Amex, Visa and Mastercard hit hard by subdued international travel

Summary

  • Recent earnings of Amex, Visa and Mastercard depict the pain wrought by the pandemic.
  • Cross border volumes, international transactions, and overall billing continue to be lower.

International travel continues to be one of the areas suppressed by pandemic implications. Although international travel has resumed in channels, the return to pre-pandemic levels is far. 

In the light of rising infections in Europe, countries are embracing lockdowns again. As a result, it is highly likely that domestic travel would be impacted. The results of Amex, Visa, and Mastercard also show the implications of a halt in cross border people movement. 

Visa, Inc. 

Last week, Visa reported Q4 and full-year results for the period ending on 30 September 2020. Although for many countries there has been positive domestic spending growth in the last quarter, cross-border spending remains depressed due to lacklustre travel spending. 

Net revenues for the quarter were US$5.1 billion down 17% compared to the same period last year, and full-year revenues were down by 5% to US$21.8 billion. 

Source: VISA Q4, Full-Year Presentation, dated 28 October 2020

Source: VISA Q4, Full-Year Presentation, dated 28 October 2020

GAAP-based net income for the quarter was down by 29% to US$2.1 billion, and full-year net income was down 10% to US$10.9 billion. Payment volume was up 4% in Q4 and 2% for the full year. Cross border volume declined 29% and 16% for the quarter and full year, respectively. 

Visa also announced a definitive agreement to acquire YellowPepper. The management believes that the transaction would improve adoption of its ‘network of networks’ strategy in the Caribbean and Latin America. 

During the quarter, the company spent US$1.6 billion to repurchase 8.2 million shares of class A common stock. For the year ended September 2020, Visa’ share buyback saw spending of US$8.1 billion. 

Mastercard Incorporated

Mastercard released Q3 results for the period ending on 30 September 2020 last week. Chief Executive Ajay Banga said that domestic spending had shown encouraging progress, but travel spending remained challenging. 

He also updated that Mastercard is making progress in digital solutions, multi-rail capabilities, and differentiated service offerings. 

Net revenue for the quarter was US$3.8 billion against US$4.5 billion in the previous corresponding period.

Operating income for the period was US$2.1 billion down by 21% compared to pcp. Net income for the quarter was down by 28% to US$1.5 billion from US$2.1 billion. 

Source: Mastercard 3Q Earnings Presentation, dated 28 October 2020

Source: Mastercard 3Q Earnings Presentation, dated 28 October 2020

In Q3, net revenue decreased by 14% compared to the same period last year. This result was largely driven by a decline of 36% in cross-border volume (local currency terms). Net revenue was supported by gross dollar volume growth, switched transaction growth, and other revenue growth. 

During the third quarter, the company paid US$402 million in dividends and repurchased 6.5 million shares. At the end of September 2020, it had issued 2.7 billion Mastercard and Maestro-branded cards. 

American Express Company

On 23 October 2020, the company released third-quarter results for the period ending on 30 September 2020. Chief Executive Stephen J. Squeri noted that though business continues to be impacted by the pandemic significantly, third-quarter results have cemented the confidence on the strategy to manage the crisis. 

Source: AXP Q3 Earnings Presentation, dated 23 October 2020

Source: AXP Q3 Earnings Presentation, dated 23 October 2020

In Q3, total revenues net of interest expense declined by 20% to US$8.8 billion from US$11 billion in the previous year. Consolidate provision for credit losses were US$665 million, down by 24% from US$879 million in the same period the previous year. 

Consolidated expenses for the quarter were US$6.7 billion, down by 14% from the previous corresponding period. This decline was driven by lower customer engagement costs and lower usage of travel-related benefits.

Net income for the quarter was US$1.07 billion compared to $1.75 billion in the previous corresponding period. 

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