MercadoLibre Inc., Latin America’s leading e-commerce and fintech giant, reported robust growth in its lending business in the third quarter of 2023. However, the aggressive expansion into credit strained profits, resulting in a significant drop in its stock price, Bloomberg reports. The company’s credit portfolio surged by 77% year-over-year to $6 billion, primarily due to a 172% increase in credit card lending. The necessary provisions set aside for this lending push contributed to a lower-than-expected net income of $397 million, missing Bloomberg analysts’ projections of $513 million.
Chief Financial Officer Martin de los Santos explained that the company undertook several major investments this quarter, including new logistics facilities to enhance e-commerce operations. MercadoLibre opened five new fulfilment centres in Brazil and one in Mexico. Revenue for the quarter matched expectations at $5.3 billion, though profit was impacted by the fintech expansion, according to de los Santos.
The company’s fintech arm, Mercado Pago, remains at the core of its strategy, handling payments, consumer lending, and offering high-yield deposit accounts. Monthly active users for Mercado Pago reached 56 million, contributing to a total payment volume of $50.7 billion. In e-commerce, which generates about 60% of the company’s revenue, gross merchandise value reached $12.9 billion, with substantial growth in Brazil and Mexico, where local currency sales rose by 34% and 27%, respectively.
De los Santos highlighted Argentina’s consumer recovery under recent economic policies, which has supported a rise in lending activity. Mexico has been a standout market, with MercadoLibre holding the largest fintech credit portfolio in the country, underscoring both user growth and asset management success.
Following these results, Bloomberg noted a sharp decline in MercadoLibre’s shares, which dropped as much as 12% in late trading before reducing losses to close down by 5.5% at $1,999.99.
