Agibank, a closely held Brazilian financial-technology firm, tripled its profit during the first half of the year while expanding its credit portfolio as default rates dropped.
The bank, which mixes a digital platform with physical "smart hubs" that help customers with their financial needs, recorded net income of 440.5 million reais, or about $81.6 million, in the six months through June, on revenue of 3.42 billion reais, according to an emailed statement. Return on equity was 47.2% and active clients grew to 3.2 million.
Unlike Nubank, which targets young and tech-savvy clients in Brazil, Agibank's average client is older than 40, lives outside large capital cities and has a recurring salary or benefit hitting their accounts each month. That means 80% of its 19.1 billion reais of loans are guaranteed, and payroll financing is a large part of the business, founder and Chairman Marciano Testa said in an interview.
"We built our strategy to address and cover this blank space" left between traditional banks and digital-only banks, said Testa, 48, who relinquished his role as chief executive officer a few years ago as part of an effort to improve corporate governance. "Our hybrid platform is providing access to the real Brazil outside of the main cities for people who often aren't served."
While Testa began a credit business as far back as 2000, the current iteration of Agibank began in 2020. That year, private equity firm Vinci Partners Investments paid 420 million reais for an equity stake and remains the only outside investor.
Agibank, named for the need to be "agile," plans to grow its network of smart hubs to 2,500 from the current 1,000 by 2030 while quadrupling interest-bearing assets to 100 billion reais, according to Testa. The hubs cost on average about 95% less than a traditional bank branch and allow clients to access free Wi-Fi and get help from advisers including onboarding.
The bank, which secured a license in 2017, has issued hundreds of millions of reais in local bonds and was recently upgraded by rating agencies.
It's now considering its first international bond sale in U.S. dollars that could be about $300 million, Testa said. The timing will depend on when the Federal Reserve lowers its benchmark interest rate.
When asked about an eventual initial public offering, Testa said "we're in no rush."
This year, Agibank signed funding agreements with large international banks including Citigroup for a total of $15.4 billion and is in talks for a third accord.
Agibank has developed its own artificial-intelligence solutions for underwriting and analyzing credit. That, along with more than two decades of experience in lending, has helped it run lower rates of bad loans than competitors, according to Testa. About 3.3% of its loans were at least 90 days overdue, compared with about 6% on average for banks in Brazil, he said.
Its credit portfolio grew 53% in the first half of 2024. Testa said he expects full-year revenue to approach 7 billion reais.
About 80% of its 4,300 employees work at the "smart hubs," with the rest spread out between corporate roles and technology and products at Agibank's campus outside Campinas. The location, about 59 miles from Sao Paulo, allows the company to tap engineering talent from nearby universities and lure executives away from the megacity's infamous gridlock.
"We're managing to attract a lot of experienced executives from Sao Paulo who want a better quality of life," Testa said. "Our thesis is working."
