Credit Card Companies: With the economic recovery, Visa and MasterCard businesses have seen a strong resurgence. Several factors are ensuring that operations and stocks continue to improve. by egmund hadtow
nThe Olympic Games in Tokyo run until 8 August. While the sharp rise in the number of infections has faced resistance from many Japanese, credit card providers are using Visa Sponsor games to advertise your own cause with athletes like 23-year-old competitive swimmer Florian Wellbrock. “I pay Visa,” the company said. CEO Al Kelly wants to add to this and boost an already thriving business with higher overall marketing spend. Hence, the record run of the stock should continue despite profit-booking after the presentation of the figures.
There are a total of about 3.6 billion Visa cards in circulation, of which about 70 percent are debit and the rest credit cards. All of these have been used vigorously recently. So the group grew sales by 27 percent to $6.13 billion in the third quarter of fiscal year 2020/21 that ended in June. This contributed to the fact that the amount of payments increased by 34 percent to $2.72 trillion.
As the travel business grew significantly in many countries after easing, the amount of payments in cross-border use increased by 47 percent after adjusting for currency effects. This metric is very important because such transactions are particularly attractive to Visa. Operating profit increased 36 percent to $4.1 billion, corresponding to a margin of 66.3 percent. CFO Vasant Prabhu used it to buy back shares for $2.2 billion and pay out nearly $700 million in dividends.
More topics, strategies, tips and recommendations from the pros every week. Subscribe to BÖRSE online now!
While presenting the figures, Prabhu was confident even though he did not give a forecast for the full year due to the uncertainty caused by the pandemic. It is true that cryptocurrency purchases by Visa customers, which increased after stimulus checks were sent to the US in April and May, reversed in June. “In all of our American business, we are practically back where we were, as if the pandemic never happened,” Prabhu said. “The only area of our business that is not at the previous level is cross-border travel. This is the next phase of recovery.” Easing in Great Britain and Canada should contribute to this. The acquisitions provide additional tailwinds. At the end of June, Visa acquired Swedish fintech Tink for 1.8 billion euros. Banks and start-ups use Tink’s open banking platform to access financial data of customers of more than 3,400 financial institutions. At the end of July, the credit card provider then bought CurrencyCloud for 700 million pounds (822.6 million euros). The London-based company is a technology provider for cross-border payments.
High inflation in many countries is also encouraging trade. For example, consumer prices in the US rose 5.4 percent in June. Many experts expect inflation to remain at similarly high levels in the coming months, especially as the US Federal Reserve continues to print money. The European Central Bank (ECB) back in the Fed’s course after a recent strategy review: European monetary officials want inflation to rise further in the next few years. In the medium and long term, Visa should also benefit from the fact that e-commerce is growing rapidly. In brick-and-mortar retail, there should be a significant increase in debit and credit card payments at the expense of cash. We are increasing the course target for Visa.
Company’s good numbers go smoothly with competitors American Express who also reported great results for the card business. However, this only accounts for 12.5 percent of the group’s sales. In addition, there are risks in the event of a payment default with the American Express card. Unlike Visa and Competitor MasterCard: These only forward payments. You have a different business model. Business at Mastercard is also thriving, which is why the stock is at record highs. The company has 2.85 billion cards in circulation, of which 85.8 percent are credit cards. Sales in the second quarter rose 36 percent to $4.53 billion. Payment volume increased by 33 percent after adjusting for currency effects at $1.9 trillion. MasterCard benefited greatly from cross-border use of cards, with volume increasing by 58 percent after adjusting for currency effects. Environment made the tillage ring, operating profit rose to $2.34 billion — in line with a margin of 51.7 percent.
hope for more wanderers
“We delivered solid growth in sales and profit this quarter,” said CEO Michael Miback. He also returned $1.7 billion to shareholders through share buybacks. Added to this was $434 million in dividends. Maybach, like its visa ally Prabhu, expects more impulses from the tourism sector. “The international travel business is only in the early stages of recovery and offers additional upside potential,” Mibach said.
Mastercard acquired US company Unity in early June for $850 million. With solutions for identity verification and technology for machine learning in combination with Mastercard’s information for fraud prevention, the new subsidiary helps customers such as retailers, financial companies and travel companies interact securely online. The transaction is expected to have a negative impact on the profitability of the mother for a maximum of two years, but will then boost it further.
Visa and Mastercard stocks remain promising. Both companies shine with excellent margins and, according to analysts’ concurrence, should see a sharp rise in profits this year and next.
at a glance
winning advance Plastic money was only briefly interrupted by the pandemic. Meanwhile he walks at full speed. Although Visa was replaced in 2015 by China UnionPay as the world’s largest card provider, Visa is clearly number one in the rest of the world ahead of MasterCard. The outlook for the sector is strong.
Image Source: BÖRSE ONLINE, BÖRSE ONLINE
Organizer. Zombie aficionado. Wannabe reader. Passionate writer. Twitter lover. Music scholar. Web expert.