Write About Everything

SAO PAULO, Nov 16 (Reuters) – Brazilian financial technology firm Pagbank said on Thursday its third-quarter profits grew 8% from a year earlier, lifted mainly by a decline in financial expenses.

The firm posted net profit of 411 million reais, beating out the estimated 398.58 million reais from analysts polled by LSEG.

In recurring terms, which excludes the effects of a stock bonus program for executives carried out over the quarter, profit came in at 440 million reais, up 7% and also above analysts’ expectations.

For Pagbank, which operates as a payment processor and a digital bank, the profit growth comes even as revenue for the period was nearly flat from a year earlier at 4 billion reais and in line with estimates.

“We expect to resume revenue growth starting in the fourth quarter of 2023,” Eric Oliveira, executive director of investor relations, told Reuters.

The firm’s payment-processing segment, its main business, reported total payment volume (TPV) of 99.8 billion reais, up 11% from the previous year.

“The trend for the coming months is positive,” said CEO Alexandre Magnani about the metric.

“(TPV) accelerated as the months went by in the third quarter, and we’ve seen the same trend in the fourth quarter,” added CFO Artur Schunck, without going into further detail.

Financial expenses fell 11% to 820 million reais, the first year-on-year decline since 2021, when Brazil’s Selic interest rate hike cycle began.

Brasil’s central bank raised rates up to a high of 13.75%, which was held from August 2022 until June of this year, when it kicked off a rate-cut cycle which is

expected to continue

.

Pagbank’s drop in financial expenses is not only related to the start of Brazil’s rate-cutting cycle, but also the the increase in the share of clients’ deposits in the firm’s funding, “because deposits are now a cheaper source of funding for the company,” Oliveira added.

Deposits grew 11% to 21.6 billion reais, compared to a year earlier. (Reporting by Andre Romani; cv writing service by Peter Frontini; Editing by Kylie Madry)