Business

Friday May 1, 2009

Earnings at Visa beat forecasts


NEW YORK: Visa Inc posted better-than-expected quarterly earnings on Wednesday as the world’s largest credit-card network increased prices, slashed expenses and consumers used debit cards more.

Net income rose 70% to US$536mil for the second quarter ended March 31, compared with a profit of US$314mil a year earlier.

On an adjusted basis, reflecting a normalised tax rate, restructuring and purchase amortisations, quarterly net income rose 38% to US$553mil.

“What caught my attention most was the expense control they had. For instance, advertising falling from US$210mil to US$196mil. Their ability to cut costs in this environment is surprising,” said Ken Crawford, senior portfolio manager at Argent Capital Management.

“It speaks of the flexibility and profitability of card processor companies. MasterCard Inc reports on Friday (tomorrow) morning and it sets a stage,” Crawford said.

Adjusted operating expenses fell 5% to US$745mil, as the company cut personnel, advertising and marketing, as well as consulting fees, and administrative costs.

Net operating revenue rose 13% to US$1.6bil, while total processed transactions – which represent transactions processed by VisaNet – increased 6% to US$9.4bil.

Visa said payments volume fell 1% for the quarter ended Dec 31, which translated to revenue in the following quarter.

“The results turned out to be pretty good,” said Robert Dodd, an analyst at Morgan, Keenan & Co.

Visa is partially insulated from the credit crisis because it processes transactions rather than lends funds. However, the company has seen a slowdown in the growth of revenue and transaction volumes as battered consumers used their credit cards less.

Still, debt-burdened consumers have been increasing the use of their debit cards.

“The continued strength of debit is attributable in part to that product’s strong correlation with non-discretionary spend categories, which are holding up relatively well in the face of a tough economy,” chief financial officer Byron Pollitt said in a conference call with analysts.

“In fact, in the quarter ending December, for the first time in Visa’s history, US debit payment volumes eclipsed that of credit,” Pollitt added.

Payments volume fell 7% in credit in the United States to US$203bil, while debit volumes grew 5.5% to US$206bil. — Reuters


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