What AGI (AGBK) Said on Its Q3 Earnings Call

Key Points

• Profit and revenue grew: Third-quarter net income rose 31% year over year to BRL 276 million, while total revenue increased 15% to BRL 3.2 billion and annualized return on equity reached 22.4%.
• Lending and customer acquisition accelerated: Credit originations climbed 77% year over year to BRL 10.2 billion, the loan portfolio reached BRL 38.8 billion, and active customers grew 29% to 8.3 million. Management expects continued growth, though INSS lending growth may be less pronounced in the fourth quarter.
• Fees expanded, while credit metrics warrant attention: Fee revenue rose 30%, with Agi+ surpassing 700,000 subscribers, but loans more than 90 days past due increased to 3.5% and net interest margin after provisions fell to 6.3%.

AGI NYSE: AGBK reported higher third-quarter profit as credit origination accelerated and fee revenue rose, while executives said they expect lending and subscription income to continue growing.

Net income rose to BRL 276 million, up 31% from a year earlier and 38% from the second quarter, CFO and Investor Relations Officer Marcello Dubeux said on the company’s earnings call. Annualized return on equity reached 22.4%, compared with 16.9% in the prior quarter.

Total revenue increased 15% year over year to BRL 3.2 billion. Fee revenue climbed 30% to BRL 244 million, driven by insurance brokerage and the first quarter of revenue from the company’s Agi+ subscription program.

Credit Growth and Customer Gains

AGI originated BRL 10.2 billion in credit during the quarter, its highest quarterly total in more than a year. Originations increased 77% from a year earlier and 43% from the second quarter, Dubeux said.

The total loan portfolio reached BRL 38.8 billion, up 12% year over year and 5% sequentially. Secured loans accounted for 88% of the portfolio, while unsecured loans made up the remaining 12%.

AGI’s share of Brazil’s INSS payroll-credit market reached 10%, an increase of 40 basis points during the quarter, Dubeux said. He said the company sees room to gain further share and expects INSS lending to remain a major growth driver.

The private payroll loan portfolio reached BRL 2.3 billion, up 130% year over year and 61% quarter over quarter. Dubeux said monthly originations of the product remained between BRL 250 million and BRL 300 million during the quarter and that first-payment defaults in newer cohorts showed signs of improvement.

Active customers increased 29% from a year earlier to 8.3 million. AGI defines active customers as those with at least one active product at quarter-end. Approximately 1.7 million customers received pensions or benefits in AGI checking accounts, Dubeux said.

Asked about unsecured lending, Dubeux said the portfolio stabilized and began growing after shrinking earlier in the year. He expects it to continue expanding as AGI originates more loans to customers with existing relationships.

Fees and Subscription Revenue

Founder and CEO Marciano Testa said Agi+, which launched as a pilot at the end of the second quarter, had surpassed 700,000 subscribers. The program offers benefits including access to learning and streaming platforms, medical consultations and pharmacy discounts.

Dubeux said the rise in fee income was not a one-time event. Insurance brokerage benefited from a redesigned sales process, while Agi+ began contributing revenue in the third quarter. He expects the subscription program to provide more recurring revenue in the fourth quarter.

Testa also announced that Rafael Siqueira, formerly a Latin AI leader at McKinsey, had joined as a partner to support the integration of artificial intelligence across AGI’s business units. Testa said he expects data science and credit models to help improve delinquency predictions.

Margins and Credit Quality

Net interest income rose 10% year over year to BRL 1.3 billion but increased only 1% from the second quarter. Annualized net interest margin fell 20 basis points sequentially to 11.8%, which Dubeux attributed primarily to the greater share of secured loans in the portfolio.

Net interest margin after provisions declined 50 basis points to 6.3%, reflecting faster credit origination. Dubeux said the newly originated portfolio had not yet had sufficient time to show its full effect on margins, but he expected a different margin trend in the fourth quarter.

Loans more than 90 days past due rose to 3.5% of the portfolio, up 20 basis points from the second quarter. The coverage ratio fell to 157% from 183% in June, a level Dubeux said the company considers adequate given the share of secured lending.

The operating efficiency ratio improved to 44.2%, down 470 basis points from the prior quarter, as net interest income plus fees grew while operating expenses remained flat.

Capital and Outlook

AGI’s consolidated capital adequacy ratio stood at 18.1% at quarter-end. Testa said that position supports investment in growth and technology alongside a share repurchase program announced on October 27. The program authorizes repurchases of up to 3 million Class A shares over 12 months, at management’s discretion.

On the outlook for INSS lending, Dubeux said an expiration of a provisional measure affected borrowing capacity and contributed to September’s acceleration. He said conditions normalized in October and that fourth-quarter growth would probably be less pronounced than in the third quarter.

Asked about higher funding costs, Dubeux said AGI views INSS payroll lending as a way to acquire customers and build longer-term relationships, including opportunities to sell insurance and unsecured loans. Testa said the company would focus more on higher-margin products as it manages funding costs.

About AGI (NYSE:AGBK)

Agibank S.A. is a Brazilian financial services company that combines digital banking with a network of physical service locations. Its offerings include digital accounts, payment services, cards, personal credit and insurance, with a focus on serving individuals across Brazil. The company is particularly known for payroll-deductible loans, including credit products for retirees and public-sector employees. Agibank traces its origins to Agiplan, established in 1999, and adopted the Agibank name as it expanded its digital banking operations.

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