretion of our board of directors and will depend upon, among other things, the results of operations, cash flows and financial condition, operating and capital requirements, and other factors as our board of directors considers relevant. We cannot assure that we will pay dividends in the future. See “Item 8. Financial Information―A. Consolidated Statements and Other Financial Information―Dividends and Dividend Policy” and “Item 10. Additional Information―B. Memorandum and Articles of Association—Dividends and Capitalization of Profits.”
We may identify material weaknesses in our internal control over financial reporting and, if we fail to maintain effective internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.
We cannot provide assurance that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified in the future. If we fail to maintain the adequacy of our internal control over financial reporting, as the laws, regulations and policies standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. If we fail to maintain an effective internal control environment, we could suffer material misstatements in our financial statements, fail to meet our reporting obligations or fail to prevent fraud, which would likely cause investors to lose confidence in our reported financial information. This could, in turn, limit our access to capital markets and harm our results of operations. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from Nasdaq, regulatory investigations and civil or criminal sanctions.
We are subject to consumer protection laws and governmental consumer protection authorities. Non-compliance with consumer protection laws and agreements entered into with authorities may adversely affect our reputation, brands and financial results.
In Brazil, the Consumer Protection Code, which is applicable to financial institutions, regulates commercial practices and provides for, among other things, product and service liability, strict liability of the supplier of products or services, reversal of the burden of proof to the benefit of consumers as the weaker party, the joint and several liability of all companies within the supply chain, abuse of rights in contractual clauses, advertising and information on products and services offered to the public. The Consumer Protection Code further establishes the consumers’ rights to access and modify personal information collected about them and stored in private databases. Brazilian consumer protection laws could result in substantial compliance costs. Financial institutions are generally exposed to a significant number of administrative and judicial claims from consumers, and scrutiny of federal and state prosecution offices and associations for protection of Consumer’s Rights. We are involved in certain public civil claims or other types of class actions available under Brazilian law with claims relating to our payroll deduction loans and other matters, and may be subject to new claims in the future. The public prosecutor’s office and governmental consumer protection authorities may inspect and initiate administrative proceedings related to regulatory compliance. In such cases, we may enter into consent orders (termos de ajustamento de conduta) with these authorities, through which we will agree to perform (or abstain from performing) certain actions.
In addition, with our international expansion we are subject to international consumer protection rules. Specifically in relation to Inter&Co Payments, we are subject to the rules of the United States federal agency the Consumer Financial Protection Bureau (CFPB), responsible for consumer protection in the financial sector which implements and enforces federal consumer financial laws to ensure that all consumers have access to markets for consumer financial products and services that are fair transparent and competitive.
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Changes made by the Central Bank in the basic interest rate may materially adversely affect our operating results and financial condition.
The Monetary Policy Committee of the Central Bank (Comitê de Política Monetária), or COPOM, periodically determines the Special System for Settlement and Custody (Sistema Especial de Liquidação e de Custódia), or SELIC rate, the basic interest rate of the Brazilian banking system, which serves as an important instrument for meeting inflation targets. The basic interest rate has fluctuated frequently in recent years. The COPOM has often adjusted the basic interest rate due to economic uncertainties and to achieve the objectives determined by the Brazilian government’s economic policy.
For example, on August 5, 2020, the SELIC rate reached 2.0%, the lowest level in history, a decision taken at a time of strong reduction in the level of activity of the global economy. However, the SELIC rate has increased significantly since 2021. On March 19, 2025, the SELIC rate was increased to 14.25%, due to concerns of inflationary pressures.
Increases in the basic interest rate may materially adversely affect the results of our operations, by reducing the demand for credit, increasing funding costs and increasing the risk of client default, among other consequences. In particular, lending tends to be more affected by an increase in the basic interest rate, which may materially adversely affect us. Reductions in the basic interest rate may also materially adversely affect us by, for example, reducing revenues from revenue-generating assets and decreasing margins. We are unable to predict whether the Central Bank will maintain current interest rates. For more information of how we are affected by the inflation, see Item 5. Operating and Financial Review and Prospects — A. Operating Results — The Brazilian Macroeconomic Environment.
Changes in Brazilian tax and social security laws may materially adversely affect our operating results and financial capacity.
The Brazilian government regularly implements changes in tax, social security contributions and other laws and regimes that affect us and our clients. These changes may affect the determination of tax rates, occasionally, the establishment of temporary rates and the calculation of the tax basis. Additionally, we may also be affected by differing interpretations on the tax laws applicable to us.
These events may result in increased tax payments and social security contributions, which may materially adversely affect us. There can be no assurance that conditions will be sufficient to maintain the profitability we achieved in previous years should there be substantial increases in taxes levied on us, our subsidiaries and our operations.
The Brazilian Congress approved a broad tax reform that aims at replacing several federal, state and municipal taxes with two new Value Added Taxes (VAT) (reform of consumption taxes). The new tax regulation provides for a transition period in which both current taxes and the new VATs will coexist, with a progressive reduction of the former and a progressive increase of the latter. Tax rates are not defined yet. The approved reform of consumption taxes also determines that financial services will be subject to a special taxation regime.
Past tax reforms have brought uncertainties with respect to the national financial system, increased the cost of credit and contributed to an increase in client defaults. It is not possible to predict the impacts of the tax reform mentioned above or the impacts from future tax reforms that may be implemented by the Brazilian government or their effects or ensure that any tax reform that may be undertaken does not materially adversely affect us.
During 2025, the Brazilian Congress has approved significant changes to the income tax regime affecting both individuals and legal entities, including: (i) taxation of dividends paid to individuals and non-resident legal entities; (ii) an increase on the taxation of interest on net equity (juros sobre o capital próprio - JCP); and (iii) the reduction of federal tax benefits and an increase on the Social Contribution on Net Income (Contribuição Social sobre o Lucro Líquido - CSLL) tax rate for Payment Institutions. Furthermore, the Brazilian Federal Government also implemented changes in the Financial Transactions Tax (Imposto sobre Operações Financeiras – IOF) rate.
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We are unable to quantify the effects of changes in tax rules and regulations that may be implemented by the Brazilian government in the future. There can be no assurance that future changes in tax rules and regulations will not have a material adverse effect on our results and operations or those of our clients.
Our business is significantly impacted by the Brazilian regulatory environment.
Historically, the Brazilian government has implemented or amended the regulations that govern financial institutions in connection with the implementation of the Brazilian government’s economic policy. These regulations are constantly modified by the Brazilian government in order to control the availability of credit and reduce or increase consumption. Certain controls are temporary in nature and may be modified from time to time in accordance with the Brazilian government’s credit policies. Other controls were introduced and remain in force or were gradually reduced. Since regulatory changes may occur frequently, historical operating results do not necessarily provide any indication of our expected results in the future. Brazilian financial institutions are subject to extensive and continuous regulatory review by the Central Bank and CMN.
We have no control over regulations relating to banking operations, including, but not limited to, those that govern:
•minimum capital requirements;
•compulsory deposit requirements;
•limits on fixed asset investments;
•limits on lending and other credit restrictions;
•accounting and statistical requirements;
•limits on exchange exposure;
•limits or other restrictions on fees;
•requirements for the contracting of services for the processing and storage of data and cloud computing;
•requirements in relation to the prevention of money laundering, record keeping and ethical issues; and
•intervention, liquidation and/or temporary monitoring.
The regulatory framework, which establishes the guidelines to be followed by Brazilian financial institutions (including banks, brokerage firms and leasing companies) has been continuously changing. Existing laws and regulations may be amended, the manner in which existing laws and regulations are enforced or interpreted may change, and new laws or regulations may be adopted. Moreover, regulations issued by the Central Bank and CMN are not subject to the legislative process and, as such, may be enacted and implemented expeditiously, affecting our activities in an unforeseen and sudden manner. Any such changes may materially adversely affect us.
Moreover, the Central Bank has periodically modified the level of reserves and compulsory deposits that Brazilian banks are required to maintain with the Central Bank. Reserve and compulsory deposit requirements may reduce our liquidity and ability to provide loans and undertake other investments. In the future, the Central Bank may increase reserve requirements or establish new reserve or compulsory deposit requirements, and such developments may materially adversely affect us.
In addition, Brazilian law generally sets a cap on annual interest rates that may be charged on loans, but financial institutions, such as us, are exempted from this limit. Changes in this exemption (resulting from change in the applicable laws, court decisions or otherwise) may materially adversely affect us.
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Changes in compulsory deposit requirements may reduce our operating margins.
The Central Bank has periodically changed the level of compulsory deposits that financial institutions in Brazil must maintain. The Central Bank may increase our compulsory deposit requirements in the future or impose new requirements. Compulsory deposits that are remunerated (such as term resources and saving deposit resources) typically generate lower returns than other investments given that no interest is received on a portion of our compulsory deposits with the Central Bank and given that the monies cannot be loaned out. Any increase in compulsory deposit requirements may reduce our ability to lend funds and make other investments, which may materially adversely affect us.
We may be materially adversely affected as a result of some intervention by the Central Bank in other Brazilian financial institutions.
Brazilian banks may experience a decrease in deposits as a result of certain circumstances and conditions in the Brazilian financial market, particularly relating to the financial health of these institutions, as previously observed in various local and global crises, which had a pronounced effect on the availability of liquidity for Brazilian banks. There can be no assurance that the Central Bank will not intervene in other financial institutions. If the Central Bank undertakes an intervention, even in other financial institutions that are not part of our economic group, we may experience unexpected withdrawals of funds that may materially adversely affect us.
Certain claims over the payroll borrower’s income have priority over payroll loan payments and may result in the temporary suspension of, or permanent reduction in, payroll loan payments.
The INSS and other governmental entities impose a series of requirements on payroll deductible loans of INSS retirees and pensioners as well as public sector employees. In particular, payroll deductions for INSS retirees and pensioners and federal public servants cannot exceed 45% of the total monthly amount that payroll borrowers receives from the INSS or their employer, after deducting certain preferred expenses (such as alimony, INSS contributions and income taxes). The amount available for deductions from payroll after priority expenses is referred to as the payroll borrower’s margin. The margin is a total limit that applies to all deductions from the payroll of INSS retirees and pensioners and the salaries of federal public servants and employers of the private sector governed by the Brazilian Consolidated Labor Law.
Suspension or reduction in payments deducted from payroll may occur when a borrower assumes additional obligations that have priority in payment over payroll loan payments, thereby reducing the amount of the borrower’s payroll available to make the payroll loan payments (with payments in respect of payroll credit cards having priority over other payroll loan payments). If the amount owed monthly by a payroll borrower exceeds the borrower’s margin that may be lawfully assigned, only the assignable amount may be deducted from the payroll borrower’s benefits or salary, as applicable, which may result in a partial payment or no payment of the payroll loan and materially adversely affect us.
The increase in the competitiveness of the banking sector due to the implementation of the Open Financial System (Open Finance) may hinder client retention and affect our results.
In 2022, the CMN and the Central Bank completed the implementation of the Open Financial System, or Open Finance, in Brazil, which system was designed to facilitate the access of new players to the financial markets, as well as encouraging competition between financial institutions. The changes brought about by these new regulations started to demand the opening and sharing of information about the services of the main financial institutions in Brazil, and expansion of the portability of data and transactions of clients. As a consequence, financial institutions are required to adopt certain technological standards for the implementation and operationalization of interfaces dedicated to sharing data and services. Thus, data from clients and services of financial institutions are now available for access by participants in the financial system, provided that the sharing of their data is previously allowed by clients.
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We are required to participate in Open Finance as a payment transactions initiator (iniciador de transação de pagamento). If we are unable to be competitive in the face of these new market conditions or fully and duly observe the required technological standards, including those related to cybersecurity, we may experience difficulties in retaining clients and our financial results, as well as our reputation, may be negatively impacted.
We are subject to various risks in our credit card operations.
We issue credit cards and payroll cards (credit card for payroll clients) to our clients. Our credit card operations are subject to various risks, including risk of fraud and credit risk of our clients, as well as risk relating to the general economic conditions of the Brazilian economy. Fraud risks include losses from various types of fraud by our clients or third parties, including use of stolen or fraudulent credit card data, attempted payments with insufficient funds and other forms of fraud. People use increasingly sophisticated methods to engage in illegal activities involving personal information, such as unauthorized use of another person’s identity, account information or payment information and unauthorized acquisition or use of credit or debit card details, bank account information and mobile phone numbers and accounts. Our credit risk with credit cards is the risk that our client may not have enough funds to pay the credit card balance when due. This risk can be exacerbated if the models we use to determine the amount of credit we extend to each client are not properly calibrated. Additionally, our credit card operations are relatively new. As such, we are still developing and implementing more sophisticated methods and models to mitigate the risks relating to our credit card operations.
We cannot assure you that we will effectively manage our scale.
Our employee headcount and the scale and complexity of our business have increased significantly over time. The scale of our business and breadth of our products creates significant challenges for our management, operational, and financial resources, including managing multiple relationships with users, marketers, developers, and other third parties, and maintaining information technology systems and internal controls and procedures that support the scale and complexity of our business. In addition, some members of our management do not have significant experience managing a large global business operation, so our management may not be able to manage our scale effectively. To effectively manage our scale, we must maintain, and continue to adapt, our operational, financial, and management processes and systems, manage our headcount and facilities, and effectively train and manage our personnel. In addition, from time to time, we implement organizational changes to pursue greater efficiency and realign our business and strategic priorities. As our organization continues to evolve, and we are required to implement and adapt complex organizational management structures, we may find it difficult to maintain the benefits of our corporate culture, including our ability to quickly develop and launch new and innovative products. This could negatively affect our business performance.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or nonperformance by financial institutions or transactional counterparties, could adversely affect the Company’s current and projected business operations and its financial condition and results of operations.
Current events involving reduced or limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. In Brazil, for example, credit markets were significantly impacted by the Americanas case (Americanas is a publicly traded company in Brazil that operates in retail in two sectors physical stores and e-commerce. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, or result in breaches of our financial and/or contractual obligations. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations and financial condition and results of operations.
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Risks Relating to Brazil and the Global Economy
Disruption or volatility in global financial and credit markets could adversely affect the financial and economic environment in the countries in which we operate, most notably Brazil, which could have a material adverse effect on our business, financial condition and results of operations.
Our operations are dependent upon the performance of the economies in which we do business, Brazil in particular. Crises and volatility in the financial markets of countries other than Brazil may affect the global financial markets and the Brazilian economy and may have a negative impact on our operations.
Volatility and uncertainty in global financial and credit markets have generally led to a decrease in liquidity and an increase in the cost of funding for Brazilian and international issuers and borrowers. Such conditions may adversely affect our ability to access capital and liquidity on financial terms that are acceptable, if at all. If we are unable to access capital and liquidity on financial terms acceptable to us or at all, our financial condition and the results of our operations may be adversely affected. In addition, the economic and market conditions of other countries, including the United States, countries in the European Union and emerging markets, may affect the volume of foreign investments in Brazil. If the level of foreign investment declines, our access to capital may likewise decline, which could negatively affect our business, ability to take advantage of strategic opportunities and, ultimately, the trading price of our Class A common shares.
The demand for credit and financial services, as well as our clients’ ability to make payments and deposits, is directly impacted by macroeconomic variables, such as economic growth, income, unemployment rates, inflation, interest and foreign exchange rates. Disruptions and volatility in the global financial markets may have significant consequences in the countries in which we operate, such as volatility in the prices of securities, interest rates and foreign exchange rates. Higher uncertainty and volatility may result in a slowdown in the credit market and the economy, which, in turn, could lead to higher unemployment rates and a reduction in the purchasing power of consumers. Such events may significantly impair our clients’ ability to perform their obligations and increase overdue or non-performing loans, resulting in an increase in the risk associated with our lending activity.
Any significant growth in the Brazilian economy may be limited by inadequacies in infrastructure, including energy shortages and deficiencies in the transport, logistics and telecommunications sectors, the lack of skilled manpower and of public and private investment in these areas and in education, limiting productivity growth. Any of these factors could result in inflation and consumption levels, which may adversely affect us due to restricted growth in the economy and a resulting increase in inflation and default rates.
The Brazilian government exercises significant influence over the Brazilian economy and government actions may materially adversely affect the Brazilian market and us.
Economic policies, including credit, monetary, tax and exchange policies, are used as instruments to maintain the functioning of Brazil’s economic system. In this context, changes in regulations of exchange controls, taxes and other areas applicable to services offered by financial institutions may materially adversely affect us. As Brazil approaches presidential elections scheduled for October 2026, uncertainty regarding the outcome of the elections and future economic and regulatory policies may further increase volatility in the market price of securities issued by companies with businesses in Latin American countries, including our securities, which may adversely affect our business.
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Uncontrolled inflation, significant exchange rate variations, social instability and other political, economic and diplomatic events, as well as the Brazilian government’s response to these events, may materially adversely affect us. In addition, uncertainty regarding the guidelines of economic policy may contribute to a lack of confidence and increased volatility in the Brazilian capital markets, as well as in the price of securities of Brazilian issuers. It is not possible to predict with any certainty how the approval of any reforms, such as labor, social security, political and tax reforms, will impact on the Brazilian economy. Continuing political uncertainty may affect the approval of important measures and lead to reversals in expectations, such as, but not limited to:
•fluctuations in interest rates;
•fluctuations in exchange rates;
•reductions in salary and income levels;
•increased unemployment rates;
•inflation;
•reserve requirements;
•capital requirements;
•liquidity of capital and credit markets;
•macroeconomic measures;
•client defaults;
•monetary and fiscal policies, as well as changes in the tax regime;
•political, social or economic instability;
•allegations of corruption against political parties, civil servants and others; and
•other political, social and economic events affecting Brazil.
We cannot foresee which measures may be adopted by the Brazilian government, which measures (if and when implemented) may create instability in the Brazilian economy. For example, the deterioration in federal, state and municipal governments’ fiscal results in recent years has led to an unprecedented increase in gross debt as well as in the gross debt to GDP ratio. In this environment, the government may encounter difficulty honoring its commitment to pass on to us the credit installments deducted from the salaries of its employees, increasing our provisions for credit in general.
We are unable to estimate the impact of changes in Brazilian economic and fiscal policy. We also cannot predict how current or future measures may impact our business. Moreover, due to the current political and economic instability, there are substantial uncertainties in relation to future economic policies and we cannot foresee which policies will be adopted by the Brazilian government and whether these policies will materially adversely affect the economy or us. Any changes in the regulatory capital requirements, the reserve requirements or regulations that govern our products and services, for example, or continued policy uncertainty, may materially adversely affect us.
Political instability in Brazil, including instability resulting from social and political unrest relating to corruption investigations or other events may materially adversely affect us.
Historically, Brazil’s political landscape has influenced and continues to influence the performance of the country’s economy. Political crises have affected and continue to affect the confidence of both investors and the public, which has resulted in an economic downturn and increased the volatility of securities issued by Brazilian companies.
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The Brazilian markets have also experienced an increase in volatility on account of the uncertainties generated by corruption investigations, led by the Federal Public Prosecutor’s Office and other authorities, and its impact on the Brazilian economy and political environment.
We are unable to predict the outcome of any such political unrest and investigations (future or present), including its effects on the Brazilian economy.
The potential result of these and other events is uncertain, but they already had a negative impact on the image and reputation of the companies involved, as well as on the general perception of the Brazilian economy. The development of these events has and may continue to adversely affect our business, financial condition, results of operations, as well as the market price of our shares. We cannot predict the results of the ongoing events, nor their impact on the Brazilian economy and stock market.
We cannot predict how the Brazilian government may impact on the overall stability, growth prospects and the country’s economy and political situation. Nor can we predict how ongoing and future political unrest and investigations may affect Brazil’s political and economic environment. Likewise, any difficulty for the Brazilian government in obtaining a majority of votes in the Brazilian Congress may result in a political standstill, protests and strikes, all of which may adversely affect our operations. Any of the above factors may create political uncertainty, which may materially impact on the Brazilian economy, our business, financial conditions and the results of our operations.
Downgrading of Brazil’s credit rating may have a material adverse effect on our funding costs.
Rating agencies regularly evaluate Brazil and its sovereign ratings based on a number of factors, including macroeconomic trends, physical and budgetary conditions, debt metrics and the prospect of changes in any of these factors.
On December 19, 2023, S&P raised Brazil’s credit rating to BB from BB-, considered speculative grade, citing that the government continues to implement fiscal consolidation measures that have helped reduce the country’s still high deficit, which together with lower interest rates. Besides the gradual implementation of the tax reform recently approved, it should contribute to stronger growth and investment prospects over the next three years, in addition to a gradual improvement in fiscal results.
In October 2024, Moody’s upgraded Brazil’s credit rating to a Ba1, which was maintained in May 2025. Since July 2023, Fitch’s maintained Brazil’s BB - credit rating.
As a result of Brazil losing its investment grade status with the three major rating agencies, the trading prices of debt and equity securities issued by Brazilian issuers have been adversely affected. Any extension of the current Brazilian recession could lead to further downgrades of the ratings, while any further decline in Brazil’s sovereign credit rating could increase investors’ risk perception and, consequently, may increase our future borrowing costs and materially adversely affect us.
In the event the Brazilian government fails to make payments due to holders of bonds issued by the Brazilian National Treasury to finance public debt, we may be materially adversely affected in light of our investments in these securities. In addition, a significant decrease in the market value of Brazilian government securities allocated in our portfolio could result in negative adjustments to the market value of these securities, which could materially adversely affect us.
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Brazil’s economy is vulnerable to external shocks that may have a material adverse effect on its economic growth and us.
Events and the perception of risks in other countries, particularly in emerging market countries, may have a material adverse effect on the market price of Brazilian securities, including those issued by us. The market value of securities issued by Brazilian companies is influenced, to varying degrees, by the economic and market conditions in other countries, including the United States, European countries, Latin American countries and emerging market countries. Investors’ reactions to the events in these other countries may have an adverse effect on the market value of Brazilian companies’ securities. The prices of the stocks traded on B3, for example, have historically been sensitive to fluctuations in U.S. interest rates, as well as to variations in major U.S. stock exchanges. Moreover, crises in other emerging market countries may reduce investors’ interest in the securities of Brazilian companies, including those issued by us, which may negatively affect the market price of the shares issued by us. In addition, the instability or volatility of the global financial markets may further increase the negative effects on Brazil’s financial and economic environment, which may materially adversely affect us.
War, terrorism, geopolitical uncertainties, public health issues and other business interruptions have caused and could cause damage or disruption to the economy and commerce on a global or regional basis, which could have a material adverse effect on our business, our clients, and companies with which we do business. For instance, the current crisis caused by Ukraine-Russia war has caused high levels of market volatility and uncertainty and could continue to adversely impact global financial and capital markets. Also, the length and impact of Ukraine-Russia war and Israel-Hamas war, is highly unpredictable, the conflict could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
Exchange rate instability may have adverse effects on the Brazilian economy, us and the price of our Class A common shares.
The Brazilian currency has been historically volatile and has been devalued frequently over the past three decades. Throughout this period, the Brazilian government has implemented various economic plans and used various exchange rate policies, including sudden devaluations, periodic mini devaluations (during which the frequency of adjustments has ranged from daily to monthly), exchange controls, dual exchange rate markets and a floating exchange rate system. Although long-term depreciation of the real is generally linked to the rate of inflation in Brazil, depreciation of the real occurring over shorter periods of time has resulted in significant variations in the exchange rate between the real, the U.S. dollar and other currencies. For more information about the exchange rate between the real and the U.S. dollar, see “Item 4. Information on the Company―Business Overview―Exchange Rates.”
A devaluation of the real relative to the U.S. dollar could create inflationary pressures in Brazil and cause the Brazilian central bank to, among other measures, increase interest rates. Any depreciation of the real may generally restrict access to the international capital markets. It would also reduce the U.S. dollar value of our results of operations. Restrictive macroeconomic policies could reduce the stability of the Brazilian economy and harm our results of operations and profitability. In addition, domestic and international reactions to restrictive economic policies could have a negative impact on the Brazilian economy. These policies and any reactions to them may harm us by curtailing access to foreign financial markets and prompting further government intervention. A devaluation of the Brazilian real relative to the U.S. dollar may also, as in the context of the current economic slowdown, decrease consumer spending, increase deflationary pressures and reduce economic growth.
On the other hand, an appreciation of the Brazilian real relative to the U.S. dollar and other foreign currencies may deteriorate the Brazilian foreign exchange current accounts. We and certain of our suppliers purchase services from countries outside Brazil, and thus changes in the value of the U.S. dollar compared to other currencies may affect the costs of services that we purchase. Depending on the circumstances, either devaluation or appreciation of the real relative to the U.S. dollar and other foreign currencies could restrict the growth of the Brazilian economy, as well as our business, results of operations and profitability.
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Finally, our exchange rate is also susceptible to volatility arising from international markets. Lately, uncertainty in the U.S economy has been increasing due to political events, in particular due to trade policy uncertainty. We cannot predict how the Brazilian economy will be affected by tariffs coming from the U.S and whether Brazil will choose to retaliate such tariffs. In this scenario, the prevailing exchange rates could become very volatile, impacting both our results and costs.
Our ability to make payments may be limited by liquidity constraints in Brazil in the occurrence of an event that could lead to an exodus of capital from Brazil and/or induce the Central Bank to effect a sudden and substantial increase in the basic interest rate of the Brazilian economy.
The occurrence of an event that could lead to an exodus of capital from Brazil or induce the Central Bank to effect a sudden and substantial increase in the basic interest rate of the economy could have repercussions on local liquidity conditions. These financial uncertainties, which could be both external and internal, may increase liquidity risks, adversely affecting the main sources of funds, particularly short-term deposits, and raising financing costs, which may have a material adverse effect on our profits as well as our liquidity levels. In addition, negative events affecting the Brazilian economy may directly or indirectly affect certain clients’ ability to honor their financial commitments with us, which can materially adversely affect us.
A substantial increase in inflation could materially adversely affect us.
Brazil has been experiencing high rates of inflation. A number of measures and plans were adopted by the Brazilian central bank to combat inflation, which negatively affected the Brazilian economy. If, however, the Brazilian central bank fails to control inflation, we may be materially adversely affected due to a negative impact on our ability to meet our obligations given certain of our agreements are adjusted by the inflation indices. Inflationary pressures may also reduce our ability to access foreign financial markets, affect our clients’ ability to meet their obligations and lead to further government intervention in the economy, including the introduction of economic policies that may materially adversely affect the performance of the Brazilian economy as a whole and, consequently, us.
Risks Related to Our Common Shares
Our controlling shareholder owns all our Class B common shares, which represent approximately 78% of the voting power of our issued share capital and controls all matters requiring shareholder approval.
Our controlling shareholder controls us through the ownership of all our Class B common shares and, therefore, approximately 78% of our voting capital. Our Class B common shares are entitled to ten (10) votes per share and our Class A common shares are entitled to one vote per share. As a result, our controlling shareholder controls the outcome of all decisions at our general meetings and will be able to elect a majority of the members of our board of directors. The decisions of our controlling shareholder on these matters may be contrary to your expectations or preferences, and they may take actions that could be contrary to your interests. For further information regarding shareholdings in Inter&Co, see “Item 7. Major Shareholders and Related Party Transactions.” So long as our controlling shareholder beneficially owns a sufficient number of Class B common shares, even if they beneficially own significantly less than 50% of our outstanding share capital, they will be able to effectively control all decisions at our general meetings.
If the trading price of our Class A common shares fluctuates, you could lose a significant part of your investment. A significant number of our Class A common shares are held through our BDRs, in Brazil, which may impact the liquidity and trading price of our Class A common shares.
The market price of the Class A common shares may be influenced by many factors, some of which are beyond our control, including:
•announcements by us or our competitors of significant contracts or acquisitions;
•technological innovations by us or competitors;
•the failure of financial analysts to continue covering our Class A common shares;
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•actual or anticipated variations in our results of operations;
•changes in financial estimates by financial analysts, or any failure by us to meet or exceed any of these estimates, or changes in the recommendations of any financial analysts that elect to follow our Class A common shares or the shares of our competitors;
•adverse news relating to us and our business, our executives and key business partners or suppliers;
•future sales of our shares (including by our controlling shareholder who may at any time convert its Class B common shares into Class A common shares); and
•investor perceptions of us and the industries in which we operate.
In addition, the global stock market in general has experienced substantial price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of particular companies affected. These broad market and industry factors may materially harm the market price of our Class A common shares. In the past, following periods of volatility in the market price of certain companies’ securities, securities class action litigation has been instituted against these companies. This litigation, if instituted against us, could adversely affect our financial condition or results of operations. If a market does not develop or is not maintained, the liquidity and price of our Class A common shares could be seriously harmed.
A significant number of our Class A common shares are held through our BDRs, in Brazil, which may impact the liquidity and trading price of our Class A common shares. To the extent our Class A common shares are held through our BDRs, you may have difficulty selling any Class A common shares. We cannot predict the extent to which investor interest in us and in our Class A common shares will affect the trading market for our Class A common shares on Nasdaq or otherwise or how liquid that market might become.
We may issue additional Class A common shares, which may dilute your interest in our share capital and affect the trading price of our Class A common shares.
We may issue additional our Class A common shares in the future, which may result in a dilution of your interest in our share capital and affect the trading price of our Class A common shares. Current Class A shareholders will not have preemptive or priority rights to participate in a priority offering of our Class A common shares.
Under our Articles of Association, holders of our Class B common shares are entitled to preemptive rights in order to maintain their proportional ownership interests. For more information, see “Item 10. Additional Information ― B. Memorandum and Articles of Association ― Preemptive or Similar Rights.”
We may also raise additional funds to grow our business and implement our growth strategy through public or private issuances of common shares or securities convertible into, or exchangeable for, our shares, which may dilute your interest in our share capital or result in a decrease in the market price of Inter&Co shares. In addition, we may also enter into mergers or other similar transactions in the future, which may dilute your interest in our share capital or result in a decrease in the market price of our shares. Any fundraising through the issuance of shares or securities convertible into or exchangeable for shares or the participation in corporate transactions with an effect similar to a merger, may dilute your interest in our share capital or result in a decrease in the market price of our Class A common shares.
Our Articles of Association contain anti-takeover provisions that may discourage a third-party from acquiring us and adversely affect the rights of holders of our Shares.
Our Articles of Association contain certain provisions that could limit the ability of others to acquire our control, including a provision that grants authority to our board of directors to establish and issue from time to time one or more series of preferred shares and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders of the opportunity to sell their shares at a premium over the prevailing market price by discouraging third parties from seeking to obtain our control in a tender offer or similar transactions.
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Requirements associated with being a public company in the United States require significant company resources and management attention.
We are subject to certain reporting requirements of the Exchange Act, and the other rules and regulations of the SEC and Nasdaq. We are also subject to various other regulatory requirements, including the Sarbanes-Oxley Act. These rules and regulations have increased and may continue to increase our legal, accounting and financial compliance costs and to make some activities more time-consuming and costly. New rules and regulations relating to information disclosure, financial reporting and controls and corporate governance, which could be adopted by the SEC, Nasdaq or other regulatory bodies or exchange entities from time to time, could result in a significant increase in legal, accounting and other compliance costs and make certain corporate activities more time-consuming and costly, which could materially affect our business, financial condition and results of operations. These rules and regulations may also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. These cost increases and the diversion of management’s attention could materially and adversely affect our business, financial condition and results of operations.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common shares and their trading volume could decline.
The trading market for our Class A common shares may depend in part on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research about us. If no or too few securities or industry analysts start to cover us, the trading price for our Class A common shares would be negatively affected. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our Class A common shares or publish inaccurate or unfavorable research about our business, the price of our Class A common shares would likely decline. If one or more of these analysts ceases to cover us or fail to publish reports on us regularly, demand for our Class A common shares could decrease, which might cause the price of our Class A common shares and trading volume to decline.
Our dual class capital structure means our shares will not be included in certain indices. We cannot predict the impact this may have on the trading price of our Class A common shares.
FTSE Russell, S&P Dow Jones and MSCI generally take the position that companies with multiple classes of common stock are not eligible to be included in certain of their indices. We cannot assure you that other stock indices will not take a similar approach in the future. Under the announced policies, our dual class capital structure makes us ineligible for inclusion in any of these indices and, as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not invest in our stock. It continues to be somewhat unclear what effect, if any, these policies will have on the valuations of publicly traded companies excluded from the indices, but in certain situations they may depress these valuations compared to those of other similar companies that are included. Exclusion from indices could make our Class A common shares less attractive to investors and, as a result, the market price of our Class A common shares could be adversely affected.
Inter&Co is a Cayman Islands exempted company with limited liability. The rights of Inter&Co shareholders, including with respect to fiduciary duties and corporate opportunities, may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.
Inter&Co is a Cayman Islands exempted company with limited liability. Inter&Co corporate affairs are governed by its Articles of Association and by the laws of the Cayman Islands. The rights of Inter&Co shareholders and the responsibilities of members of Inter&Co’s board of directors may be different from the rights of shareholders and responsibilities of directors in companies governed by the laws of U.S. jurisdictions. In particular, as a matter of Cayman Islands law, directors of a Cayman Islands company owe fiduciary duties to the company and separately a duty of care, diligence and skill to the company. Under Cayman Islands law, directors and officers owe the following fiduciary duties: (1) duty to act in good faith in what the director or officer believes to be in the best interests of the company as a whole; (2) duty to exercise powers for the purposes for which those powers were conferred and not for a collateral purpose; (3) directors should not improperly fetter the exercise of future
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discretion; (4) duty to exercise powers fairly as between different sections of shareholders; (5) duty to exercise independent judgment; and (6) duty not to put themselves in a position in which there is a conflict between their duty to the company and their personal interests. Inter&Co’s Articles of Association have varied this last obligation by providing that a director must disclose the nature and extent of his or her interest in any contract or arrangement, and following such disclosure, such director shall not vote in respect of any transaction or arrangement in which he or she is interested and shall not be counted in the quorum at the meeting. The resolution may be passed by a majority of the directors present at the meeting. Conversely, under Delaware corporate law, a director has a fiduciary duty to the corporation and its stockholders (made up of two components) and the director’s duties prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally.
Inter&Co shareholders may face difficulties in protecting their interests because Inter&Co is a Cayman Islands exempted company.
Inter&Co corporate affairs are governed by our Articles of Association, by the Companies Act (As Revised) of the Cayman Islands, or Companies Act, and the common law of the Cayman Islands. The rights of shareholders to take action against Inter&Co directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as that from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of Inter&Co shareholders and the fiduciary responsibilities of Inter&Co directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less exhaustive body of securities laws than the United States. In addition, some U.S. states, such as Delaware, have more fulsome and judicially interpreted bodies of corporate law than the Cayman Islands.
While Cayman Islands law allows a dissenting shareholder to express the shareholder’s view that a court sanctioned reorganization of a Cayman Islands company would not provide fair value for the shareholder’s shares, Cayman Islands statutory law does not specifically provide for shareholder appraisal rights in connection with a merger or consolidation of a company that takes place by way of a scheme of arrangement. This may make it more difficult for you to assess the value of any consideration you may receive in a merger or consolidation (by way of a scheme of arrangement) or to require that the acquirer gives you additional consideration if you believe the consideration offered is insufficient. However, Cayman Islands statutory law provides a mechanism for a dissenting shareholder in a merger or consolidation that does not take place by way of a scheme of arrangement to apply to the Grand Court of the Cayman Islands for a determination of the fair value of the dissenter’s shares if it is not possible for the company and the dissenter to agree on a fair price within the time limits prescribed.
Shareholders of Cayman Islands exempted companies have no general rights under Cayman Islands law to inspect corporate records and accounts or to obtain copies of lists of shareholders. Inter&Co directors have discretion under Inter&Co Articles of Association to determine whether or not, and under what conditions, Inter&Co corporate records may be inspected by Inter&Co shareholders, but are not obliged to make them available. This may make it more difficult for you to obtain information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.
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As a foreign private issuer, Inter&Co has different disclosure and other requirements than U.S. domestic registrants and non-emerging growth companies.
As a foreign private issuer, we are subject to different disclosure and other requirements than domestic U.S. registrants and non-emerging growth companies. For example, as a foreign private issuer, in the United States, Inter&Co is not subject to the same disclosure requirements as a domestic U.S. registrant under the Exchange Act, including the requirements to prepare and issue quarterly reports on Form 10-Q or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules applicable to domestic U.S. registrants under Section 14 of the Exchange Act or the insider reporting and short-swing profit rules applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we intend to rely on exemptions from certain U.S. rules which will permit Inter&Co to follow Cayman Islands legal requirements rather than certain of the requirements that are applicable to U.S. domestic registrants.
We follow Cayman Islands laws and regulations that are applicable to Cayman Islands companies. However, Cayman Islands laws and regulations applicable to Cayman Islands companies do not contain any provisions comparable to the U.S. proxy rules, the U.S. rules relating to the filing of reports on Form 10-Q or 8-K or the U.S. rules relating to liability for insiders who profit from trades made in a short period of time, as referred to above.
Furthermore, foreign private issuers are required to file their annual report on Form 20-F within 120 days after the end of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days after the end of each fiscal year. Foreign private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making selective disclosures of material information, although we are subject to Cayman Islands laws and regulations having, in some respects, a similar effect as Regulation Fair Disclosure. As a result of the above, even though we are required to furnish reports on Form 6-K disclosing the limited information which we have made or are required to make public pursuant to Cayman Islands law, or are required to distribute to shareholders generally, and that is material to us, you may not receive information of the same type or amount that is required to be disclosed to shareholders of a U.S. company.
We cannot predict if investors will find Inter&Co common shares less attractive because we may rely on these exemptions. If some investors find Inter&Co common shares less attractive as a result, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.
As a foreign private issuer and a “controlled company,” we may rely on exemptions from certain corporate governance requirements. You will not have the same protections afforded to shareholders of companies that are subject to such requirements.
We are a “controlled company,” within the meaning of the corporate governance standards of Nasdaq corporate governance rules, and a foreign private issuer, which permits us to rely on exemptions from certain corporate governance requirements. As a result, (i) we are not required to have a board that is composed of a majority of “independent directors,” as defined under the rules of such exchange, (ii) we are not required to have a compensation committee that is composed entirely of independent directors; and (iii) we are not required to have a nominating and corporate governance committee that is composed entirely of independent directors. We utilize and intend to continue utilizing these exemptions.
United States civil liabilities and certain judgments obtained against Inter&Co by Inter&Co shareholders may not be enforceable.
We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. In addition, the majority of Inter&Co directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside of the United States. As a result, it may be difficult to effect service of process within the United States upon these persons. It may also be difficult to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and Inter&Co officers and directors who are not resident in the United States and the substantial majority of whose assets are located outside of the United States.
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Further, it is unclear if original actions predicated on civil liabilities based solely upon U.S. federal securities laws are enforceable in courts outside the United States, including in the Cayman Islands and Brazil. Courts of the Cayman Islands may not, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature. Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, courts of the Cayman Islands will recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, provided it is not in respect of taxes or a fine or penalty, is not inconsistent with a Cayman Islands’ judgment in respect of the same matters, and was not obtained in a manner which is contrary to the public policy of the Cayman Islands. In addition, a Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.
We are subject to the Economic Substance Regime in the Cayman Islands.
The Cayman Islands enacted the International Tax Co-operation (Economic Substance) Act (As Revised) (the “Economic Substance Act”). The Economic Substance Act is supplemented by the issuance of related Guidance on Economic Substance for Geographically Mobile Activities. We are currently subject to the Economic Substance Act. As we are a Cayman Islands exempted company, compliance obligations include filing annual notifications for us, which need to state whether we are carrying out any relevant activities and, if so, whether we have satisfied economic substance tests to the extent required under the Economic Substance Act. Given our business activities and operations may change from time to time, it is difficult to predict if we will continue to be subject to the Economic Substance Act and the impact that the Economic Substance Act could have on us and our subsidiaries. For example, compliance with any applicable obligations may create significant additional costs that may be borne by us or otherwise affect our management and operation. We will continue to consider the implications of the Economic Substance Act on our business activities and operations and reserve the right to adopt such arrangements as we deem necessary or desirable to comply with any applicable requirements. Failure to satisfy these requirements may subject us to penalties under the Economic Substance Act.
Judgments of Brazilian courts to enforce our obligations with respect to our Class A common shares may be payable only in Reais.
Most of our assets are located in Brazil. If proceedings are brought in the courts of Brazil seeking to enforce our obligations in respect of our Class A common shares, we may not be required to discharge our obligations in a currency other than the real. Under Brazilian exchange control laws, an obligation in Brazil to pay amounts denominated in a currency other than the real may only be satisfied in Brazilian currency at the exchange rate, typically as determined by the Central Bank, in effect on the date the judgment is obtained, and such amounts are then typically adjusted to reflect exchange rate variations and monetary restatements through the effective payment date. The then-prevailing exchange rate may not afford non-Brazilian investors with full compensation for any claim arising out of or related to our obligations under the Class A common shares.
There could be adverse U.S. tax consequences to U.S. persons that hold the Class A common shares if we are treated as a passive foreign investment company.
U.S. shareholders of passive foreign investment companies are subject to potentially adverse U.S. federal income tax consequences. In general, a non-U.S. corporation is a passive foreign investment company, or PFIC, for any taxable year in which (i) 75% or more of its gross income consists of passive income; or (ii) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) is attributable to assets that produce, or are held for the production of, passive income. For purposes of the above calculations, a non-U.S. corporation that owns, directly or indirectly, at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation and received directly its proportionate share of the income of the other corporation.
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Based on our Audited Financial Statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not believe that we were treated as a PFIC for the 2025 or 2024 taxable years and we do not anticipate becoming a PFIC for our current taxable year or in the reasonably foreseeable future.
However, the determination whether we are a PFIC must be made annually after the close of each taxable year and based on the facts and circumstances at that time, such as the valuation of our assets, including goodwill and other intangible assets, which may depend on the value of the Class A common shares and the BDRs at the time and can be expected to vary from over time. The determination of our PFIC status also depends on whether and how fast we deploy significant amounts of cash and other liquid assets. In addition, although we consider ourselves to be actively engaged in an active business, certain of our income may be treated as passive income, unless it is eligible for an exception for certain income derived in the active conduct of a banking business, or the “Active Banking Exception,” and related assets may be considered passive assets unless the Active Banking Exception applies. We believe that the Active Banking Exception, as interpreted by Treasury regulations, including recently proposed Treasury regulations, or the Proposed Regulations, should apply to treat such income and related assets as active, but such treatment is not certain. Moreover, while the Proposed Regulations permit taxpayers to rely on them, it is possible that the U.S. Department of the Treasury, or Treasury Department, will not follow the approach of the Proposed Regulations when issuing final regulations, in which case the Active Banking Exception might not apply to our income or related assets and it is possible that we could be treated as a PFIC. Accordingly, there can be no assurance that we will not be treated as a PFIC for a given taxable year. If we are a PFIC, U.S. shareholders would be subject to certain adverse U.S. federal income tax consequences as discussed under “Taxation—United States Federal Income Tax Considerations.”
If we are required to register under the Investment Company Act, our ability to conduct our business could be materially adversely affected, and you could suffer losses.
Inter&Co is not registered, and does not intend to register, as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. The Investment Company Act contains substantive legal requirements that regulate the manner in which investment companies are permitted to conduct their business activities. Inter&Co’s assets are primarily its indirect equity interest in Banco Inter, which we believe is not an investment company pursuant to the exemption set forth in Rule 3a-6 under the Investment Company Act (which covers foreign banks).
We expect that Inter&Co’s operations will be conducted through wholly or majority-owned operating subsidiaries so that Inter&Co and each of its subsidiaries is not an investment company under the Investment Company Act. As a consequence of seeking to avoid the need to register under the Investment Company Act on an ongoing basis, we may be restricted from holding certain securities or may structure operations in a manner that would be less advantageous than would be the case in the absence of such requirements.
Additionally, if we were to be deemed an investment company, restrictions imposed by the Investment Company Act, including limitations on our capital structure and our ability to transact with our affiliates, could make it impractical for us to continue our business as currently conducted and could have a material adverse effect on our financial performance and operations.
Pursuant to Brazilian law, we may amend our deposit agreement in respect of the BDRs and the rights of BDR holders by means of an agreement with the BDR Depositary and without the consent of BDR holders.
Pursuant to Brazilian law, we may amend the BDR deposit agreement and the rights of Inter&Co BDRs by means of an agreement with the BDR Depositary and without the consent of BDR holders. We also can change in the BDR program without the consent of BDR holders. In both cases, even if the amendment or change is materially adverse to the rights of BDR holders, it will become effective and the BDR holders will not be able to challenge such amendment.
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There are no specific rules relating to the delisting of our BDRs from the B3.
We may decide to delist the Inter&Co BDRs from B3. In such case, we cannot guarantee that we (or any person related to us) will make a public offering for the acquisition of Inter&Co BDRs or the underlying Class A common shares on terms and conditions that meet the expectations of the BDR holders, who in any case will not be able to prevent us from deregistering from the CVM and delisting our BDRs from the B3.