PagBank Q1 2026: Banking Growth Continues, but Earnings Growth Remains Tepid

What happened

PagSeguro reported 1Q26 recurring net income of R$575 million, up 4% year-over-year, with deposits surpassing R$42 billion and loans reaching R$5 billion, driven by PagBank's expansion and operating leverage. However, the modest earnings growth underscores persistent structural headwinds from high interest rates, Pix-driven pressure on acquiring margins, and a negative CDI gap that limits full profit conversion from revenue gains. The DeepValue report, which rates the stock as WAIT with conviction 3.5, notes that while PagBank's banking revenue surged 50%+ in 2025, non-GAAP net income was flat, and the same pattern of top-line growth not translating into proportional earnings appears to continue. The growing deposit and loan base supports the bull case for PagBank as a high-margin growth engine, but the 4% net income gain against a 14%+ revenue trend suggests cost and funding drag persist. Overall, the quarter validates the thesis that PagBank is scaling but fails to decisively break the pattern of earnings stagnation, keeping the risk-reward balanced near $11.34.

Implication

Over the next 12 months, investors should watch for three developments: first, whether banking revenue can maintain 30–40%+ growth without a spike in NPLs; second, if management confirms and fully executes the anticipated R$1.4 billion 2026 dividend while keeping the BIS ratio above 18%; and third, if Selic rate cuts materialize to relieve funding cost pressure. The current quarter does not change the WAIT rating; the stock's low P/E of ~7.8x offers some valuation support, but the margin of safety is thin given net debt/EBITDA of 5.3x and interest coverage of 1.5x. A pullback toward $10 would provide a more compelling risk-reward, especially if Q2 results confirm stable credit quality and further progress on capital returns. Until then, the lack of earnings acceleration and macro uncertainty warrant caution despite the attractive yield story.

Thesis delta

Q1 2026 results reinforce the existing thesis but do not trigger a shift. PagBank continues to grow deposits and loans, but net income growth of 4% YoY is below the 30%+ pace needed to re-rate the stock. The DeepValue report's base case of flat-to-modest EPS growth remains intact, and while banking revenue is a bright spot, overall earnings momentum is still capped by high funding costs and acquiring headwinds. No change to the WAIT stance; the stock remains fairly valued near $11.34, and a better entry point closer to $10 is preferred.