Goldman Says Sell SoftBank-Backed Brazil Fintech

(Bloomberg) -- Goldman Sachs has initiated coverage on Banco Inter SA shares with a sell rating, joining Morgan Stanley in a bearish view for the Brazilian online lender, as weaker results have raised doubts on the firm’s ability to monetize its fast-growing client base.

“While we are positive on the growth outlook for the bank, we think the challenge will be to effectively monetize the client base in order to justify the stock’s current valuation,” Goldman analyst Tito Labarta wrote in a note, setting a price target of 11 reais for Banco Inter’s preferred shares -- implying a potential downside of about 27% from current levels.

Banco Inter, in which SoftBank Group Corp. holds a stake, reported net income dropped to 11.8 million reais in the third quarter. Shares fell 9% last week on the back of weaker-than-expected results, which prompted Morgan Stanley’s analysts to cut EPS estimates and say a round of large downward revisions should take place ahead.

Since Banco Inter went public last year, the stock has gained nearly 400%. Shares fell as much as 3.6% on Monday in early trading in Sao Paulo

--With assistance from Gaurav Panchal and Felipe Marques.

To contact the reporter on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net

To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Jennifer Bissell-Linsk

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