PagSeguro shares slide after Brazil announcese pay as you go, debit card price caps (NYSE:PAGS)

PagSeguro Digital (NYSE:PAGS) inventory has slumped 11% in Monday afternoon buying and selling after the Brazilian Central Financial institution imposed a cap on interchange charges of pay as you go and debit playing cards and require the identical settlement interval for each forms of transactions.

Financial institution of America Securities analyst Mario Pierry commented in a word that the central financial institution’s transfer negatively impacts card issuers, because the 0.7% cap on pay as you go transactions is lower than the 1.5% charges that card issuers at the moment cost.

Additionally acquirers, which at the moment reap monetary acquire on float, as pay as you go playing cards function with settlement interval of 28 days, may even be negatively affected. Nonetheless, on the identical time, acquirers may even profit as a result of decrease transaction prices.

Pierry estimated that interchange charges on pay as you go card transaction symbolize 60%-70% of PagBank income, or 5%-6% of PagSeguro’s (PAGS) consolidated income. The corporate, although, ought to be capable of mitigate among the impression with decrease prices on buying operations, the analyst mentioned. He maintains a Purchase score on PAGS.

General, the Banco do Brasil announcement was optimistic because the 0.7% pay as you go transaction price price was increased than the 0.5% price that was urged at a public listening to in 2021.

For Nu Holdings (NYSE:NU), which operates Nu Financial institution, the pay as you go transactions cap of 0.7% would have damage its trailing 12-month income by 2.9%, it mentioned in a submitting. Pierry maintained a Impartial score on NU. He describes the unfavorable impression on the corporate’s profitability as “manageable.” Nu Holdings shares, in the meantime, are down 2.5%.

SA contributor Caterer Goodman Companions counsel shopping for PagSeguro (PAGS) earlier than rates of interest peak in Brazil