PagSeguro Digital Ltd. PAGS

The business

PagSeguro runs the PagBank ecosystem: card machines and point-of-sale tools for Brazil's micro and small merchants, paired with a digital bank offering deposits, cards, credit, and payments. The payments-and-float complex still carries the franchise: R$133B of quarterly total payment volume, and roughly R$47B of the R$52.4B expanded credit portfolio is merchant-prepayment receivables, against a true loan book of about R$5.1B. That loan book is where the growth lives; per the Q2 2026 release, total loans grew 31% year over year, led by working capital up 204% and credit cards up 35%, funded by R$43B of deposits growing 15%, more than 90% of them generated on-platform. The moat, at the highest level, is the switching cost and float economics of holding both the merchant's payments and the merchant's banking.

The fact the financials do not show is how completely Brazil's policy rate governs the reported result; PagSeguro funds prepayment of card receivables and its credit book, so Selic is its cost of goods in a real sense. That cycle is now four cuts deep: Copom cut for the fourth straight meeting on August 5, 2026, a unanimous 25 basis points to 14.00%, in an easing run that began in March off a 15.00% plateau. Management, on the August 11 call, still called 2026 "a much more challenging year than we were expecting" and Selic levels a live pressure on the business, but the company has now posted nine consecutive quarters of funding-cost reduction as a share of CDI, and its capital ratio sits at 22.5% against an 18% to 22% target. New credit products, private payroll loans and PIX Finance, began rolling out this quarter.