StoneCo's 'Bank for Entrepreneurs' Pivot Gains Traction, but Credit Quality Clouds the Path
TPV reaccelerates and deposits grow 22%, yet rising NPLs and a non-recurring provision keep cost of risk elevated—guidance holds, but execution is key.
STNE · Earnings Call · 2026-08-13
A Quarter of Steady Progress, and a Strategic Rebrand
StoneCo's second-quarter earnings call was framed as a story of "steady progress," but beneath the surface, the company is executing a meaningful strategic transition. CEO Mateus Schwening opened with a bold declaration: the launch of a new brand positioning—Stone, the bank for entrepreneurs—a signal that the company intends to be perceived as a full financial partner, not just a payments processor. The quarter delivered a modest reacceleration of TPV growth to 4% year-over-year, an early sign that retention initiatives are beginning to pay off. Yet the more consequential narrative lies in the credit book, which has more than doubled in a year, and the provisioning challenges that come with it.
TPV growth accelerated to 4%, an early signal that the retention initiatives we launched this year are beginning to work, though there is still a lot of work to be done.
The reacceleration, while small, is a welcome turn after consecutive quarters of deceleration. Diego Salgado, CFO, acknowledged the persistent churn issues candidly: “We're still facing the churn challenges we detected earlier this year, and they still weight on our overall performance.” — Diego Salgado, CFO · 2026-08-13 The company is seeing faster wins among micro merchants, where simpler offers and easier onboarding are driving down churn, while SMB clients remain a more complex, slower-moving problem. This focus on retention over new sales is a clear shift from the past, echoing the recurring themes of active client base and retention that have dominated recent commentary. Management expects the benefits to become more visible as the year progresses, with a gradual acceleration rather than a sharp inflection.
Credit Quality: The Axe in the Room
The credit portfolio has been the engine of growth, reaching R$3.8 billion—twice the level of a year ago—but it is also the source of mounting pressure. Provision expenses hit R$188 million, and the cost of risk held at 21.5%, well above the mid-to-high teens guidance. Coverage dropped to 204%, a decline management attributes to a mix shift toward government-backed loans and the mechanical seasoning of the book. However, the quarter also included a non-recurring allowance tied to a liquidated credit card issuer. Mateus explained: “While we do expect to settle this issue and receive the settlements that are due to us, for a matter of accounting prudence, we decided to make the provisions.” — Mateus Schwening, CEO · 2026-08-13 This serves as a reminder of the ecosystem risks embedded in the acquiring model.
More concerning is the dedicated desk, where defaults among the largest tickets have spiked. The company has been exposed to a record wave of judicial recuperations, particularly among larger merchants. As Mateus noted, “We were a little bit exposed to the record judicial recuperations that we're having in the country.” — Mateus Schwening, CEO · 2026-08-13 In response, Stone is capping maximum ticket sizes and steering new originations toward government-backed programs, such as FGI PEAC, which carry guarantees that materially reduce loss given default. Diego detailed the risk waterfall: “On average, especially on PEAC, the government guarantees roughly 75% of the defaulted amount.” — Diego Salgado, CFO · 2026-08-13 These government programs are becoming a strategic lever, allowing the company to lend to lower-risk clients while maintaining acceptable risk-adjusted returns. Yet they also carry lower yields, which could pressure future margins.
The dedicated desk remains a wildcard, with management acknowledging that short-term fluctuations in NPLs are inevitable. The contrast with prior quarters is stark: in the May call, Diego projected a decline in cost of risk to mid-to-high teens over time, a target that now appears challenged. “We expect cost of risk to decrease going back to mid- to high teens in time.” — Diego Salgado, Executive · 2026-05-19 That guidance now requires a meaningful improvement in portfolio quality, which the government-backed mix may help deliver, but only if the new programs scale without unintended consequences.
Banking, Deposits, and the Road Ahead
On the banking side, Stone continues to build its deposit franchise. Retail deposits rose 22% year-over-year to R$10.8 billion, and the integration of Pagar.me into the Stone platform is intended to consolidate online and offline operations into a single account. The new brand positioning is designed to shift merchant perception from "payments" to "bank for entrepreneurs," a strategic bet that deeper relationships will unlock more value from the existing base. As the banking franchise scales, it becomes an increasingly important driver of funding costs and interest rate resilience, partially hedging the company's sensitivity to Selic.
Despite the headwinds, management maintained its full-year guidance, though with a clear bias toward the lower end. The primary obstacle is interest rates, with the Selic now expected to end the year near 14% versus the 12.5% assumed at the start of 2026. Diego quantified the impact: “Every 100 basis points on Selic carries a pretax impact of roughly BRL 200 million to BRL 250 million.” — Diego Salgado, CFO · 2026-08-13 With rates north of expectations, the company is leaning on operational leverage and a continued shift toward lower-risk credit products. The first half delivered R$3.1 billion in adjusted gross profit and R$4.58 adjusted EPS, leaving a substantial gap to close in the second half. Management expressed confidence in the growth of credit revenues and the commercial initiatives, but the market will be watching whether the executed measures can deliver the promised acceleration.
In essence, StoneCo is navigating a delicate balancing act: scaling its credit business aggressively while managing rising NPLs and the cost of risk. The introduction of government-backed programs could be a game-changer, but it remains early days. The company's evolution into a comprehensive financial partner for Brazilian entrepreneurs is undeniably compelling, yet the near-term credit cycle will likely determine how smoothly that path unfolds. As Mateus remarked, this is a long journey with no silver bullets—only careful calibration and disciplined execution.