Visa released its quarterly financial results yesterday. Compared to the same period last year, net revenue rose by 13 percent (to reach $6.1 billion) while net income rose 18 percent (to $3.3bn), which is no surprise with payment volumes up for credit and debit cards alike, both domestically and internationally. Growth is largely attributed to business drivers remaining strong : data processing revenue, for example, has grown by 16 percent (to $2.7bn), while service revenue and international transaction revenue also grew, by nine percent and 11 percent respectively. However, operating expenses jumped by 18 percent year-on-year, a hike largely attributable to a provision to cover the upcoming settlement of a long-running class action lawsuit concerning merchant fees ( MDL 1720 ) being brought against Visa and Mastercard. Additional personnel and marketing costs also contributed. "The network seems well prepared and able to weather rising operating costs with little impact to net income," noted Lorna Baek of Verisk Financial Research. "Visa overall has rounded out its fiscal year with growth in large client partnerships and a number of strategic acquisitions of emerging companies in the payments ecosystem."
Next week Mastercard releases its own quarterly report; American Express meanwhile has announced net income of $1.8bn for the quarter, six percent higher than the same period last year. The scheme credits higher spending by its cardholders, along with net interest income and card fees, for this performance and the even healthier rise (by eight percent to $11.0bn) in consolidated total revenues net of interest expense. However, the company said that "consolidated provisions for losses were $879 million, up eight percent from $817 million a year ago. The increase reflected slightly higher net write-offs and delinquencies. Consolidated expenses were $7.8 billion, up nine percent from $7.2 billion a year ago. The rise reflected, in part, growth in rewards and other customer engagement costs driven by increased Card Member spending and continued investments in cobrand partnerships."
According to Roger Hochschild, chief executive and president of Discover Financial Services, his company "had a strong third quarter, achieving key objectives for loan growth, margin expansion and credit performance, against the backdrop of continued stability in the consumer sector of the US economy." Discover's credit card loans stood at $74.0bn by quarter's end, a rise of seven percent over the number for this time last year. During the earnings call, the firm's chief financial officer noted that some 60 percent of the six percent increase in the company's overall loans could be attributed to new accounts.
Across the Atlantic, a £900m ($1.15bn) charge for compensation claims on mis-sold insurance led to a dip into the red of £8m for Royal Bank of Scotland's latest quarter. However, the claims were filed before an August deadline and are thus particular to the period. On an annualised basis, the value of personal advances and cards were up 10.5 percent and 2.5 percent respectively (gross in both cases). "Cards growth [was] supported by the re-entry to the 0% balance transfer market" in the second quarter, the bank's management noted in a statement, assuring investors of "strong customer volumes [for its] credit card proposition....with a net 61k joining in the last nine months". Once the largest bank in the world, RBS continues to make its way back to normality, although it remains 62 percent state-owned.
Sweden's Handelsbanken has announced that it is eliminating 800 jobs and also pulling out of Germany and Asia. Having steered clear of the money-laundering scandals which have ensnared Swedbank and Danske Bank, the bank's main challenges concern digitalisation and the modernisation of IT systems. But will such reforms undermine the bank's decentralised ethos, which passes decision-making to branch staff and managers? This is not a peripheral question for the firm, which once fired a chief executive for his centralising tendencies. In an interview two years ago, then-CEO Anders Bouvin, since retired, observed that "the board – when looking at particularly significant credits – can only approve decisions that are already approved locally. That way we're not enticing managers to cut corners. The goal is not product sales but satisfied customers."
To end, links to some other stories of interest this week...
Singapore: Monthly transactions in PayNow cross $1b mark
US: Capital One reports 3Q19 amid tech transformation
US: China wins with digital renminbi if Libra nixed, says Facebook
US: PayPal 3Q19 profit rises six percent
US: Revolut reveals Mastercard tie-up for debit card launch
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