Earnings call transcript: Banco Pan Q3 2025 sees stock rise despite earnings miss

Banco Pan reported its third-quarter 2025 earnings, revealing a slight miss on both earnings per share (EPS) and revenue forecasts. The company posted an EPS of $0.1643 compared to the expected $0.1679, marking a -2.14% surprise. Revenue came in at $2.87 billion, below the forecast of $2.97 billion, a -3.37% surprise. Despite these misses, Banco Pan’s stock rose by 3.23% to $10.83, reflecting investor optimism possibly fueled by strategic initiatives and future projections.

Key Takeaways

• Banco Pan's EPS and revenue missed forecasts, yet the stock rose by 3.23%.
• Net income grew by 9% to BRL 209 million, with a return on equity of 12.1%.
• The credit portfolio expanded by 6% to BRL 61.5 billion.
• The company is focusing on product diversification and risk control.
• New product launches and AI developments are underway to enhance growth.

Company Performance

Banco Pan showed resilience in Q3 2025, achieving a 9% growth in net income to BRL 209 million and a return on equity of 12.1%. The credit portfolio increased by 6% to BRL 61.5 billion, demonstrating solid growth. The bank's focus on product diversification and risk control appears to be paying off, despite missing analyst forecasts.

Financial Highlights

• Revenue: $2.87 billion, missed forecast by 3.37%
• Earnings per share: $0.1643, missed forecast by 2.14%
• Net income: BRL 209 million, 9% growth
• Return on equity: 12.1%
• Net interest margin: BRL 2.6 billion, 17% growth
• Fee revenues: Increased from BRL 420 million to BRL 464 million

Earnings vs. Forecast

Banco Pan's actual EPS of $0.1643 was slightly below the forecast of $0.1679, representing a -2.14% surprise. Revenue also fell short at $2.87 billion against a forecast of $2.97 billion, a -3.37% surprise. These results reflect a minor deviation from expectations, which may not significantly impact long-term investor sentiment.

Market Reaction

Despite the earnings miss, Banco Pan's stock increased by 3.23%, closing at $10.83. This rise indicates positive investor sentiment, possibly driven by the company's strategic focus on product diversification and risk management. The stock remains within its 52-week range, with a high of $11.18 and a low of $6.14.

Outlook & Guidance

Banco Pan is optimistic about its future, planning to escalate public payroll and INSS loans. The company expects gradual improvements in financial margins and continues to focus on enhancing client experience and service quality. The development of new AI models and a new app are part of its strategy to drive growth.

Executive Commentary

• "Our growth strategy is based on the diversification of origination of our products with a controlled risk." - André Luís Calabro, Director-President
• "We do not expect an abrupt change of levels, but ongoing and positive construction." - Inácio Caminho, Head of Investor Relations
• "We believe that quarter upon quarter, we're going to get this very good, great result." - André Luís Calabro, Director-President

Risks and Challenges

• Macroeconomic conditions may impact growth.
• Maintaining controlled risk while diversifying product offerings.
• Continued reduction in credit assignments could affect revenue.
• Competition in the banking sector remains intense.
• Regulatory changes could pose challenges.

Q&A

During the earnings call, analysts focused on risk-adjusted margins and potential improvements. Management highlighted opportunities for enhancing margins through product mix optimization and pricing strategies, indicating a positive outlook for future quarters.

Full transcript - Banco Pan SA (BPAN4) Q3 2025:

Conference Moderator, Banco Pan: Good morning, everyone. Welcome to Banco Pan's teleconference for discussing our results related to the third quarter of 2025. This conference call is being broadcast in Portuguese with simultaneous translation into English. To select your preferred language, click on "Interpretation" on the applications menu. This conference's audio and slides are being broadcast simultaneously on the internet on our company's IR website, www.bancopan.com.br/ri, and via Zoom. This event will also be available for download after its conclusion. We would like to inform everyone that this event is being recorded, and all participants will be in listen-only mode during the company's presentation. Once the bank's remarks are completed, there will be a question-and-answer session when further instructions will be provided.

Before proceeding, we shall inform you that statements that may be made during this conference call related to Banco Pan's forward-looking perspectives, projections, financial and operational goals are based on the beliefs and assumptions of the bank's management and on information currently available to the company. Future-looking statements are no guarantee of future performance. This involves risk uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors and analysts should understand that general economic conditions, industry, and other operating factors could also affect the bank's future results and could cause the results to differ naturally from those expressed in such forward-looking statements. With us here today, we have Mr. André Luís Calabro, Banco Pan's Director-President, and Mr. Inácio Caminho, Head of Investor Relations. We will now give the floor to Mr. André Luís Calabro, who will begin today's presentation. Please, Mr.

Calabro, you may proceed.

André Luís Calabro, Director-President, Banco Pan: Good morning. Thank you, everyone, for being here with us today in our earnings release. Before talking about our performance in the quarter, I would like to mention this relevant factor we have disclosed recently. We were told by our controlling shareholder about the incorporation of shares, and all the needed analyses are ongoing now. They are being done by our independent advisors. They are ongoing, and we are waiting for more information. Any additional information relevant will be promptly informed to the market according to the transparency that guides our actions. Now let's talk about the highlights of the quarter. I would like to highlight some important points that we had. The first one is the expansion on the credit origination, new, and about the products in all the segments. We grew a lot in the private loan. We resumed leadership in motorcycles, growth in used vehicles.

Also, we are working now for having a rebound in the INSS in the next quarters and also a gradual rebound on cards and private loans where we have been careful because of the macro scenario here in the country regarding operational leverage. As disclosed in the last quarter, we had this no exception of portfolio as a strategy. Also, we had an improvement in the expenses. Besides increasing the portfolio, we have had an improvement in the expense, personal expenses, admin expenses. We have had good results with a decrease in these indicators regarding revenues. We had growing margin and growing fee revenue. Regarding delinquency, there was a decrease in motorcycles and light vehicles. We have had a very controlled delinquency. Of course, private loans and cards, we are being more careful because of the scenario in the country, in the macro scenario.

We have been working with more controlled production. Delinquency, it's kind of, you know, nervous, let's say so. Regarding efficiency, we are working with the B2C channel origination there. We have had several AI models that we are using, data models combined. It's intensive work in this strategy. Regarding self-service, we have had good results, very positive indicators results. Our UX client experience and the bot usage has been improving so that we can offer a better service to our clients. The last highlight, really important regarding the quality and the focus on our clients, it's important to highlight that for the second quarter in a row, the bank has presented good positions in the rank. Last half, we were in sixth in the BACEN ranking. We have improved. This shows our commitment to our client in the Reclame Aqui. We had 8.1 grade.

This shows our commitment to our client as well. Of course, we have been working in our new app. It is a long-term project. We are going to disclose more novelties in the next half. I think these are the first eight points, and Inácio is now going to continue with the presentation. Thank you. Now, continuing to page three, we have details about how the results of the bank have kept flat, around BRL 200 million. We have reduced the credit assignments. In the second quarter, there was no credit assignment. The portfolio grew strongly, reaching BRL 61.5 billion, leveraging the results and ROE evolving to 12%. In page four, we have the big numbers, the big figures. Clients, we closed with 32.5 million in this quarter. The portfolio, BRL 61.5 billion, representing a growth of 6%, very important growth in the quarter.

Net income, a growth of 9%, amounting to BRL 209 million in ROE, 12.1%. Regarding the engagement on page six, we were rather kind of flat in this quarter. Total and active clients, 59% of our basis, 2.3 products in the cross-sell index, big skis 9.5, and transaction volume amounting to BRL 32.3 billion in the quarter. Regarding origination, on page seven, we have here a rebound driven by vehicles. We had a record origination of BRL 5.2 billion, and also the new product, private payroll loan, in which we are working hard. We had very good results in this quarter. Public payroll loan slash INSS is still with timid, shy volumes, but we imagine that in the future, we are going to escalate it again. FGTS and AP Clean Plan stable in this third quarter. We originated BRL 8.4 billion, BRL 1 billion more than on the previous quarter.

Credit portfolio, BRL 61.5 billion, an important growth of 6% in the quarter. Vehicles is the main portfolio with BRL 36.5 billion, almost 60% of the portfolio. Public payroll plus FGTS decreased in the margin due to smaller origination, and private payroll has more relevant growth, totalizing BRL 2.8 million in a portfolio for which we see a very promising future. Regarding credit cards, flat volumes, and more soft growth because of credit characteristics and the behavior of the product. Regarding delinquency, on page nine, the portfolio mix changes gradually, especially with the reduction of the payroll loan and FGTS. We have more risk in the operations, but we offset these with more spread. When we look at the indicators of in arrears, we see that there were vehicles here contributing here.

Vehicles increased in the over 90, but we perceive this in the total movement of the portfolio because the clean portfolio is kind of more difficult. Okay. Due to this, on slate page 10, we see that new cars issued continue with a limited offer with 144 new credit cards, and TPV also decreasing to BRL 3.6 billion with a BRL 63 million revenue. Insurance on page 11, the performance was a strong good in here. We see the relationship it has with the vehicles, but also with the private payroll loan. We can work on several types of policies with our clients amounting to 268 in prices issued and 124 in revenues in this quarter. Now, the financial highlights on page 13, we see that our interest margins totalized BRL 2.6 billion in the quarter, 17% with without assignments. We did not do in arrears or on-day portfolio assignments.

Credit cost had 9% in the quarter. It's a level very close to the first quarter of 2025. In the second quarter, there was this decrease because we did this arrears portfolio assignment in the second quarter. We penalized the margin, the financial margin, BRL 14.8 million. If we hadn't done these assignments in the last quarter, the cost of credit would be quite almost flat. We see how comfortable we are here with the risk management at the bank. Of course, NIM after credit cost closed at 7.4%, BRL 1.1 billion on the quarter. On page 14, we have the lines regarding the results. Expenses, we see that the efficiency agenda is working on the personal expenses. For instance, we reduced to BRL 201 million in the third quarter. Expenses as a whole decreased gradually, and expenses with contingencies also decreased.

We have this ongoing work bringing more leverage to the bank. Regarding fee revenues, we see an important leap in the levels. You know, we had BRL 420 million around, and now we have reached BRL 464 million this quarter. And profitability, BRL 209 million, 12.1% of ROE. To close this first part of our call, we have here equity and capital, 12.7%. With that, I close the first part and open for the Q&A session. The floor is open for questions from investors and analysts. If you have a question, click raise hand at the platform. Please hold while we collect the questions. We begin with the question from Brian Flores from City. Hello, good morning. Thank you for taking my question. I have only one. It is clear that you are broader origination. Congratulations for this initiative.

Also, we see that the risk cost is growing notably, of course, because of the way you are operating. I would like to understand if the margin adjusted according to the risk would continue on this level. Is there space for improving? Please, could you explain about the levers of this potential improvement? Thank you. Hi, Brian. Thank you for the question. I think that we see some room for improvement. The mix, as you said, is changing towards these. The products, naturally, they have a little bit more risk, but we try to offset this with the pricing, with the more aligned spread to have for return, even with the risk. If you look at our historical records in the long term, this movement has been happening since some time.

We do not expect an abrupt change of levels, but ongoing and positive construction. We understand that this is going to happen, okay, thinking about the financial margin. When you adjust the risk, of course, we had a change in the 4966 that changed the level of the initial risk. When you continue and you have a more adjusted mix of products for improving the risk, then the risk improves, there is a better result. We understand that there is still space for improvement. Okay, thank you. Thank you, Inácio. If you want to ask questions, please raise hand in the platform Zoom. Please hold. Since there are no more questions, I would like now to hand over to Mr. Calabro for the final remarks.

I think that the main messages here that we would like you to take home, since we have already spoken about this, our growth strategy is based on the diversification of origination of our products with a controlled risk. As Inácio commented, this is going to materialize along the next semesters and quarters. We are working on the products of the bank. We see excellent results on light vehicles and private payroll loans. We are resuming now the INSS and the public payroll loans. We have been working very well on delinquency, reducing also the fixed expenses, improving in the variable expenses. This is a daily work that we do, and the results are showing up. In the average and the long term, this is going to get even better.

In talking about efficiency, but also about excellence regarding our clients, we can disclose that we have some very positive indicators like the ranking and the Reclame Aqui. This shows our commitment regarding the services that we deliver to our clients. We believe that this is going to improve our recurrence, improve the relationship. The strategy is set up since the beginning, since my first day at work here at Banco Pan. We are going to continue with this strategy because we believe that quarter upon quarter, we're going to get this very good, great result. Thank you so much. We finish this today. This concludes Banco Pan's conference call. We thank you for your attendance and wish you a nice day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.