PagBank posted all-time high net income of R$1.8 billion in 2023 and starts a new growth cycle

Rhea-AI Summary

PagBank (PAGS) reports impressive financial results for 4Q23, with record net income, TPV growth of +21% y/y, and reaching 31 million clients with R$28 billion in deposits. The digital bank showcases strong performance in acquiring, digital banking, and credit portfolio, emphasizing sustainable growth and client engagement.

Positive

• Record net income (Non-GAAP) of R$520 million in 4Q23 (+27% y/y)
• TPV growth in Payments of +21% y/y, reaching R$113.7 billion in 4Q23
• Digital bank reached 31 million clients with R$28 billion in deposits
• Credit portfolio stable at R$2.5 billion, focusing on low-risk products
• Strategic focus on profitable and sustainable growth, expanding client engagement
• Balanced growth strategy for 2024 based on five pillars for profitability

Negative

• None.

Insights

Financial Analyst

The reported TPV growth of +21% y/y by PagBank significantly outstrips the industry average, indicating a robust competitive position in the payments sector. This growth, coupled with a record net income of R$520 million for 4Q23, suggests that the company has effectively leveraged its revenue recovery strategies and managed operating expenses efficiently. The emphasis on acquiring growth and the successful offset of interchange cap effects are critical factors contributing to the financial performance.

Furthermore, the strategic shift towards a diversified funding strategy, marked by a reduced average cost of funding, reflects a prudent approach to financial management. The stable credit portfolio focused on low-risk products is indicative of a cautious yet potentially rewarding credit strategy, which may enhance the company's resilience against economic fluctuations.

Market Research Analyst

PagBank's expansion in its digital banking services, achieving 31 million clients and R$28 billion in deposits, demonstrates a successful penetration into the market and a growing customer base. The increase in cash-in transactions by +48% y/y in 4Q23 highlights the growing client engagement and adoption of PagBank’s services like Pix and credit origination. This level of engagement is a strong indicator of potential for increased customer lifetime value and share of wallet.

The emphasis on a diverse product range and the company's positioning as a tech-forward entity suggest an alignment with evolving consumer expectations and digital trends. The record figures in both TPV and deposits can be seen as a reflection of the effectiveness of the company's product innovation and market strategy.

Economist

The broader economic implications of PagBank's performance, such as the reduction in financial expenses due to a lower average cost of funding, suggest a favorable macroeconomic environment, potentially characterized by an easing interest rate cycle. This may have positive implications for the broader financial services industry, as it indicates a period of lower borrowing costs and potential stimulation of economic activity.

The company's focus on balancing profitable and sustainable growth reflects a strategic approach that may contribute to long-term economic stability. The emphasis on operational efficiency and disciplined capital allocation can be seen as a microcosm of broader economic principles that prioritize sustainable growth over short-term gains.

In Payments, TPV growth in 4Q23 reached +21% y/y, more than 2x industry growth;

Digital bank reached 31 million clients, totaling R$28 billion in Deposits;

The results consolidate the business expansion and diversification beyond longtail and POS devices

SÃO PAULO, Feb, 29, 2024 /PRNewswire/ -- PagBank (NYSE: PAGS), a complete digital bank in financial services and payments solution and one of the largest digital banks in the country, announces its results for the fourth quarter of 2023 (4Q23). Among the main highlights, the Company posted a record net income (Non-GAAP) of R$520 million in 4Q23 (+27% y/y and +18% q/q), concluding 2023 with almost R$1.8 billion for the year (+11% y/y), the highest in the Company's history. Net income, in GAAP basis, reached R$488 million in the fourth quarter (+20% y/y and +19% q/q), totaling R$1.65 billion for the year (+10% y/y).

Alexandre Magnani, CEO of PagBank, points out the reasons for this performance in net income, stating the dynamics of revenue recovery, with strong growth in acquiring (TPV), more than offsetting the effects of the interchange cap established in April 2023; a reduction in losses and chargeback, with relevant developments on the security and fraud prevention front; a decrease in financial expenses in the annual comparison, due to the lower average cost of funding on the back of larger share of deposits in the funding strategy and the easing interest rate cycle; and also the fact that operating expenses remained controlled, without harming growth opportunities.  

In Payments, the company marked a record TPV of R$113.7 billion in the last quarter of last year (+21% y/y and +14% q/q) and R$394 billion throughout 2023 (+11% y/y), with growth in all segments, including micro-merchants, SMEs and large accounts.

In digital banking, PAGS reached R$66 billion in cash-in (all transfers sent from different financial institutions into PagBank account) in 4Q23 (+48% y/y and +38% q/q) and R$217  billion in the year 2023 (+59 % y/y). This proves the clients' growing engagement to PagBank's financial services, by using the features such as Pix, card issuance, credit origination and bill payments. Consequently, PAGS reached a record R$27.6 billion in deposits (+33% y/y and +28% q/q).

"The outstanding numbers show that PagBank is entering a new growth stage. Our value proposition goes beyond serving micro-entrepreneurs and offering POS devices. We are an increasingly solid and active tech company, reaching almost 15% of the total Brazilian population. Our wide and diverse range of products and services serve the most diverse audiences, as our purpose is precisely to make the financial lives of people and businesses easier in a simple, secure, digital and affordable way," the CEO of PagBank states.

The executive also points out that 2023 was marked by important achievements from PagBank, such as the attribution of the brAAA rating by S&P Global Ratings, the completion of the integration of Moip (online payments company acquired in August 2020), the strengthening of the Internet Banking interface, facial authentication for link online payments and the launches of Tap on Phone in the PagVendas app and Boleto/Cobrança Pix. In SMBs accounts, initiatives such as automatic settlement from different acquirers into PagBank account, multiple users account and Payroll enabling business owners to transfer paycheck up to 2,000 employees are also highlighted by Alex as levers for the digital bank's performance last year.

Currently, PagBank has the largest acceptance network for payment solutions, with 6.5 million active merchants and entrepreneurs. The Company maintains its focus on balancing profitable and sustainable growth rather than the overall number of merchants, looking for expanding client's share of wallet, and offers, as competitive advantages, zero fees for new merchants, 24/7 instant payment on PagBank accounts, express payment device delivery, and the best investment options on the market, with CDBs that yield up to 130% of CDI.

The credit portfolio reached R$2.5 billion, stable in relation to the previous quarter, with a focus on low-risk and high-commitment products, such as credit cards, payroll loans and advance FGTS birthday withdrawals. For Alex, the improvement in the credit cycle in the coming months will open up opportunities for PagBank to accelerate credit underwriting and expand the digital bank's product offering. "Our numbers demonstrate that growth and higher client engagement can be stimulated by offering credit through low-risk products. This allows us to be cautious in more critical moments, like what the sector experienced throughout 2023. However, we understand that underwriting and expanding credit products is a natural path and it's within our plans."

Financial highlights

PagBank's balance sheet also highlights net revenue – which grew again year-on-year – of R$4.3 billion (+10% y/y and +8% q/q) in 4Q23, accumulating the amount of R$15.9 billion by the end of 2023 (+4% y/y). For Artur Schunck, CFO of PagBank, this performance was driven by the strong growth in Payments, led by MSMEs, in addition to the acceleration of volumes processed in large accounts, with emphasis on online payments and commercial automations, in addition to higher margin revenues in financial services .

"As far as operational expenses are concerned, we spent practically the same amount as in 2022, but we managed to do much more. We prioritize growth in organic investments, focusing on simplification and integration, product launches and improvements, and disciplined capital allocation," Schunck explains.

According to Alex, in order to balance growth and profitability throughout 2024, PagBank's strategy will continue to be based on five pillars: profitable growth in payments, with a sustainable increase in market share in key segments for the Company; promoting digital banking engagement to diversify revenue sources and increase revenue per client; development of the ecosystem that integrates payments, financial services and value-added services; 360º security, aiming to reduce losses, increase client security and promote operational efficiency; and disciplined cost management and capital allocation to improve profit and cash flow generation. 

In 2023, PagBank also published its third Sustainability Report, including the main highlights and actions the Company implemented in the previous year. The Company, which today is a reference among digital banks and fintechs in Latin America, put into practice an ambitious plan that is now reflected in the ratings that measure the maturity stage of companies in ESG, such as Sustainalytics and CDP. "Currently, our stage of maturity on several ESG fronts is similar or higher than that of institutions with decades of work experience. We are focused on creating value for all stakeholders and our society", highlights Eric Oliveira, Executive Director of IR, ESG and Market Intelligence at PagBank.    

See PagBank's financial results in 4Q23 by clicking here.

About PagBank
PagBank promotes innovative solutions in financial services and payment methods, automating the purchase, sale and transfer process to boost the business of any person and company, in a simple and secure way. A company belonging to the UOL Group – leader of Brazilian internet –PagBank acts as an issuer, an acquirer, and offers digital accounts, in addition to providing complete solutions for online and in-person payments (via mobile devices and POS devices).    

PagBank also has a wide variety of payment methods, such as credit and prepaid cards, as well as bank transfers, bank slip payments, account balance, among others. PagBank (PagSeguro Internet Instituição de PayPal S.A) is regulated by the Central Bank of Brazil as a payment institution that issues electronic currency, an issuer of postpaid instruments and an acquirer, having partnerships with the main card brands. Its parent company, PagSeguro Digital, is publicly traded in the USA (NYSE: PAGS) and is regulated by the SEC (Securities and Exchange Commission). The distribution of investment funds is carried out by BancoSeguro S.A., authorized by the Central Bank of Brazil, the Securities and Exchange Commission and affiliated with ANBIMA.  

Visit the PagBank Press Room 

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SOURCE PagBank

FAQ

What was PagBank's net income in 4Q23?

PagBank reported a record net income of R$520 million in 4Q23, showing a growth of 27% year-on-year.

How much did PagBank's TPV grow in 4Q23?

PagBank's TPV in Payments grew by 21% year-on-year, reaching R$113.7 billion in 4Q23.

How many clients did PagBank reach in 4Q23?

PagBank reached 31 million clients in 4Q23, with R$28 billion in deposits.

What was the focus of PagBank's credit portfolio?

PagBank's credit portfolio focused on low-risk and high-commitment products, such as credit cards, payroll loans, and advance FGTS birthday withdrawals.

What is PagBank's growth strategy for 2024 based on?

PagBank's growth strategy for 2024 is based on five pillars: profitable growth in payments, digital banking engagement, ecosystem development, 360º security, and disciplined cost management.