Mastercard

Mastercard Results Outpace Street As Cross-Border Volumes Top 21 Percent

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Credit and debit spend higher? For Mastercard the answer was a resounding yes, as the global consumer remains quick to buy with plastic, and online too. Cross-border volumes are healthy, to the tune of a positive 21 percent gain. CEO Ajay Banga delved into the micro behind the healthy macro environment and guided listeners on the conference call to the eventuality of a universal pay button.

Mastercard beat estimates on Wednesday (May 2) as the company showed results that reflected higher spending on both credit and debit cards through the first quarter, as well as cross-border volumes that surged by double digits.

The company said that worldwide gross dollar volume gained 14 percent to $1.4 trillion, and, as CFO Martina Hund-Mejean stated on the conference call with analysts, most regions saw double-digit growth.

The headline numbers showed earnings of $1.50 a share on an adjusted basis, easily outpacing the Street at $1.24. The net revenue number of $3.6 billion, up 31 percent year on year and 27 percent in constant currency terms, was better than the $3.3 billion consensus.

In the United States, gross dollar volume was up 10 percent, gaining a percent from last quarter. Within that number, credit was up 9 percent, and debit 12 percent. Internationally, volume growth was 16 percent, with tailwinds from Asia Pacific and Europe.

Of particular note was cross-border volume, which gained 21 percent as measured in local currency, and driven by Europe. That growth has moderated slightly through April 28 and stands at about 19 percent, said management.

In remarks made during the post-earnings conference call with analysts, Ajay Banga, CEO, said that excluding impacts of accounting changes and acquisitions, net revenue growth was up 20 percent year over year.

In terms of macro outlook, said the executive, the company continues to see growth but is eyeing the movement toward central banks to rein in fiscal stimulus.

Broken down by region, he continued, in North America, the environment is a healthy one where unemployment is low, while consumer confidence and retail spending are strong. Beyond U.S. borders, the environment is sanguine, with some retail spending growth in the U.K. (though Brexit remains a concern), marked by some deceleration. Latin America continues to show recovery.

“Most of the economies in Asia continue trending positively [with] more stable oil prices, and I think a number of government initiatives have driven some improvement in the Middle East and Africa region,” Banga told analysts. “If you put that together, we expect the global economy to remain positive absent any significant impact from geopolitics or trade risks.”

Later in the call, Hund-Mejean offered some color on the international front, remarking that “we’re seeing very solid spend in the U.K. domestically. We see solid double-digit cross-border growth outbound of the U.K. as well as inbound into the U.K.

“So, we’re seeing at the moment no clouds on the horizon, even though we are obviously worried about Brexit,” she continued. “We see very solid growth in Eastern Europe showing up. In Asia Pacific, what we’re really seeing is that Australia is coming back a little bit, and we’re also seeing some healthy growth, it’s like in the high single-digit rate, from a cross-border perspective in China,” she told analysts.

Expanding a bit on China, Banga reiterated recent corporate efforts, where Mastercard has applied in that country for a domestic license with a joint venture.

Against that solid macro backdrop, the double-digit transaction growth in both credit and debit was illustrated by management on the call.

Amid specific initiatives and partnerships, Banga called out the fact that Kroger is converting cards to Mastercard on the heels of its relationship, which was announced last year. In addition, he spotlighted Mastercard’s ongoing efforts with PayPal, where Mastercard is the exclusive network for the latter’s first consumer debit card in the United States, which lets customers access funds to shop online and withdraw cash globally at ATMs.

The company is making progress with Vocalink, he said, with RFPs out in the field. As illumination of the potential of faster payments, he offered the example of the PromptPay mobile system in Thailand, where the international payments function is underpinned by Vocalink. As of April of this year, said Banga, 14 million customers have signed up, with 170 million transactions logged cumulatively since January 2017, and $16 billion in business and consumer payments seen in the past six months.

Speaking broadly of digital inroads, said Banga, “You heard us recently announce our support of the EMVCo standards for simple and unified payments. When people shop online and in-app, they expect the same convenience and security that they have in store. And just like the single acceptance terminal in a physical store, we believe there should be one common checkout button in the digital world.” As many as 75 percent of cards from the company are enabled to be tokenized, he said.

Hund-Mejean said the company’s eCommerce business grew 25 percent year on year. She offered guidance on the remainder of 2018, where revenues should be in the high teens, percentage wise, as should organic growth. Cross-border growth may, she said “moderate somewhat” with a falloff in crypto wallet funding – to the tune of 1 percent impact seen in the fourth quarter and one percentage point in the first quarter.

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