By Brazil Stock Guide – PagSeguro Digital (NYSE: PAGS) delivered a steady third-quarter profit despite Brazil’s high interest rates, as banking expansion and cost discipline offset weaker payment volumes and higher funding costs. Net revenue excluding interchange fees rose 14.4% year over year to R$3.41 billion, while non-GAAP net income remained stable at R$571 million, showing resilience in a challenging macro environment.
Banking Takes the Lead
The banking unit was the quarter’s main growth driver. Gross profit surged 59% to R$536 million, supported by a 30% expansion in the credit portfolio to R$4.2 billion and a 15% increase in deposits to R$39.4 billion. Cash-in flows rose 13.7%, reflecting stronger client engagement and cross-selling of investments and insurance. Banking now accounts for nearly 28% of total gross profit, up from 18% a year earlier, with the segment’s gross margin climbing to 72%.
Payments Adjust to High Rates
The payments business continued to face headwinds from weak economic activity and higher funding costs. Total Payment Volume (TPV) fell 4.7% year on year to R$129.8 billion, while gross profit declined 10.8% to R$1.39 billion. Still, PagSeguro’s repricing of merchant discount rates and focus on small and mid-sized businesses helped support revenue, which rose 7% in the segment.
Efficiency Supports Profitability
Operating discipline remained a key offset. Operating expenses fell 3%, and total losses dropped 26%, aided by tighter fraud prevention and AI-based credit management. Despite a 45% jump in financial expenses driven by the Selic rate hike, the company’s return on average equity (ROAE) improved to 15.1%, up 30 basis points, while GAAP diluted EPS increased 14% to R$1.88. The cost of funding declined for the sixth straight quarter.
Shareholder Returns Remain Strong
PagBank continued to reward investors, repurchasing R$880 million in shares year to date—about a quarter of its ongoing US$200 million buyback program—and distributing R$617 million in cash dividends in 2025. It also announced a R$1.4 billion dividend payout for 2026, to be paid in four installments. Its Basel ratio stood at 28.6%, well above its 18%–22% target range, leaving ample flexibility for further capital optimization.
Leadership Transition and Governance Shift
PagSeguro Digital Ltd., parent company of PagBank, announced a leadership transition effective January 1, 2026, as the company moves into a new management cycle under tighter capital discipline. The Board appointed Carlos Mauad as Chief Executive Officer and Gustavo Bahia Gama Sechin as Chief Financial Officer and Chief Accounting Officer. Both joined in 2024—Mauad as COO and Sechin as Investor Relations Director—and will now lead PagBank’s next stage of growth. They replace CEO Alexandre Magnani and CFO Artur Schunck, who will step down and be nominated to join the Board of Directors. Principal Executive Officer Ricardo Dutra will oversee the succession, describing it as “a planned transition to strengthen execution, governance, and long-term value creation.”
Expanding Credit and Launching New Products
PagBank’s credit portfolio reached R$4.2 billion, an increase of 30% from a year earlier, driven by growth in working capital loans and personal credit. Mauad said monthly origination currently stands at about R$70 million and could reach R$100 million in 2026 as new risk models and credit clusters scale. The company plans to introduce PIX Financing and Payroll Loans next year, leveraging regulatory changes such as the digitalization of Brazil’s FGTS system—part of a broader push to expand lending safely while diversifying revenue sources.
Capital Strength and Long-Term Vision
Its capital ratio improved by roughly two percentage points from 2024, reflecting disciplined allocation and prudent funding management. “Our balance sheet remains solid, and our focus on efficiency continues to deliver results,” said outgoing CFO Artur Schunck, who will assist Sechin during the transition. Under Mauad and Sechin, PagBank aims to grow its credit portfolio to R$25 billion by 2029, deliver average annual revenue growth above 10%, and expand EPS more than 16%. The company ended the third quarter with R$95 billion in total account balances, up 14%, and an average customer balance of R$5,500, up 12%.