PagSeguro Digital NYSE: PAGS, which operates as PagBank, reported higher first-quarter earnings per share and continued expansion in its banking and credit operations, while management said elevated Brazilian interest rates continued to pressure financial costs and gross profit.
On the company’s first-quarter 2026 earnings call, Principal Executive Officer Ricardo Dutra said PagBank made “continued progress” executing its strategy, with banking and credit acceleration and operating leverage contributing to earnings growth despite a challenging macroeconomic backdrop.
Total Payment Volume reached BRL 128 billion in the quarter, flat year over year. Dutra said the result confirmed a gradual reacceleration compared with prior quarters. The company’s expanded credit portfolio reached BRL 51 billion, up 11% from a year earlier, while total loans grew 36% year over year. Deposits rose 23% to BRL 42 billion.
Net revenue excluding interchange fees was BRL 3.3 billion, up 6.4% year over year, driven mainly by credit acceleration and banking performance. Recurring non-GAAP net income reached BRL 575 million, up 4%. Dutra said the result was affected by higher financial expenses tied to Brazil’s base interest rate, partially offset by operating leverage. Diluted non-GAAP EPS increased 12% year over year, helped by capital optimization initiatives.
Banking and Credit Remain Key Growth Areas
CEO Carlos Mauad said PagBank’s integrated payments, banking and credit platform serves individuals and micro, small and medium-sized businesses. He said the company sees significant room to grow in several banking segments where its market share is currently below 1%.
Mauad highlighted increased customer engagement across PagBank’s ecosystem. Cash-in volumes, excluding acquiring-related inflows, reached BRL 81 billion, up 11% year over year, while cash-in active clients grew 12%. He attributed the performance to stronger usage of the platform, including bill payments, Pix transactions and increased penetration of investment and insurance products.
PagBank’s total credit portfolio reached BRL 5 billion at the end of the quarter, growing 36% year over year. Mauad said credit growth was broad-based across products and channels, with working capital loans leading the expansion. Working capital grew 191% year over year and represented 10% of the total portfolio.
Management said asset quality remained controlled. Mauad noted that nonperforming loan indicators were well below the Brazilian banking system average, while later in the call he said PagBank’s NPLs were “almost half of the industry.” He said the company is gradually shifting from a mostly secured credit portfolio toward a more balanced mix as it expands underwriting for unsecured products.
Funding Costs Decline as Deposits Grow
Mauad said deposits reached BRL 42 billion, with more than 90% sourced from PagBank’s own platform. Including other funding sources such as related-party deposits and borrowings, total funding was nearly BRL 47 billion, up 15% year over year.
The company’s deposit annual percentage yield fell for the eighth straight quarter, reaching 83.9% of CDI in the first quarter. Mauad said average remuneration on demand deposits was 38.6% of CDI, down 10 percentage points year over year. The loan-to-funding ratio improved to 109% from 114% a year earlier.
In response to analyst questions, CFO Gustavo Sechin said PagBank has implemented disciplined repricing and reductions in remuneration on certificates of deposit and checking accounts to mitigate higher financial costs. He said the company is still identifying additional opportunities to address funding cost pressures, while Mauad said some changes made near the end of the first quarter should continue to affect results going forward.
Financial Costs Weigh on Gross Profit
Sechin said total revenue and income excluding interchange fees grew 6.4% to BRL 3.3 billion, driven primarily by banking and credit expansion. Banking revenue increased 41% year over year, supported by credit growth and higher transactionality from clients. Gross profit totaled BRL 1.9 billion, up nearly 1% year over year, with banking representing about 31% of total gross profit.
However, Sechin said the company continued to face pressure from rising financial costs due to Brazil’s higher benchmark interest rate. He said the Selic rate was up 1.9 percentage points over the period, although the effect was partially mitigated by lower deposit APY. Sequentially, financial costs declined 2.6%.
Total losses, including acquiring chargebacks and expected credit loss provisions, rose 29% year over year, mainly reflecting credit portfolio expansion and mix changes. On the acquiring side, chargebacks fell 15% year over year, which Sechin attributed to improved fraud prevention.
Sechin pointed to operating leverage as a key highlight, saying operating expenses declined as a percentage of revenue by about 230 basis points year over year. He cited cost discipline and the use of artificial intelligence in areas such as client service. During the Q&A session, he said the company is “just in the beginning” of opportunities to generate further operating leverage.
Shareholder Returns and Capital Optimization
Dutra said PagBank returned approximately BRL 2.4 billion to shareholders over the last 12 months through dividends and share buybacks, representing a total yield of around 16% over that period. Sechin said the company is working to bring its Basel index to between 18% and 22% in coming years.
PagBank’s managerial Basel ratio stood at 24.1%, down more than four percentage points from the prior quarter. Sechin said the level still provides ample capacity to support credit expansion and shareholder returns.
The company plans to distribute an additional BRL 400 million in dividends in June, equivalent to $0.26 per common share, in line with its commitment to distribute at least BRL 1.4 billion in dividends this year.
Management Reaffirms 2026 Guidance
Sechin said PagBank ended the first quarter above its expected range for credit portfolio growth and expects consistent growth through the year. He said gross profit expansion was limited in the first quarter due to Selic-related financial cost pressure, but management expects those headwinds to fade in the second quarter and beyond.
In response to UBS analyst Kaio Da Prato, Mauad said TPV trends have improved from a 5% year-over-year decline in the third quarter of last year to a roughly 2% decline in the fourth quarter and flat growth in the first quarter. He said management expects TPV to turn positive in the second quarter and accelerate in the second half.
Asked about competition, Mauad said the small and midsize business landscape has been broadly stable over the past 24 months, naming PagBank, Stone, Mercado Pago and CloudWalk as key players in that segment. He said competitors posting 20% to 25% TPV growth are often serving different customer clusters, including enterprise clients and “serial acquirers.”
Mauad also said PagBank expects credit growth to accelerate in 2027, citing the current macro environment and the fact that some products are still in pilot or development. He identified payroll loans for private-company employees as one area with potential, while noting the company remains cautious on unsecured lending.
“We are confident to achieve our 2026 guidance,” Mauad said, adding that PagBank remains focused on operational excellence, disciplined expansion and consistent value creation as it works toward its 2029 targets.
About PagSeguro Digital NYSE: PAGS
PagSeguro Digital Ltd. is a Brazil-based financial technology company that specializes in digital payment solutions for merchants and consumers. Through its online platform and a suite of physical point-of-sale devices, the company enables businesses of all sizes to accept credit and debit cards, process e-commerce transactions, and manage payments via QR codes and digital wallets. In addition to payment acceptance, PagSeguro offers prepaid accounts, funds transfers, and working-capital credit lines designed to support small and medium-sized enterprises.
The company's product portfolio includes portable card readers, countertop terminals, and mobile point-of-sale devices that connect via Bluetooth or cellular networks.
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