Brazilian digital lender Banco Inter and payments firm StoneCo are reportedly in talks for a potential merger.

The merger talks, which Reuters reported citing a person familiar with the matter, come after StoneCo reported a loss of $75m in its latest lending business due to higher provisions.

Earlier this year, StoneCo inked a definitive investment agreement with the Brazilian digital lender.

Under the agreement, StoneCo invested approximately $471m (BRL2.5bn) and acquired a 4.99% stake in Banco Inter.

Currently, Banco Inter offers StoneCo’s payment processing services to its clients and merchants.

If the merger talks materialise, the combined entity may have a market capitalisation of nearly $22bn.

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SoftBank-backed Banco Inter offers banking, marketplace, credit, insurance, investments products and services.

Banco Inter is said to have a market cap of $9.8bn and had 10.2 million users at the end of March this year.

In September 2019, Japan’s SoftBank Group signed an agreement to increase its shareholding in Banco Inter from 8.10% to 14.94%.

Recently, Banco Inter announced plans to acquire US-based startup USEND for an undisclosed sum.

In other Brazilian banking news, last month, another digital lender Cora raised $116m in a Series B round led by Greenoaks Capital.

In the same month, Nubank hired Morgan Stanley, Goldman Sachs, and Citigroup to lead its US initial public offering (IPO).

The IPO could value Warren Buffett’s Berkshire Hathaway-backed Nubank over $40bn.