What are the potential risks or downside scenarios that could affect PagBank's future earnings trajectory?

Key downside risks to PagBank’s earnings outlook

1. Macroeconomic & credit environment in Brazil – The bank’s growth is tightly linked to consumer‑spending power and the health of the SME segment, both of which are vulnerable to Brazil’s persistent inflationary pressure, a potential tightening of monetary policy, and a slowdown in GDP. A further rise in the Selic rate could depress loan demand while simultaneously increasing funding costs. Moreover, higher default rates on credit cards and personal loans would erode the impressive 61 % YoY revenue surge and could force the bank to raise provisions, compressing the recurring net‑income margin.

2. Regulatory & competitive headwinds – The digital‑banking space in Brazil is becoming crowded with fintechs (Nubank, Banco Inter) and traditional banks accelerating their digital transformation. Any regulatory clamp‑down on fintech licensing, data‑privacy rules, or the introduction of stricter capital‑adequacy requirements would raise compliance costs and may limit PagBank’s ability to launch new products at pace. A price‑war on transaction fees or a shift in merchant acceptance toward rival platforms could also pressure the 26 % share of gross profit that banking now contributes.

3. Operational scaling & technology risk – Maintaining a 61 % revenue jump requires rapid expansion of the technology stack, fraud‑prevention infrastructure, and customer‑service capacity. Unexpected outages, cyber‑attacks, or slower‑than‑expected rollout of higher‑margin services (e.g., lending‑as‑a‑service, wealth‑management) could increase operating expenses and dilute margins. In addition, a stronger Brazilian real against the dollar would reduce the translation benefit on any offshore assets, subtly lowering reported earnings.

Trading implication: While the 2Q25 results have reinforced a bullish bias, the stock should be watched for signs of margin compression or widening credit‑loss provisions in upcoming releases. A break below the recent technical support around R$ 15 could signal that investors are pricing in these macro‑ and regulatory risks, presenting a short‑term entry for contrarians. Conversely, a sustained rally above the R$ 18 resistance, paired with forward‑looking guidance that highlights resilience to rate hikes and competitive differentiation, would support a continuation‑long position with a focus on earnings‑growth multiples. Keep a tight stop‑loss around the 12‑month moving average to manage the downside from any adverse macro or regulatory shock.