SAO PAULO: SoftBank-backed digital lender Banco Inter SA and payments company StoneCo Ltd are in preliminary talks to expand a current partnership agreement, including a potential merger, one source familiar with the matter said.

       StoneCo acquired a 4.99% stake in Banco Inter in June, as part of a strategy of attracting the bank’s clients to its payments services.

       The talks are the latest sign of stepped-up dealmaking involving a new breed of financial companies that have emerged as rivals to Brazil’s once-dominant traditional lenders.

       The current talks come as StoneCo faced a 400-million-real (US$75mil or RM314.14mil) loss in its newly-launched lending operation due to higher provisions.

       If StoneCo and Banco Inter agreed on a merger, it would create a financial institutional with a market capitalisation of roughly US$22bil (RM92.15bil).

       Both US-listed Stoneco, which has a market value of US$12.5bil (RM52.36bil), and Banco Inter, with a US$9.8bil (RM41.05bil) market cap, said they do not comment on rumours.

       Under their existing partnership, Inter offers Stone’s processing services to its clients and merchants who use Stone to process credit and debit cards are being offered connections to Inter’s nascent online marketplace.

       It was unclear what a deeper partnership absent a merger might involve.

       Brazilian newspaper Valor Economico reported earlier on Friday on the talks. ―Reuters