StoneCo’s (STNE) Credit Boom Comes With A Costly Catch

StoneCo’s (STNE) Credit Boom Comes With A Costly Catch

Thu, August 27, 2026 at 5:06 PM GMT+3 4 min read

• STNE +0.26%

On August 13, StoneCo (NASDAQ:STNE) walked investors through a quarter that captures the central tension in its story right now: a credit business scaling faster than almost anyone expected, and a loan book showing real cracks under Brazil's stubbornly high interest rates. Revenue reached BRL 3.6 billion, up 2.5% year over year, but the more telling number sat inside the credit line, where the portfolio more than doubled to BRL 3.8 billion. That growth is exactly what management wants. What it costs is the story underneath.

Doubling Down On Credit

StoneCo's credit portfolio doubling to BRL 3.8 billion year over year is the headline, but the composition matters just as much. Working capital solutions drove most of that expansion, and credit revenues jumped 153% to BRL 348.5 million as the book scaled and average rates rose. The company also began disbursing government-backed loans this quarter, which already total BRL 334.2 million. These carry lower risk and lower pricing because a government guarantee absorbs part of the loss on default, letting StoneCo price more aggressively for clients it once passed on.

Banking is building alongside credit. Retail deposits climbed 22.3% to BRL 10.8 billion, and that growth pushed funding costs down to roughly 85% of CDI, a direct benefit to margins. PIX QR code volume rose 44.3% to BRL 30.7 billion, outpacing card volumes and signaling where merchant transactions are headed. Meanwhile, the integration of Pagar.me into the core Stone platform folds online and physical sales into a single merchant account, the foundation for the company's new positioning as a bank for entrepreneurs rather than just a payments processor. On the shareholder side, BRL 3.0 billion in buybacks over the past year cut the share count by 40.3 million shares, which is why adjusted basic EPS rose 8.6% to BRL 2.40 even as net income slipped.

Cracks In The Loan Book

The credit expansion is not without cost. Cost of risk climbed to 21.5% from 20.2% a year earlier, and non-performing loans over 90 days nearly doubled to 8.60% from 4.67%, as loan vintages from late 2025 and early 2026 rolled forward into delinquency. Coverage fell to 203.6% from 279.9%, reflecting both a shift toward better-rated and government-backed loans and the mechanical lag between rising NPLs and write-offs.

The pain is concentrated at the high end. On the dedicated desk that serves larger clients, some defaults have come in above BRL 10 million, including an BRL 11 million default from a long-standing client that filed for bankruptcy protection and caught the company off guard. Management also flagged that a liquidated card issuer could require additional provisioning depending on how a pending litigation matter resolves.

Macro conditions are not helping either. Brazil's benchmark Selic rate has held near 14% instead of the 12.5% StoneCo built into its original plan, a gap CFO Diego Salgado estimated at more than BRL 300 million of pressure on 2026 results. Adjusted net income fell 2.6% to BRL 582.7 million, partly on a higher 16.4% effective tax rate, and adjusted gross margin slipped to 43.6% from 44.6%. Management still backs its full-year guidance of BRL 6.6 billion to BRL 7.0 billion in adjusted gross profit, but says results are tracking toward the lower end.

What The Market Sees

Hedge fund ownership rose to 24 funds last quarter from 22, a modest sign of accumulating interest. StoneCo trades at a forward P/E of just 8.06, as of August 27, cheap even for a Brazilian fintech carrying rising credit losses. Short interest sits at 10.03% of float, pointing to a real bear camp betting against the stock. That combination suggests the market is genuinely split on whether the credit story or the default story wins out.

A Bank Still Building Trust

StoneCo's quarter tells two stories at once. The credit and banking businesses are scaling in ways that support the company's pitch to become a full-service bank for entrepreneurs, and buybacks are doing real work for per-share earnings. But the same credit engine is now generating losses concentrated in its largest accounts, at a moment when Brazilian interest rates refuse to ease.

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