PagSeguro Digital Q2 2026 Earnings Call Transcript

Quartr
Provided by Quartr
August 11, 2026

Key Takeaways

  • Positive Sentiment: Credit portfolio growth accelerated, with total credit outstanding up 31% year over year to BRL 5.1 billion, led by working capital and credit cards. Management said July working-capital origination improved and maintained confidence in its longer-term credit targets.
  • Positive Sentiment: Banking engagement continued to expand, with cash-in volumes up 23% year over year, active banking clients up 27% to 5.7 million, and higher penetration of investments, insurance, and credit products.
  • Positive Sentiment: Funding efficiency supported profitability as deposits rose 15% to nearly BRL 43 billion and funding costs declined for the ninth consecutive quarter. Financial costs fell 5% sequentially, while non-GAAP net income reached BRL 576 million and diluted EPS increased 10% year over year.
  • Neutral Sentiment: PagBank maintained its 2026 guidance despite a more challenging macroeconomic environment and higher-than-expected Selic rates. Management expects the second half to contribute more strongly, but indicated gross profit performance may land near the lower end of its guidance range.
  • Negative Sentiment: Total losses increased 9% year over year as the credit portfolio expanded and shifted toward unsecured products, while high interest rates continue to pressure results. The company also noted uncertainty around future credit conditions and declined to provide specific performance metrics for individual credit products.
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Earnings Conference Call
PagSeguro Digital Q2 2026
00:00 / 00:00

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Operator

Good evening. My name is Sophia and I will be your conference operator today. Welcome to PagSeguro Digital earnings call for the second quarter of 2026. The slide presentation for today's webcast is available on PagSeguro Digital's investor relations website at investors.pagbank.com. Please refer to the forward-looking statements and reconciliation disclosure in this presentation and in the company's earnings release appendix. All participants will be in a listen-only mode. To ask a live question after the presentation, please use the raise hand button to join the queue. Once you are announced, a request to activate your microphone will appear on your screen. Today's conference is being recorded and will be available on the company's IR website after the event is concluded. Now, I will turn the call over to Daniel Spencer Pioner, Head of Investor Relations.

Daniel Spencer Pioner
Head of Investor Relations at PagBank

Good evening, everyone, and thank you for joining PagBank's second quarter 2026 earnings conference call. We appreciate your time and interest in our company. Joining me tonight are Ricardo Dutra, our Principal Executive Officer, Carlos Mauad, our CEO, and Gustavo Sechin, our CFO. After the presentation, we will open the call for questions and to allow for broader participation, we ask that each analyst limit themselves to one question only. I now turn the call over to Ricardo Dutra for this quarter's highlights and key accomplishments. Dutra, please go ahead.

Ricardo Dutra
Principal Executive Officer and Member of the Board of Directors at PagBank

Good evening, everyone, and thank you for joining our earnings call. Let's start on slide four with some key figures. Q2 was another solid quarter for our company. We continued to increase client engagement while expanding our multi-product ecosystem across payments, banking and credit, driving resilient profitability and reinforcing the strength of our business model. Total payment volume reached BRL 133 billion, up 3% year-over-year, reinforcing the gradual re-acceleration trend we have seen over the past quarters. Our expanded credit portfolio reached BRL 52 billion, while total loans increased impressive 31% year-over-year, driven mainly by the expansion of working capital and credit cards offering. Total deposits continued to grow, reaching BRL 43 billion, up 15% year-over-year, and provide an important foundation to support future credit growth.

Ricardo Dutra
Principal Executive Officer and Member of the Board of Directors at PagBank

On the financial side, net revenue, excluding interchange fees, reached BRL 3.4 billion, growing 2% year-over-year, mainly driven by acquiring volume re-acceleration in our credit portfolio. Recurring net income, non-GAAP, also grew 2%, reaching BRL 576 million, while diluted non-GAAP EPS increased 10%, supported by earnings resilience and capital optimization initiatives and within our guidance range for the year. Overall, we are seeing the strategy play out as expected. Stronger engagement, broader monetization and resilient profitability despite a challenging microenvironment. Going to slide five. Before moving into the business highlights, it is worth stepping back and looking at the broader value creation journey. Over the last 12 months, PagBank returned approximately BRL 2 billion to shareholders through dividends and share buybacks, represent a last 12 months total yield of around 13.4%. Since our IPO, we have significantly expanded the platform.

Ricardo Dutra
Principal Executive Officer and Member of the Board of Directors at PagBank

We started as a payment-led ecosystem and have gradually built a much broader financial service platform around our clients' needs, combining payments, banking, credit, investments, insurance, and new digital solutions. This evolution has increased the recurrence of our results, expanded our addressable market, and strengthened our ability to monetize client relationships across different products and use cases. With that, I'll now turn the call over to Carlos Mauad.

Carlos Mauad
CEO at PagBank

Thank you, Dutra, and good evening, everyone. Before going into the business update, I would like to start on slide seven with the key messages that frame our performance this quarter and our long-term ambition. Q2 reinforces the consistency of our strategy. We continue to evolve our ecosystem with broader monetization across payments, banking and credit, while deepening our relationship with our active client base. This evolution is reflected in our operational performance, with acceleration in our business from TPV to credit portfolio, and most importantly, with increasing penetration of our banking products across our active client base. At the same time, execution and discipline are central to how we manage the business, demonstrating the resilience of our business model. On the second quarter of this year, we protected profitability supported by financial cost efficiency, operational leverage and disciplined capital allocation.

Carlos Mauad
CEO at PagBank

Finally, as we move forward, our focus remains on strengthening our competitive position, capturing the opportunities ahead and consistently executing against both our 2026 commitments and our long-term strategic ambition. With that context, let me move to the business overview and the opportunity ahead of us. Starting with the marketing opportunity. We continue to see significant room for growth across our core verticals. PagBank has built an integrated platform across payments, banking and credit, serving individuals and micro, small, and medium-sized businesses in markets where penetration remains low and growth potential is still meaningful. Our ecosystem give us several avenues for growth. We have opportunities to increase share in Pix, deposits, expanded credit, and other financial service. In several of these markets, our current share remains below 1%, which reinforce how much room we have to expand.

Carlos Mauad
CEO at PagBank

Moving to slide nine, product innovation continues to support engagement and monetization across the ecosystem. During the quarter, we advanced several initiatives designed to make PagBank more useful in our clients' daily lives. These includes Minizinha Voz, the first terminal in Brazil featuring an AI-powered sales assistant, launched in January of this year, iOS cashback on international credit card transactions, private payroll loans, and Pix Finance, an integrated Pix installment solution, both products launched earlier this year and to be rolled out in the next months. Zero fee investments, private pensions plans, collections management tools, and new insurance products. What is important here is that these products expand our relationship beyond payments. They strengthen our banking and financial service offering, create additional cross-sell opportunities, and support our long-term ambition of building a more complete financial platform for both merchants and individuals.

Carlos Mauad
CEO at PagBank

As we have discussed before, the more products the clients use, the more engaged they become with the platform. That drives transaction activity and creates additional monetization opportunities over time. Turning to banking on slide 10, engagement continues to translate into higher transactionality and broader product adoption. Cash-in volumes, excluding acquiring related inflows, reached almost BRL 100 billion in the quarter, increasing 23% year-over-year and 19% quarter-over-quarter. Cash active banking clients reached 5.7 million, up 27% year-over-year. We also continue to see stronger usage of our daily banking features, including bill payments and Pix transactions, which increased 12% year-over-year. In parallel, product penetration expanded across the active client base. Investment penetration increased from 23%-28%, while insurance penetration increased from 11%-16% year-over-year.

Carlos Mauad
CEO at PagBank

Credit products penetration, excluding payroll clients, also increased from 4%-6%, a strong 43% expansion that shows not only our capacity to perform, but most importantly, the growth potential in this avenue. What we are seeing is simple. Clients are bringing more activity into PagBank and using a broader mix of products. This deeper relationship is central to our strategy, and it supports higher engagement, broader monetization, and stronger lifetime value. Moving to slide 11, credit remains one of the key growth levers. It deepens client relationships and gives us additional opportunities to monetize the ecosystem. Our total credit portfolio reached BRL 5.1 billion, increasing 31% year-over-year. Growth was mainly driven by working capital and credit cards, both of which are important in the long-term strategy, and to the 2019 ambition we have shared with the market.

Carlos Mauad
CEO at PagBank

Working capital reached BRL 0.6 billion in credit outstanding, growing 204% year-over-year, while credit cards reached BRL 1.1 billion, up 35% year-over-year. Payroll loans and other credit products totaled BRL 3.4 billion, increasing 18% year-over-year. This is also worth highlighting the origination trend. While working capital origination was lower on average in Q2 compared to Q1, July already shows a stronger run rate at approximately BRL 80 million in credit production. This is above Q2 average and also above the average levels seen in the prior quarters, which gives us confidence in the continued momentum and scalability of the product. When we include financial operations linked to merchants prepayment, the expanded credit portfolio reached BRL 52.4 billion, up 9% year-over-year and 3% quarter-over-quarter. Just as important, we are growing the portfolio while maintaining the prudent risk profile.

Carlos Mauad
CEO at PagBank

NPL90 stood at 3.4%, remaining well below the Brazilian market average of 6.2%. This reflects the strength of our underwriting, enhanced analytics, risk governance, and the proximity we have with our clients through the ecosystem. As expected, the portfolio mix continues to evolve gradually, with unsecured products increasing as a share of the total portfolio. This is consistent with our strategy and remains supported by prudent risk management across cycles. Let me move to funding on slide 12, which remains one of our key competitive advantages. Total deposits reached almost BRL 43 billion, growing 15% year-over-year, while total funding reached BRL 47 billion, up 10% year-over-year. More than 90% of our total deposits are generated on-platform, which reinforces the strength of our ecosystem and the relevance of our digital channels.

Carlos Mauad
CEO at PagBank

The growth of our deposit base, combined with a high on-platform concentration and lower funding costs, provides a scalable and efficient foundation to support credit expansion. During the quarter, we continued to optimize the cost of funding. The company has now delivered nine consecutive quarters of funding cost reduction as a percentage of the CDI, reflecting a disciplined liability management and improvements in product pricing and remuneration conditions. This funding structure gives us flexibility to continue to grow credit while maintaining a healthy balance sheet and strengthening client relationships. Now, I will hand it over to Gustavo to cover how these business trends translated into financial performance. Gustavo, please.

Gustavo Sechin
CFO at PagBank

Thank you, Mauad. Hello, everyone, and thank you for joining us today. I will now cover our consolidated financial performance for the quarter. This slide shows the contribution of business execution and funding efficiency to revenue and gross profit. Total revenue and income, excluding interchange fee, reached BRL 3.4 billion in the quarter, increasing 2% year-over-year and 1% quarter-over-quarter. Gross profit reached approximately BRL 2 billion, growing 3% year-over-year and 6% over quarter. This performance reflects business execution, continued contribution from banking and credit, and a sequential improvement in financial cost. At the same time, it's important to note that interest rates remain high for the year, and the rate cuts have not come in the magnitude initially expected. We continue to manage pricing, funding, and capital allocation with discipline. The banking business is an important driver of our results.

Gustavo Sechin
CFO at PagBank

Higher transactionality, credit expansion, and broader product penetration are contributing to a more diversified gross profit base and reinforcing the value of our integrated ecosystem. Now, on slide 15, we provide more details on the cost and efficiency drivers behind the quarter. Financial costs declined 5% quarter-over-quarter, primarily reflecting management initiatives to optimize the company's funding cost, despite still elevated Selic levels. Total losses increased 9% year-over-year, mainly reflecting the expansion and mix evolution of the credit portfolio. This is consistent with our strategy to scale credit in a disciplined way while maintaining strong asset quality indicators. Operating expenses represent 25.9% of our total revenue and income, excluding interchange fees in the quarter.

Gustavo Sechin
CFO at PagBank

On a year-to-date basis, operating expenses improved as a presentation of revenues, reinforcing again our focus on operating leverage, even considering second quarter effects related to the World Cup broadcast sponsorship in Brazil and the annual collective bargaining agreement. D&A plus POS write-off also improved as a percentage of revenues in the first quarter of the year, reflecting better allocation and POS management. Looking ahead, we still see room for additional efficiency gains and remain an important part of our value creation. Next slide, we summarize how these dynamics translate into bottom-line performance and returns. non-GAAP net income reached BRL 576 million, up 2% year-over-year. Diluted non-GAAP EPS reached BRL 2.06, increasing 10% year-over-year, supported by earnings resilience and a reduction in average shares outstanding following the execution of our share buyback program.

Gustavo Sechin
CFO at PagBank

Annualized non-GAAP ROE reached 15.6%, increasing 30 basis points year-over-year, and remaining in line with our solid capital structure and disciplined approach to our profitability. These results show that we continue to protect profitability while investing in technology, product innovation, and long-term growth of the business. Moving to the next slide, I would like to reinforce the strength of our capital position and our commitment to disciplined shareholder returns. We have continued to advance our capital optimization agenda, pursuing a Basel ratio with our target range of 18-22 over time. At the end of this quarter, our adjusted Basel ratio stood at 22.5, compared to 24.1 in the first quarter and 29.6 in the second quarter of a year ago. This movement brings us closer to our target range, while preserving all the flexibility and capabilities to support the company growth.

Gustavo Sechin
CFO at PagBank

Over the last 12 months, PagBank returned BRL 2 billion to shareholders through dividends and share buybacks. In this first half of 2026, we completed our third repurchase program, authorized for up to $200 million, with more than BRL 307 million repurchased during this period. In addition, the second tranche of our 2006 dividend was paid in June, and a third tranche of $0.28 per common share will be paid on September 30, with a record date on September 16. We continue to expect total cash dividends paid in 2006 to reach approximately BRL 1.4 billion, subject to the relevant approvals, as always we say, market conditions, and the company's financial position. As we said before, we always manage to use dividends and buybacks, and dividends remain the most effective way to optimize capital while continuing to support the business growth.

Gustavo Sechin
CFO at PagBank

Moving to the next slide, we show where we stand against our 2026 commitments after the first half of the year. At this point, we are maintaining our targets for the year, recognize that year-to-date performance reasonably in line with our strategy. We have been observing a much more challenging year than we were expecting, with risks coming both internally and externally. The macroeconomic environment remains clearly uncertain, and it is very important to recognize that current Selic rate levels create additional pressure for the performance of the business. At the same time, we have been focusing on running the business with efficiency and discipline, looking for different initiatives to boost our profitability. For that reason, we continue to expect to deliver a full year performance in line with the guidance range. Now, starting with credit.

Gustavo Sechin
CFO at PagBank

Total credit portfolio growth reached 31% year-over-year in the first half, within our expected range for the full year. We expect to keep this growth within the expected range for the year, as we further evolve our credit offering with the rollout of new products in the next quarters, such as private payroll and Pix Finance. Gross profit grew 2% year-over-year in the first half, highlighted by the positive contribution coming from financial cost efficiency. Again, we managed the business to reduce our financial cost. Diluted non-GAAP EPS increased 11% year-over-year in the first half, with the guidance range for 2026. This reflects resilient profitability and the positive effect of capital optimization initiatives. Finally, CapEx reached BRL 1.1 billion in the first half of this year, and we continue to manage investments with discipline, aligned with our full year commitment.

Gustavo Sechin
CFO at PagBank

With that, I will turn the call back to Mauad for his final announcement.

Carlos Mauad
CEO at PagBank

Thank you, Gustavo. Before we move to Q&A, I would like to share a recent leadership update. We are pleased to welcome Enrique Fragata as PagBank's new COO. Enrique brings strong experience in the financial sector, and his arrival will strengthen our focus on execution, efficiency, and operational excellence. Enrique comes at an important stage as we continue to expand our ecosystem and advance our long-term strategy. With that, I thank you all for joining us today. We appreciate your continued trust and partnership.

Operator

Thank you all for the presentation. We will now begin the Q&A session for investors and analysts. Our first question comes from Arnon Shirazi with Citi. You can open your microphone.

Arnon Shirazi
Arnon Shirazi
Analyst at Citi

Hi, all. Nice to be here. My questions will make it to credit and the 2029 goals. Remember that the expectations was to accelerate the credit portfolio, especially in 2027, but for 2026, you are testing the product. From the current scenario that we are seeing today with everyday surprisingly negative news on the delinquency levels, do you see any change in plans reducing the growth pace or revising the 2029 goals? Thank you.

Carlos Mauad
CEO at PagBank

Hello. This is Mauad. Thank you for your question. No, we are still quite confident on everything that we are doing here. In fact, we see the 31% increase on the credit outstanding as a very good number in terms of volume and performance. There is a long way to go before 2029. Of course, there is going to be different macro cycles that we are going to have to face. There is going to be regulatory milestones that can change the credit landscape in Brazil, especially on the collateral products. But again, it is our mission here to find out the workarounds, find out the new products, and to scale up the credit strategy of the company.

Carlos Mauad
CEO at PagBank

So far, despite the fact that the macro is tougher than we thought on the beginning of the year, we are still quite confident on everything that we are doing and confident on the long-term guidance that we published last year.

Gustavo Sechin
CFO at PagBank

Just to complement.

Arnon Shirazi
Arnon Shirazi
Analyst at Citi

Okay.

Gustavo Sechin
CFO at PagBank

Arnon, just part of the answer here is to remember that. Look at slide 11, we have very low NPLs, which give us the comfort to keep growing the credit portfolio in a sustainable way. We are still far below the industry, 3.4% compared to 6.2%. We do have the comfort to keep growing in a sustainable way, same way we've been doing so far.

Arnon Shirazi
Arnon Shirazi
Analyst at Citi

Great. If I may, a follow-up on credit. Regarding the private payroll loans that the company was testing internally, how is this advancing, and the rollout to other companies has started yet?

Carlos Mauad
CEO at PagBank

Yes, we already start to produce credit outside of the economic group that we have here. We already produced the first few millions in terms of credit outstanding, and we're going to keep pushing up these volumes as we get confident on everything related to the operational risks on the product. We are confident on the first signs that we saw that everything that we designed and implemented, it is solid. But of course, there are some parts of the credit cycle that we need to still test. But, again, answering straightforward your question, we are already creating credit production outside of the group on the payroll loans.

Arnon Shirazi
Arnon Shirazi
Analyst at Citi

How's the quality so far? Sorry for the follow-up.

Carlos Mauad
CEO at PagBank

So far it's been perfect. But of course, we started with the top tiers in terms of credit quality. So it's coming on the levels in terms of delinquency on the levels that we expected.

Arnon Shirazi
Arnon Shirazi
Analyst at Citi

Great. Thank you.

Operator

Our next question comes from Daniel Vaz with Safra. You can open your microphone.

Daniel Vaz
Analyst at Safra

Hi, everyone. Thank you for the opportunity to make questions. Maybe two questions on my side. Looking at your TPV, it improved sequentially. But we didn't see the revenues being budged at the same pace, right? So you have a beat on TPV and miss on revenues, maybe on consensus and also my side. This can mean your take rate at the margin is compressing. Can you give some comments on if that has to do with pricing, maybe a seasonal World Cup volumes with more bets, if your mix or more Pix wild card are struggling, client mix. So that's my question number one. And the question number two, trying to look at your gross profit guidance for 2026. You're currently at 2% and your guidance isn't changed, at between 6% and I guess it's 11%, 6% and 9%.

Daniel Vaz
Analyst at Safra

Any expectations of pickup in the gross profit for the second half of the year to meet guidance? Thank you.

Carlos Mauad
CEO at PagBank

This is Mauad. I am going to answer your first question, then I hand over to Gustavo to give you some light on the gross profit question. In terms of the TPV, there is a small dilution when we saw the growth of the net revenue and the TPV itself. There is an impact in terms of product mix driven by the World Cup, as you mentioned there. But there is nothing that really worries us. Of course, we keep pushing TPV. We are being very careful about pricing. And that is, as probably you remember, there is also a base, let us say a tough comp when you look at the second quarter of last year, where we have a massive repricing of the entire customer base that we have here due to the hike of Selic.

Carlos Mauad
CEO at PagBank

We should take a look at the evolution of the net revenues from the first quarter of last year to the second quarter. It is quite strong. So we created this step and a little bit harder to push up the net revenue growth on the second quarter. But again, that is a price to be paid on the third that we had to manage later last year. And here we are much more confident on this balance that we are creating here between growth and defending the profitability of the company. I will pass the floor here to Gustavo so he can answer your second question.

Gustavo Sechin
CFO at PagBank

Hi, Daniel. Gustavo here. Talking about the guidance, especially the gross profit guidance, we know that we have a lot of moving parts and we have a lot of headwinds coming from the macro scenario, which give us some level of uncertainty. But at the same point, as we have been talking, we always say that second part of the year, the second half of the year should be the most important in terms of the guidance achievement. And talking about the gross profit, we can say that we considered some contributions coming from the credit origination, the credit acceleration, as we post in this presentation.

Gustavo Sechin
CFO at PagBank

Also, as Mauad said, related to the TPV, remember that we have been said that between the third and fourth quarter of last year were the worst part of the cycle for us, and gradually we have been posting an increase in terms of the payment activity. In terms of financial costs, despite the headwinds of this higher Selic when compared with what we were expecting, we have maybe ease confidence in the second half of the year. I can say that we are always looking for different initiatives that could give us the ability to deliver the guidance. Again, probably not by the top of the range, but probably reaching the bottom of the gross profit guidance as we post.

Daniel Vaz
Analyst at Safra

Okay, thank you, guys. Thank you for the answers.

Operator

Before moving on to the next question, please remember each analyst should only ask one question. Our next question comes from Kaio Prato with UBS. You can open your microphone.

Kaio Prato
Kaio Prato
Analyst at UBS

Hi, guys. Thanks for the opportunity to ask questions. I have one question on costs, please. This quarter, actually, in the next two quarters, we noted, I would say, better-than-expected POS write-offs. I think those were lower than expected in the first quarter, and now I think we had a reversal in the second quarter. Can you give us any color around that? Anything that's happening different than expected on the POS write-offs, and what can we expect going forward as well? During this talk, if you are seeing anything related to costs related to POS. We noted some players are claiming about higher costs related to POS. Just wondering if you have anything on your side as well. Thank you.

Gustavo Sechin
CFO at PagBank

Okay. To start here, Kaio, good to talk to you. Talking about the write-off of POS or the POS in general, we have implemented a series of different initiatives to organize our logistics and also how we can deploy different initiatives in terms of how we can get the POS that we had in the street and our merchants are not using it anymore, and how we can deliver a different approach, a different solution on that. That is the main reason that you are seeing. Considering going forward, probably we are going to seek for continuous improvement in that line. I would say that probably it is not going to be something linear, but the idea is to continuously improve our POS database, and we are looking for generate some kind of initiatives.

Gustavo Sechin
CFO at PagBank

Talking about efficiency or other lines in terms of expense in general, as we said, we are managing the business to getting some operational leverage. We have implemented some initiatives in terms of how we can redesign some process, how we can implement some automations. We have used the AI, to help us not only in the back office, but also in the customer care, in the customer assistance. We have been deploying different kind of initiatives to give us the opportunity to continue to generate operational leverage. That is the idea. We are managing the company, trying to seek for different opportunities to improve our profitability through the efficient gains. Okay, thank you. Anything on the cost related to POS?

Carlos Mauad
CEO at PagBank

Hello, this is Mauad. There is nothing major. We do have a memory shortage on the global market, so that kind of pressure, the terminals price is a little bit. On the other hand, FX is helping a little bit. The efficiency that we are viewing, as Gustavo mentioned, on how to recover the POS that are on the churn customers' hands. Everything that we are putting together here, we are not feeling this impact on the unit perspective. So far so good here on our side when we talk about the POS cost.

Kaio Prato
Kaio Prato
Analyst at UBS

Okay. Thank you very much, Mauad. Thank you, Gustavo.

Operator

Our next question comes from Marcelo Mizrahi. You can open your microphone.

Marcelo Mizrahi
Analyst at Bradesco BBI

Hello, everyone. Thank you for the opportunity. I have two questions. The first question is regarding the take rate, so the financial revenues. Looking forward, with this dynamic of to have a lower impact of credit cards or having more Pix, is it possible to see this dynamic maintained, so stable going forward? This is the first question. The second question is regarding the expenses side. We saw some expenses related to the World Cup. Is it possible to see a better profitability or even a reduction of the operational expenses on the third quarter looking forward? Thank you.

Gustavo Sechin
CFO at PagBank

Hi, Marcelo. Gustavo here. I will start from your second question. I would not say that we could expect a reduction in terms of expenses, but the idea is to manage the company to grow the expenses below revenues. That is the main idea, or at least below the inflation. As I said in the previous question, we are looking for opportunities from the operational side. We are looking for opportunities on the customer experience, both try together, and to generate operational leverage to the business and also give us, as I said, to improve our profitability in general. So that is the idea. I do not know if I understood correctly your first question, but when we talk about the rate or the mix between different kind of transactions, we are seeing, in general, that they are pretty much similar.

Gustavo Sechin
CFO at PagBank

Of course, what it means, that we are observing the increase in terms of Pix. That contributes not only on the payment business itself, but also through the bank. At this point, it is very important to highlight the performance of the Cash-in. Remember that we now reach almost BRL 100 billion in terms of Cash-in in the quarter. Mainly, that Cash-in comes from Pix, and that give us the capability to monetize that kind of flow of money from customers that choose our platforms as their main platform through different products. So when we look at the take rate, it give us only a portion of the relation of the customers. That is very important to look the transactionality in a whole.

Gustavo Sechin
CFO at PagBank

Look the inflow of money that comes from the payment side, look the inflow of money that comes on the bank side, and all the opportunities that we have to monetize that kind of inflow of money.

Marcelo Mizrahi
Analyst at Bradesco BBI

But with the question here, sorry to do this follow-up, is that looking forward, the dynamic of mix, we will have to see the gross profit yield. Gross profit comparing to the revenues going up. That's definitely what we have to see to deliver and to achieve the low end of the guidance. Probably the idea here is that it's accretive in terms of gross profit yield.

Gustavo Sechin
CFO at PagBank

Yes. The short answer, yes. Not related to that, but also related to increase in transactionality in general.

Marcelo Mizrahi
Analyst at Bradesco BBI

Okay. Thank you.

Operator

Our next question comes from Neha Agarwala with HSBC. You can open your microphone.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Hi, thank you for taking my question. I have a question on the credit business. Could you expand a bit more and tell us what are the kind of NPL and cost of credit that you're seeing for your working capital loans at the moment? It is considerably small right now, but just to get a sense of how things are going and where should the NPL and cost of risk normalize as you grow the book. What gives you comfort regarding accelerating in July? Was the deceleration in 2Q more a conscious effort to control this given the environment? If that is the case, why the acceleration in July? Has there been any benefit from the Desenrola Brasil program in your customer base? Thank you so much.

Carlos Mauad
CEO at PagBank

Hello, Neha. Thank you for your question. We do not disclose any information regarding individual products here in terms of credit appetite or anything like that. I am going to jump the first part of your question, and I am going straight forward to the second part of it. If you take a look in April, I am sorry, on the second quarter, we had a lower credit production in average due to a new credit model that we deployed on the beginning of the second quarter. We were waiting the first cohorts here to see if the cohorts would come inside the credit appetite and will deliver the performance that we want to before we rolled out for the entire customer database. That is why you see this high in terms of credit production in July, and you see a more, let us say, conservative approach on the second quarter.

Carlos Mauad
CEO at PagBank

That is a little bit what explain the movements between the average of the second quarter and the credit production of July.

Gustavo Sechin
CFO at PagBank

Neha, it's Gustavo here. Just to complement Mauad here. I think that's very important to highlight that we are not seeing any kind of deterioration in our asset side, in none of our products that we operate. So it gives us the confidence that we have developed all the capabilities to continuous growth with prudence, and we've serviced the credit portfolio. Despite that we do not provide reference in terms of NPLs, you could expect that it will continue growing, but at a sustainable pace and much more related to the change or to the evolution in our product mix than compared to deterioration itself.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Just to clarify, there's not been any impact from the Desenrola program, and you don't plan to do secured working capital loans. It's going to be more secured more from the funding side. You would focus on the unsecured working capital, right?

Carlos Mauad
CEO at PagBank

There is no major impact of this second Desenrola program here for us. The first program was a much bigger program due to the stock in terms of non-performing assets that we had in the company. The second one has a much lower impact. Again, working capital is going to still our priority here because it is where we have a very clear right to win with the kind of customer that we have in our client base.

Neha Agarwala
Neha Agarwala
Analyst at HSBC

Thank you so much.

Operator

Our next question comes from Mario Pierry with Bank of America. You can open your microphone.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Hey, guys. Good evening. Thanks for taking my question. Let me ask you a question, what you said about capital distribution, right? Your capital ratio is about 22.5% above your target of 18%-22%, and you have completed your buyback program, and you mentioned that you would rather pay dividends than buy back shares. I just wanted to explore that a little bit more. Why you think paying dividends is better than buying back shares? Especially because when we look at your share price, it is back to the levels where it was in September of last year when you announced your strategic plan. Just wondering why you would rather pay dividends than buy back shares. Thank you.

Gustavo Sechin
CFO at PagBank

Hi, Mario. Gustavo here. The first part of the answer of your question, why we choose dividend at this point is that because dividends give a much more regular and predictable stream to investors. We can set a target as we set in terms of capital ratio between 18% and 22%. And through dividends, we have been deploying very clear capital optimization, at the same time in a predictable way. It doesn't mean that we cannot use buyback in the future, but we choose to use dividends because the reason that I said before. At the same time, as you said here, we use the instrument of buybacks in the last 12 months, 18 months, with two programs that we execute in a very short period, but with limited effect, and without the predictability. That is why we are now, focused much more in dividends than buybacks.

Carlos Mauad
CEO at PagBank

That is the main reason.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Okay, that is clear. Just to be clear then, on your EPS guidance, right, where you talk about EPS growth of 9%-13% for the year, that does not contemplate any more buybacks this year, correct?

Gustavo Sechin
CFO at PagBank

Yes, correctly.

Mario Pierry
Mario Pierry
Analyst at Bank of America

Thank you.

Operator

Our next question comes from Guilherme Grespan with JPMorgan. You can open your microphone.

Guilherme Grespan
Guilherme Grespan
Analyst at JPMorgan

Hi, good evening, everyone. I will keep my questions to one. It is more looking into 2027 already, a little bit coupling with the guidance for the rest of the year on gross profit, but more looking throughout the year and more 2027. I think there is a growing risk that we start to get into a scenario in which you have two. You mentioned two tailwinds to gross profit, but maybe eventually in 2027, they are going to move in the opposite direction. So it is basically rates moving lower in the second half. We do not know what is going to happen in 2027. Then you have the accretion of the credit, right? As you recognize the credit revenues. But maybe we have been discussing financials credits, eventual credit cycle, and you need to pull back on credit.

Guilherme Grespan
Guilherme Grespan
Analyst at JPMorgan

So with all that said, my question is, assuming that and considering that you are growing gross profit 2% year-over-year to date, if you do not have those benefits next year, what levers can you pull to deliver earnings growth next year? Thank you so much.

Gustavo Sechin
CFO at PagBank

Hi, Guilherme. Gustavo here. I think that is too early to discuss 2027. As I said in one previous questions, we have a lot of moving parts right now. We are managing the business to deliver the 2026 guidance. That is our main focus that we are working here. Try to mitigate the headwinds, especially when it comes from the street. Try to mitigate the uncertainty or the volatility that comes both from internal and external environment. But I think that the correct time to discuss 2027 should be a little bit later. As you said, we have uncertain, and we are looking when we start to discuss that, alternatives to deliver a continuous growth, especially continuous growth of the business. Not only in terms of EPS, but also in terms of top line.

Carlos Mauad
CEO at PagBank

That should be the answer at this point.

Guilherme Grespan
Guilherme Grespan
Analyst at JPMorgan

Okay, that is clear. Thank you, Gustavo.

Operator

Our next question comes from Pedro Leduc with Itaú BBA. You can open your microphone.

Pedro Leduc
Analyst at Itaú BBA

Thanks, guys. Good evening. Question on financial costs this quarter, down a little bit. I know you mentioned working days and such, but you also didn't have an impact of a lower average Selic, even though it's just slightly. We saw some good dynamics in deposits. Looking at least until the end of this year, how should we think about financial expenses, especially relative to revenues? What levers are you pulling there? Thank you.

Gustavo Sechin
CFO at PagBank

Hi, Pedro. Gustavo again. I would say that when we consider the second half of the year, probably we're going to see easy comps in the financial expense. I would say that this is the first quarter, to be clear, that we are seeing a reduction, at least in nominal terms, in our financial cost after eight quarters, if I'm not wrong. I would say that that trend should remain a reality in the second part of this year. Despite that, we are seeing or we can forecast a lower pace in terms of the reduction in rates in Brazil. Remembering that we are assuming our guide is year-end Selic around 12.5%, and now we are looking much more close to 14% or 13.75%. We have better comps when compared to the second half of last year.

Pedro Leduc
Analyst at Itaú BBA

Great. Thank you.

Operator

Our next question comes from Tiago Binsfeld with Goldman Sachs. You can open your microphone.

Tiago Binsfeld
Tiago Binsfeld
Analyst at Goldman Sachs

Hi, good evening. Thank you for taking our questions. Also, on the deposit franchise, we see your deposit cost coming down annually to 83% of CDI. From here, when you look forward, how much more do you think there's space to lower your deposit costs? Would you say it stabilizes around these low 80s, 83%? What kind of initiatives are you implementing to lower that cost? Thank you.

Gustavo Sechin
CFO at PagBank

Hi, Tiago. Gustavo here. I would say that we are seeing our deposits growing 15% year-over-year. Should be higher for sure. We could expect a higher pace, but I think that we have a very healthy pace in terms of deposit, especially considering that we have implemented, as you said, a bunch of different initiatives to mitigate the increasing rates and also reduce the remuneration that we use to pay in our deposit, both CDs and also our Conta Rendeira. Most important than that, and also connects to the deposit is the inflow of money, as I said, connects to the banking business. If combined with the payments inflow give us the ability to continue growing our deposit franchise, that's definitely a clear advantage that we have in the business. We are always trying to identify different opportunities.

Gustavo Sechin
CFO at PagBank

We're using different instruments in our funding structure to deliver a continuous reduction in our funding cost and also maintain that advantage that I said.

Tiago Binsfeld
Tiago Binsfeld
Analyst at Goldman Sachs

Thanks, Gustavo. That's clear.

Operator

This concludes the question and answer section and today's presentation. You may now disconnect and have a nice evening.

Analysts
    • Daniel Spencer Pioner
      Head of Investor Relations at PagBank
    • Ricardo Dutra
      Principal Executive Officer and Member of the Board of Directors at PagBank
    • Carlos Mauad
      CEO at PagBank
    • Gustavo Sechin
      CFO at PagBank
    • Arnon Shirazi
      Analyst at Citi
    • Daniel Vaz
      Analyst at Safra
    • Kaio Prato
      Analyst at UBS
    • Marcelo Mizrahi
      Analyst at Bradesco BBI
    • Neha Agarwala
      Analyst at HSBC
    • Mario Pierry
      Analyst at Bank of America
    • Guilherme Grespan
      Analyst at JPMorgan
    • Pedro Leduc
      Analyst at Itaú BBA
    • Tiago Binsfeld
      Analyst at Goldman Sachs
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