Prepared remarks
Good evening. My name is Sophia, and I will be your conference operator today. Welcome to PagSeguro Digital Earnings Call for the Fourth Quarter of 2025. The slide presentation for today's webcast is available on PagSeguro Digital's Investor Relations website at investors.pagbank.com. Please refer to the forward-looking statements, a reconciliation disclosure in this presentation and in the company's earnings release appendix. Operator instructions were given. Today's conference is being recorded and will be available on the company's IR website after the event is concluded. Now I will turn the call over to Daniel Spencer Pioner, Head of IR.
Good evening, everyone, and welcome to PagBank's Earnings Conference Call for the Fourth Quarter of 2025. I'm Daniel Spencer Pioner, PagBank's Head of Investor Relations, and I want to thank you for taking the time to join our webcast. I'm here with Ricardo Dutra, our Principal Executive Officer; Carlos Mauad, our CEO; and Gustavo Sechin, our CFO. After the presentation, we'll have a live Q&A session. Please note that during Q&A, we'll take only one question per analyst to ensure the best use of our time. Now I'd like to hand it over to Dutra. Please, Dutra.
Hello, everyone, and thank you for joining our full year and fourth quarter 2025 earnings call. In Q4, we continued to expand our credit and banking businesses, along with the reacceleration of acquiring volumes. As a result, we are pleased to report a robust performance, demonstrating our resilience sustained by disciplined execution and value creation focused on our long-term ambition. Going to Slide 4, we can see the key operational and financial highlights for the full year 2025. Compared to last year, our revenues reached BRL 13.4 billion, 16% growth, driven by an impressive 51% growth in banking revenues and 9% in payments revenues. Net income was up 4% year-over-year. Later on the presentation, we will see the main impact on net income was due to the increase in financial expenses linked with the basic interest rate of Brazil, SELIC, which grew from an average of around 10.8% per year in 2024 to almost 14.5% per year in 2025. Going to the value creation for shareholders section. Our earnings per share reached BRL 7.99, growing 21% year-over-year. Buybacks and total dividends distributed in 2025 reached BRL 2.1 billion, leading to a 15% total shareholder yield. On Slide 5, we can see the highlights of the fourth quarter. Our TPV grew 10% quarter-over-quarter, marking an inflection point with sequential improvement in volumes. Our expanded credit portfolio reached BRL 50 billion. It is important to highlight the portion of the credit portfolio composed by loans, credit cards and working capital grew 33% year-over-year, with NPLs 90 approximately half of the industry average. These trends reinforce the underlying strength of our ecosystem and our ongoing commitment to expanding access to financial services in a responsible and sustainable way. On the funding efficiency initiative, our deposits reached BRL 40 billion, growing 13% year-over-year. Moving on to financial highlights. Our total net revenue, excluding interchange and card scheme fees increased 12% year-over-year, reaching BRL 3.5 billion. Our non-GAAP net income was BRL 678 million, 7.4% higher year-over-year, leading to annualized return on average equity of 18.4%, improved 100 basis points year-over-year. On Slide 6, I'm pleased to announce we successfully delivered our 2025 guidance despite strong headwinds such as macro volatility and sharp increase in Brazilian interest rates in 2025. Gross profit grew 6.9% for the year, within our expected range of 5% to 7%. GAAP diluted EPS increased 18.2% in 2025, above the guided range of 13% to 15% using the same share count as of December 2024. When you consider the benefit of buyback execution, reducing shares outstanding, EPS increased more than 20% year-over-year. Capital expenditures reached BRL 2.3 billion in 2025, landing at the upper end of our BRL 2.2 billion to BRL 2.3 billion range. Overall, the full delivery of 2025 guidance makes us confident about 2026 perspectives and reinforces our strong track record, as shown in the following slide. I'd like to briefly focus on our consistent track record in creating shareholder value. Since our IPO in 2018, GAAP diluted EPS has grown at a compounded annual rate of nearly 16% despite the global disruptions and macro volatility during this time frame. Throughout this journey, we have advanced in key strategic milestones, which broaden our addressable market, strengthened profitability and built a solid foundation for sustainable earnings growth. These efforts have increased the visibility and recurrence of our results, enhancing predictability and reinforces the resilience of our business model in generating long-term value. Now I'll pass the word to Carlos Mauad.
Thank you, Dutra. Good evening. In this section, we will take a look at the operational and commercial performance of our units in this past quarter. Let me start on Slide 9, where we highlight our main growth opportunities. As we've highlighted in recent quarters, as we tap into new verticals, there is a substantial room for expansion across our platform. In many areas of our banking business, our market share remains below 1%, which reinforces our conviction that we are only at the beginning of what we can build whether through deeper cross-sell or a stronger and more efficient deposit franchise or a broader, more diversified credit portfolio. I will manage with discipline in a long-term view. On the next slide, we will highlight our customer-centric approach demonstrated by increasing transactionality and engagement of our ecosystem. The evolution of our cash-in metric, which represents inflow not related to acquiring, remains one of the most important indicators of our client activity on our platform. In the fourth quarter of 2025, cash-in reached more than BRL 90 billion, an increase of 11% compared to the same period of last year. On a per client basis, the figure rose to BRL 5,300, up 10% year-over-year. As a reminder, cash-in is mainly composed by PIX transactions received, showing how PIX has become an important and profitable component of our business. We are also seeing an increase in our platform usage as measured through the amount of bill payments, fixed transactions and the penetration of investment and insurance products, signifying deeper relationships and improved monetization as clients increasingly rely on us for a wider portion of their financial needs. These trends underscore the strength of our ecosystem and the growing intensity of customer engagement across our base. On Slide 11, let's speak about our credit performance. We can see credit as a strategic driver of engagement across both our banking and payment business, enabling deeper transactional activity and unlocking meaningful cross-sell opportunities. In the fourth quarter, our total credit portfolio reached BRL 4.6 billion, a 33% year-over-year increase. Since the second half of 2024, we have been gradually accelerating underwriting for unsecured products with a particular focus on working capital. This progress reflects ongoing improvements in our risk assessment and collections capabilities increasingly supported by AI. While originating typically slows in the fourth quarter due to the seasonal pattern, working capital originations were still 26% higher than in Q3, showing healthy and consistent traction. When we include financial operations linked to merchant prepayment supported by our instant settlement feature, our expanded credit portfolio now approaches BRL 50 billion, up 3% over the last 12 months despite lower volumes. Turning to asset quality, as shown on the bottom right of the slide, our NPL 90 ratio remains well below market average due to our disciplined approach to risk and product mix. The small increase we observe is a natural consequence of the greater mix of unsecured products in the portfolio. On the next slide, we present the continued strength of our deposit base and the progress we are making in improving our funding efficiency. During the quarter, total deposits reached more than BRL 40 billion, growing 13% year-over-year, a resilient performance despite the macro environment. Deposits are the cores of our funding structure. In this quarter, we saw a meaningful shift towards on-platform deposits which reached 95% of the total, reinforcing strong client engagement and the growing relevance of our digital channels. Importantly, this was the seventh consecutive quarter of reduction in our funding cost as a percentage of the CDI. This trend highlights the effectiveness of our strategy to broaden and diversify our funding mix with cost efficiency, and it contributes to the resilience of our liability structure and supports the expansion of our credit portfolio. Finally, as shown on the right-hand side of the slide, our loan to funding rate improved from 113% last year to 111% this quarter as we continue to grow credit with caution and prioritize a well-balanced structure. With that, I will hand it over to Gustavo, who will walk you through the financial highlights of the quarter of 2025. Gustavo, please?
Thanks, Mauad. Hello, everyone, and thank you for joining us today. Let's focus now on our consolidated financial results. In this first slide, as a consequence of the increase in transactionality and engagement, total revenue and income, net of interchange and card scheme fees reached BRL 3.5 billion in the fourth quarter, up 12% year-over-year. This performance captures the expansion of the banking business and also the repricing measures we began implementing in payments at the end of 2024, which have been essential to offset higher financial costs and to reinforce the sustainability of our revenue base. It is very important to highlight that revenue growth has once again outpaced TPV, showing that our pricing strategy effectively supported profitability. Disciplined execution drove resilient results in 2025 and positions us to sustain solid performance into 2026 despite macro uncertainty. Banking revenue reached BRL 757 million, growing over 7% year-over-year, driven by the expansion of our credit portfolio, higher engagement and stronger monetization supported by the positive growth and increased fee generation particularly from card usage and account-related services. As a result, banking gross profit grew 54% year-over-year with a 72% margin of revenues. The combination of stronger banking results and our repricing efforts helped partially offset the impact of higher interest rates throughout the year. Consolidated gross profit reached BRL 2.1 billion for the quarter, an increase of 8.7% year-over-year when we exclude the negative effect of BRL 54 million of buyback and dividend distributions. Turning to the next slide. Fourth quarter delivered operational leverage, reflecting continued efficiency gains across the platform. Our disciplined approach to managing expenses and delivering operational leverage remains a key pillar of our strategy, and it played an important role in helping us navigate the impact of higher financial costs in this period, allowing us to balance sustainable growth with continued profitability. On the cost side, financial costs increased 39% year-over-year, driven mainly by the higher interest rate environment and the effects of recent capital structure adjustments as highlighted earlier. On the other hand, sequentially, financial costs reduced 1% due to the progress we have made in diversifying our funding structure and reducing our funding costs. At the same time, total losses declined 8%, reflecting improvements in our loyal customers and onboarding process, which led to fewer chargebacks. This benefit was partially offset by the natural increase in expected credit losses as we continue to accelerate our credit operation. Operating expenses decreased 2% year-over-year, clearly showing our commitment to efficient cost management. This reduction reflects lower personnel expenses and more disciplined marketing investments. As a result, operating leverage improved significantly by 320 basis points compared to the same period last year. Moving on to the next slide. We reported non-GAAP net income of BRL 678 million in the quarter, representing 7% year-over-year growth and an increase of 16% on our diluted EPS. On the right side of the slide, you can see our return on average equity improving by 100 basis points year-over-year, reaching 18.4% compared to 17.3% in the fourth quarter of 2024. Even with a conservative capital structure, we have consistently managed to deliver solid returns, and it becomes clear the positive impact in this metric as we progress in improving our capital structure as shown in the next slide. Now moving on to the next slide. Let's focus on the initiatives that drive shareholder value and improve our capital structure. In order to achieve our Basel index target level of 18% to 22% in the coming years, we have used not only dividends, but also buyback as an additional tool to enhance shareholder value as it can be adjusted to market conditions and liquidity. In our view, dividends offer stability and predictability while buybacks provide tactical flexibility, and it's important to use both tools to improve our capital structure. Throughout 2025, we maintained a consistent momentum in our buyback program, repurchasing over 27 million shares. In February, 5 million common shares held in treasury were canceled. Furthermore, we paid BRL 617 million in cash dividends during 2025 and in 2026 last month, roughly BRL 200 million out of the BRL 1.4 billion dividend announced for the year were already paid. The remaining balance will be distributed in three tranches over the course of this year. This schedule reinforced the consistency of our capital return framework and our focus on predictable value creation. Let me address our CET1 and the impacts from the new regulatory tax framework. Due to the tax framework approved last year, a new 10% withholding tax on intra-group dividends is effective in Brazil. Dividends declared by the end of December 2025 will remain exempt from this tax provided they are effectively paid by 2028. This transition rule gave companies the ability to optimize internal capital flows ahead of the new framework, and we are managing this process in a disciplined manner. As a result, in the fourth quarter of 2025, we declared dividends in certain subsidiaries, reducing the equity component of our regulatory capital at the entity level, while the consolidated capital base remained stable. Our Basel index ratio decreased temporarily this quarter, placing our Basel index below our intended target of 18% to 22%. It's important to highlight that this effect is purely accounting-driven and does not impact our cash position nor our ability to support growth. The reallocation of excess capital is consistent with our long-term capital efficiency strategy. As we look ahead, the actions we took in 2025 position us well for the next phase of this plan and sustainable growth and strengthen our ability to navigate 2026 with confidence. Bearing that in mind, let's move to the next slide, where we outline our 2026 guidance and walk through the key drivers that will shape our performance expectations for the year. This includes the operational priorities, credit initiatives and efficiency opportunities that support our trajectory and reinforce the foundations for long-term value creation. Starting this year, we are evolving the way we communicate with the market by aligning our annual guidance with our long-term ambition for 2029. This shift reflects the confidence we have in the structural levers of our business and the visibility we have built into our key growth drivers. In this context, our full year guidance will focus on four pillars: the expansion of our credit portfolio, the acceleration of gross profit, the continued progress toward delivering non-GAAP diluted EPS and also capital expenditure, all in line with our long-term path. We expect our 2026 credit portfolio growth to be in the range of 25% to 35%, supported by the expansion of underwriting in our core credit products, including working capital. Gross profit growth outlook is expected to be in the range of 6% to 9%, reflecting an increased contribution from our banking segment in a still pressured financial cost scenario. Diluted non-GAAP EPS is expected to be in the range of 9% to 13%, consistent with our long-term profitability roadmap and the operational efficiency we are driving across the company. Finally, capital expenditure is expected to be in the range of BRL 1.8 billion and BRL 2.0 billion, reflecting our focus on efficiency and disciplined approach. With that, I will invite Mauad for the closing remarks.
Thank you, Gustavo. Before we conclude, let's move to the next slide for a few final remarks. First, we can see credit growth accelerate, supported by discipline in underwriting and healthy asset quality. The continued momentum in our unsecured working capital solutions, driven primarily by our own active client base, reinforces both the relevance of our products and the quality of the risk management approach. Secondly, acquiring volumes have been recovering steadily since mid-third quarter, marking a clear inflection point. This recovery is now consolidating into a strong foundation for positive trends as we move into 2026, reflecting healthier client activity and the effectiveness of our commercial initiatives. And finally, improved funding efficiency and consistent cost control have played an important role in protecting margins. These efforts allowed us to sustain net income growth even in a still challenging interest rate environment. Together, these elements demonstrate our ability to execute with discipline, manage macroeconomic pressure and continue advancing our long-term goals. As a reminder, our 2029 strategic targets include BRL 25 billion in credit portfolio with a balanced mix of secured and unsecured products, emphasizing working capital loans and AI-enabled solutions such as private payroll and PIX financing, above 10% gross profit CAGR driven by stronger banking contribution, cross-sell opportunities and efficiency gains and above 16% EPS CAGR as we continue converting growth and operational improvements into consistent shareholders' returns. These targets reflect our confidence in the scalability of our platform and the strength of our execution.
Questions and answers
Operator instructions were given. Our first question comes from Mario Pierry with Bank of America.
I wanted to focus on your gross profit guidance of 6% to 9%. I'm trying to understand because this looks conservative to us because, as you mentioned, your TPV growth accelerated quarter-over-quarter to 10%. However, you're guiding for 6% to 9%. And then when we think about your financial expenses in 2026, they should be coming down as rates come down. So I'm trying to understand, are you expecting a slowdown in revenue growth? Or what kind of SELIC rates do you have embedded in your forecast? Maybe that's the reason why gross profit is growing single digits. And again, this number is below your medium-term outlook of at least 10% growth. I'm trying to understand then what gives you confidence that this growth can accelerate going forward. I understand that you're introducing more banking products and you're accelerating the credit product, but I just wanted to understand a little bit better the single-digit growth in gross profit.
Mario, it's Gustavo here. Thank you for your question. You are right that we are projecting for this year a lower gross profit when we compare it to our long-term ambition. But you'll remember that when we released our long-term ambition and also given the macro uncertainty that we are facing, we should assume that the performance in 2026 should be a little below the long-term ambition. It's also important to consider that as we ramp up the credit business, it consumes higher provisions which reduce gross profit and EPS in the first year of our long-term ambition trend. But we are confident that we are on track to deliver the long-term ambition in all lines: credit as we posted, the EPS CAGR and also the gross profit CAGR. When we talk about the SELIC rate, that's very important for financial cost. Looking at what we expect for 2026, despite expecting cuts in the interest rate along the year, the average SELIC is probably going to be quite close to the 2025 SELIC rate. At the same time, we also assume and included that in our 2026 guidance.
Okay. And Gustavo, let me follow up then: when we look at your EPS growing faster than gross profit, you are implying, I think, efficiency gains here. Can you explore a little bit where these efficiency gains are coming from? And just to be sure, the EPS guidance of 9% to 13% does not imply a reduction in the share count, correct?
Yes, you are right. We are not assuming a lower share base for the EPS guidance. And we are considering continued operational leverage across our operation. We understand that we have different initiatives that we are working on. Some of them we've put in place, and all of those initiatives will deliver continuous operational leverage.
Our next question comes from Guilherme Grespan with JPMorgan.
Just one clarification before I jump into my question. The EPS guidance, should I read it as same share count, meaning EPS is the same as earnings growth, or should I dilute it with the buyback of the year? This is just a clarification. And then my question is actually on the TPV recovery. It was a nice quarter. Just want to get your views and update on what is the diagnosis you have on why you're missing clients and potentially having churn and what you sold so far? And looking ahead, if it still has any bottleneck that you feel that you need to fix? And basically, this whole diagnosis with what is happening, what you already did and what's still to be done in early 2026?
Guilherme, Gustavo again. To make clear, we are not considering the buyback in our EPS guidance. So if we continue and intend to continue working on our buyback program, it will be accretive for EPS.
And thank you for your question. This is Mauad. Regarding the TPV recovery, we did have some operational enhancements in the second half of last year. We deployed our new logistics operations by August. We are reviewing everything related to the set of terminals that we have with our customers. The banking platform is gaining quality and a new set of products. So everything that we are doing from an operational perspective is helping us retain the customer base and recover TPV. On the last call we mentioned that the low point in terms of TPV was in August, and we kept seeing recovery month after month. At the beginning of this year, we continue to see the same movement that we saw throughout the second half of the year.
And just to complement here, remember, TPV is one of the metrics we follow, but TPV per se is not the main metric. We look at revenues, which we've been growing year-over-year. We reached 16% revenue growth. If you consider financial services companies in Brazil, including fintechs and banks, that's one of the largest growth rates in the year. So we are trying to optimize the growth of TPV combined with revenues and combined with gross profit.
That's clear. Indeed, the gross profit had a rebound; it went from 2% year-over-year to 7%–8%.
Our next question comes from Arnon Shirazi with Citi.
I have two brief questions. The first one is related to the NPL increase compared to 3Q. We saw a 30 basis point deterioration. What's behind that? And my second one is related to the CapEx guidance for 2026. It is expected to be below BRL 2.4 billion. What's behind that?
Arnon, this is Gustavo. Our CapEx guidance for this year includes a reduction or savings around BRL 400 million when compared to last year. This is mainly because we are implementing initiatives not related only to OpEx but also related to CapEx that we intend to deploy through the year, and this will reduce both the demand for POS and the demand for some technology investments that we had planned.
Can you repeat the first part of the question because it cut a little bit of connection here? First part of the question, please.
No problem at all. We saw a 30 basis point deterioration in NPLs in this fourth quarter. What's behind that trend?
Here, it's Mauad. I'm going to address the 30 basis points quarter-over-quarter movement in NPL 90. We have two main effects. First, there's a regulatory change where we keep accruing interest revenues until 90 days that makes the balances go up. So that's an artificial movement due to the regulatory milestone. Second, there is the greater mix of unsecured products that we are deploying, which pushes the NPL 90 a little bit up. Remembering that we have roughly half the industry's NPLs, which gives us a lot of room to keep pushing up our credit outstanding.
Great. If I may, just a follow-up on CapEx. You mentioned that you will reduce demand for POS. What is driving that? Is it going to be tap on phone or anything else? Why would it reduce the demand?
There are many factors we are working on from the product and logistics perspectives that help optimize terminal CapEx. We are developing reverse logistics to ensure that every time we have to replace a terminal, we recover the terminal that has a problem to remanufacture and reinclude it in our logistics network. On top of that, we also have tap on phone that helps, especially for simpler terminals, creating CapEx savings over time. So when you see a number below what we had in 2025, there is no customer impact. In fact, we will keep pushing forward the customer database throughout 2026.
Our next question comes from Kaio Prato with UBS.
First, a clarification: is the EPS non-GAAP growth that you mentioned basically considered the same as net income? Also, you sent guidance on the non-GAAP. I'd like to understand if you are assuming the same level of share-based compensation for 2026 or if we can see any acceleration?
Gustavo again. Yes, we are considering non-GAAP net income as the base for the EPS calculation. Also, we are considering the number of shares that we will have in each period when we calculate EPS. Using non-GAAP net income for EPS calculation eliminates the share-based remuneration from the EPS calculation. Regarding share-based compensation, we could assume the same levels; we do not have any plan to accelerate it.
Okay. Great. My main question is on your engagement metrics. All of them were quite good this quarter. Encouraging trends across the board. My question is especially on banking: can you break down this metric between individuals and merchants? I'm particularly interested in the performance of each group, and how relevant individuals could be going forward. Any engagement metrics for pure individuals would be helpful. Also, can you link that to the expected breakdown of your portfolio by the end of 2026? You already gave guidance on growth, but it would be interesting to see the breakdown between working capital for merchants and individuals.
We are not guiding specific splits between individuals and entrepreneurs. I can assure you that both are growing and gaining engagement. For the kinds of customers we have, especially on the payments side, individuals and SMBs have similar sets of products and needs. We have initiatives on both sides: payments and credit products for small enterprises and for individuals, such as private payroll loan, which has already started to pilot inside the company. So I couldn't give exact numbers, but both segments are growing.
Just to add, we have a unique combination of product and service for MSMBs. We offer a seamless digital experience, a full digital bank with a complete set of products and services, which generates multiple revenue streams. At the same time, we are working on the credit growth avenue. These opportunities give us confidence to be on track to deliver results.
Great. And a quick follow-up on EPS guidance since several clients asked: given the share count by the end of the year will be lower, even if net income grows modestly or remains flat, that would imply the embedded high single-digit EPS growth in the guidance. That's the idea behind it, right?
Mathematically speaking, yes, you are right, but you can assume that net income will still grow.
We will still be growing.
Our next question comes from Tito Labarta with Goldman Sachs.
Just a follow-up on capital return. Gustavo, you mentioned you are assuming a similar share count. We know you have the dividend, which is around an 8% yield, and you completed 70% of the buyback. So if you complete the other 30%, that's maybe another 2% of shares. But should we assume any additional buyback? How are you thinking about capital return beyond that? Is that it for 2026? Should we start thinking about further buybacks or dividends more in 2027? Or is there potential for additional buybacks perhaps in 2026?
Tito, it's Gustavo. We have been working on buybacks and dividends and intend to use both tools to balance flexibility and stability. We launched a buyback program last May; it remains open. We have executed approximately 80% of this buyback program and will likely deploy the rest in the upcoming months. At the same time, we released BRL 1.4 billion in dividends that will be paid along this year in three tranches; we paid the first BRL 200 million last February. We will continue to balance buybacks and dividends as appropriate.
Our next question comes from Daniel Vaz with Safra.
I'm looking at your credit portfolio guidance, nearly at the midpoint of 30% year-over-year. This implies, I think we've already covered this in your strategic update, that the 2027 to 2029 window would be a different regime and not a continuation of the current trajectory. I wanted to understand further your confidence and the macro assumptions embedded in that back-end acceleration. What terminal SELIC rate are you using? And maybe how much of that growth is a function of the rate cycle rather than structurally achievable market share gains?
Hello, this is Mauad. We are looking at a year-end SELIC around 12.5% to 13% for 2026. There are many factors that explain a lower growth in the first year of our long-term guidance: product evolution we are deploying throughout the year, as well as the tougher macro environment. We expect 2027 and 2028 to have a softer environment and a better credit backdrop so we can accelerate. So the path to BRL 25 billion is a mix of macro, product evolution and credit strategy execution.
To complement, the credit portfolio growth is based on cohorts that stack up over time, so growth is not linear. When we updated our strategy in September 2025 we said 2026 would not grow at the average pace necessary to reach BRL 25 billion by 2029. That's why we provided the 25% to 35% guidance for 2026. It could be higher, but cohorts stack up and accelerate in subsequent years. Also, we operate today with NPLs around half the industry average, which gives us comfort and room to grow sustainably.
So the target is contingent on a constructive macro scenario, correct? If fiscal or interest-rate trajectories change, we would likely see a revision to that number?
Yes. That's correct. The guidance includes market uncertainty. As macro conditions improve, there is room for acceleration, and we will act accordingly.
Just to complement, it's too far to plan precisely two years ahead given geopolitical and macro uncertainties. What we're saying is that regardless of macro movements we will aim to grow sustainably. There will be credit cycles, but we are confident in the guidance for 2026 and in the long-term ambition of BRL 25 billion in 2029.
Our next question comes from Thiago Paura with BTG.
I believe I left the queue inadvertently earlier. A follow-up on volumes: given the changes you've made to TPV disclosure, can you provide a sense of the mix behind incremental volume growth? Recently and going forward, what are the main drivers for TPV growth? Is it more driven by nano merchants, SMBs, larger accounts? Just to get a sense of the client profile on the payment side.
Thank you. The company's focus remains SMBs — small and medium enterprises. Nano merchants are part of our strategy via tap on phone and organic inflows, but our efforts, capabilities and marketing investment are focused on SMBs, which continue to be the growth frontier for the company.
I'd like to highlight that we have a powerful combination of digital account and payments capabilities that serve SMBs, generating multiple revenue streams. We will continue to grow our operation, and on top of that we are working on credit opportunities which give us confidence in the path forward.
Great. And a quick follow-up on the EPS guidance: given share count reductions by year-end, even if net income growth is modest, that implies a high single-digit EPS growth embedded in the guidance. That's the idea, correct?
Mathematically speaking, yes, you are right, but you can assume that net income will still grow.
Our next question comes from Neha Agarwala with HSBC.
Just a clarification on the volume growth you mentioned. We saw good growth in the fourth quarter, but how should we think about the sustainability of this growth? Some competitors might also be putting in more effort to retain clients. How do you see the competition in 2026? What efforts would be required to ensure you retain customers, especially given your focus on operational efficiency and cost control? Also, on the effective tax rate: we had some volatility in the fourth quarter and you mentioned the change in tax treatment. Could you elaborate and give a sense of the tax rate to expect in 2026 and 2027?
Thank you, Neha. On TPV growth, we are not guiding volumes for the year, but we reinforce the trend we saw in the second half of last year continuing into Q1 of this year. We are confident in our customer acquisition strategy and in our ability to control churn. The competitive environment is active, but we have a powerful set of products to retain and grow customer activity. Regarding taxes, structurally the tax rate should increase over time, especially because of the increase in the banking revenue pool. For 2026, you should expect a tax rate around the mid-teens for the full year.
Neha, just to complement: the competition we're seeing is consistent with recent years. With high interest rates, participants are more focused on profitability rather than aggressive market share grabs. Our cost-control initiatives are focused on efficiency and do not impact customer service, go-to-market, or client experience. We're leveraging AI across many areas to lower costs without affecting service quality. In Q4, we grew TPV 10% quarter-over-quarter, while the market grew 5%, so we outpaced the market in that period.
That's very helpful. Probably I missed earlier: what is the SELIC assumption you have for 2026 and for the long-term guidance?
For this year, we are including a year-end SELIC around 12.5%, which will give us an average SELIC quite similar to 2025. For the long-term guidance, we assume some reduction, but in the medium term we expect rates to remain above 10% in 2027 and 2028.
This concludes today's presentation. You may now disconnect, and have a nice evening.