Visa Profit Tops Estimates as Customer Card Spending Climbs

  • Net income drops 76% to $412 million on Visa Europe purchase
  • Revenue increases 3.3% to $3.63 billion, matching estimates

Visa Inc., the world’s largest payments network, posted fiscal third-quarter profit that beat analysts’ estimates as customer card spending accelerated. The company said it will buy back as much as $5 billion of its shares.

Net income for the period ended June 30 dropped 76 percent to $412 million, or 17 cents a share, from $1.7 billion, or 69 cents, a year earlier, the San Francisco-based company said Thursday in a statement. Adjusted profit, which excludes one-time items such as costs tied to its purchase of Visa Europe, was 69 cents a share. The average estimate of 33 analysts surveyed by Bloomberg was 67 cents.

“While little has changed in the global economic environment, and cross-border commerce continues to be challenged by a strong U.S. dollar, domestic consumer spend across the globe remains strong and resilient,” Chief Executive Officer Charlie Scharf, 51, said in the statement.

Visa has been pursuing co-brand deals with merchants as it seeks to boost fees and accelerate customer spending. The company replaced American Express Co. as the exclusive card network accepted by Costco Wholesale Corp. at its U.S. stores in June, a deal that gave Visa and Citigroup Inc. 11 million new cardholders.

PayPal Agreement

Revenue in the quarter climbed 3.2 percent to $3.63 billion, in line with analysts’ estimates. Operating expenses rose 155 percent to $3.2 billion, fueled by costs related to the Visa Europe deal. Payments volume advanced 10 percent to $1.35 trillion adjusted for currency fluctuations, while cross-border volume, a measure of spending abroad, climbed 5 percent, the company said. Total processed transactions climbed 10 percent to 19.8 billion.

Also on Thursday, Visa reached a deal with PayPal Holdings Inc. over fees and data-sharing, according to a separate statement. Under the agreement, PayPal won’t encourage Visa cardholders to link their PayPal accounts with a bank account. Visa executives had complained the practice, known as steering, allowed PayPal to process those payments via the cheaper, bank-owned automated clearing house network, cutting Visa out of transactions. 

PayPal also said it will provide better data about its transactions to banks that issue the cards, while Visa agreed to offer PayPal incentives on some purchases.

Visa Europe

Visa completed its 16.5 billion euro ($18.2 billion) purchase of Visa Europe in the third-quarter, bringing the two firms together after eight years as separate companies. The deal is part of Scharf’s strategy to increase the company’s presence in the region and improve Visa’s global digital offerings to better compete against smaller rival Mastercard Inc.

Visa shares rose 6 cents to $78.85 at 4:25 p.m. in extended trading in New York. The shares gained 1.6 percent this year through the close of regular trading, compared with the 4.4 increase of the S&P 500 Financials Index.

AmEx, the biggest U.S. credit-card issuer by purchases, said Wednesday that second-quarter profit rose 37 percent to $2.01 billion as customers increased spending and the company booked a $1 billion gain from the sale of its Costco portfolio. Discover Financial Services on Tuesday posted a 3 percent increase in net income to $616 million on gains in personal lending. Mastercard, the second-largest payments networks, is scheduled to report results July 28.

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