Pagbank in Brazil Records 8% Profit Growth Amid Reduced Financial Costs

17 Nov, 2023

Pagbank in Brazil Records 8% Profit Growth Amid Reduced Financial Costs

Pagbank, a leading Brazilian financial technology firm, disclosed an 8% surge in profits for the third quarter compared to the preceding year, primarily propelled by a notable reduction in financial expenses.

The company reported a net profit of 411 million reais, surpassing analyst predictions of 398.58 million reais polled by LSEG. Excluding the effects of a stock bonus program for executives conducted in the quarter, the recurring profit reached 440 million reais, marking a 7% increase and also surpassing analysts' projections.

Operating as both a payment processor and a digital bank, Pagbank's profit growth remains robust despite nearly stagnant revenue at 4 billion reais, aligning with estimates.

Eric Oliveira, the executive director of investor relations, expressed optimism, stating, "We anticipate a resurgence in revenue growth starting in the fourth quarter of 2023," in an interview with Reuters.

The payment-processing segment, Pagbank's core business, reported a total payment volume (TPV) of 99.8 billion reais, marking an 11% increase from the previous year. CEO Alexandre Magnani expressed positivity about this metric, foreseeing favorable trends in the upcoming months.

CFO Artur Schunck added, "TPV showed acceleration throughout the third quarter, and we're witnessing a similar trend in the fourth quarter," albeit without providing further specifics.

Notably, financial expenses experienced an 11% decline, amounting to 820 million reais. This decline marks the first year-on-year reduction since the commencement of Brazil's interest rate hike cycle in 2021, where the central bank raised rates to a high of 13.75%, sustained until June of the current year, initiating a rate-cutting cycle.

The decrease in Pagbank's financial expenses isn't solely attributed to Brazil's rate-cutting cycle; it also relates to the augmented share of clients' deposits in the firm's funding. Oliveira explained, "Deposits have become a more economical funding source for the company."