MasterCard Inc. (MA) expects U.S. tensions with Russia to have a “small impact” on this year’s earnings, while the longer-term effects are uncertain, according to Chief Executive Officer Ajay Banga.
“The whole Russia situation is all very serious, both at a geopolitical level and in our own small way,” Banga said today on a conference call after the Purchase, New York-based firm reported first-quarter profit that topped analysts’ estimates. “I don’t think this is a saber-rattling situation any longer.”
Payment companies including MasterCard and Visa Inc. are dealing with the fallout from sanctions imposed by the U.S. after Russia invaded neighboring Ukraine. Visa said last week that the prohibitions may trim “several pennies” from 2014 earnings, sending its stock tumbling. Banga said today that Russia represents about 2 percent of MasterCard’s total net revenue.
“By quantifying the exposure, it shows that it’s so small that investors should not be very concerned,” Christopher Donat, an analyst at Sandler O’Neill & Partners LP, said in a phone call. “It undid a lot of the damage done last week following Visa’s call and news of Russian legislation.”
MasterCard and Foster City, California-based Visa stopped processing payments at four Russian banks after the U.S. imposed sanctions. Russian President Vladimir Putin has responded by recommending that his country create its own payments system and change its laws. He has also said the two companies will lose market share.
An “overwhelming majority” of MasterCard’s Russian revenue comes from domestic customers, Banga said on the call, as compared to international travelers spending money there. “The situation is fluid, and it’s difficult for us to be certain numerically about the impact for 2015 and beyond,” Banga said.
Visa CEO Charlie Scharf will no longer attend an economic forum in Russia hosted by Putin later this month. The White House has been lobbying U.S. corporate leaders to cancel their attendance at the St. Petersburg event.
“We’re caught between the politics of the United States and the politics of Russia,” Scharf said last week during Visa’s earnings conference call.
MasterCard rose as much as 4.3 percent today in New York after reporting first-quarter profit climbed 14 percent to $870 million, or 73 cents a share, from a year earlier. The shares gained 0.9 percent to $74.22 at 4:01 p.m., trimming this year’s decline to 11 percent.
The company saw an increase in global consumer spending, including gains in regions including Latin America, Asia and the U.S. Revenue increased 14 percent $2.18 billion, the company said, topping the $2.14 billion average estimate of analysts in the Bloomberg survey. Operating expenses rose 12 percent to $892 million as the company spent more on advertising and marketing, the company said.
Visa Inc. (V) said April 24 that first-quarter profit increased 26 percent to $1.6 billion as revenue gains missed expectations.
American Express Co., the biggest U.S. credit-card issuer by purchases, said last month that quarterly net income rose 12 percent to $1.43 billion, exceeding analysts’ expectations. Discover Financial Services, based in Riverwoods, Illinois, reported April 22 that first-quarter profit slid 6.2 percent to $631 million.
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