Visa looks to soothe spending slowdown fears after tepid quarter

VISA on Tuesday (Jul 25) forecast annual results in line with Wall Street estimates and executives looked to allay fears of a spending slowdown, after the payments processor reported its smallest jump in quarterly profit in over two years.

Months of high inflation and rising borrowing costs are starting to weigh on the post-pandemic rebound in consumer spending, putting card companies on the defensive as customers rethink their travel plans and big-ticket purchases.

“The cross-border tailwind has started to slow. Consumer demand for travel remains strong, which we expect to continue albeit at a slower pace,” said Edward Jones analyst Logan Purk.

International transaction revenue at Visa climbed 14 per cent, lower than expectations of an 18 per cent growth.

“We continue to believe that the primary driver of the step-down in US payments volume growth since March is moderating inflation,” CFO Vasant Prabhu said.

A slowdown in inflation typically hurts credit card companies, which charge a percentage on the US dollar value of transactions.

Last week, American Express kept its full-year profit forecast unchanged despite reporting record spending in its quarterly report. Mastercard is scheduled to report quarterly earnings on Thursday.

“We will deliver low double-digit net revenue growth and mid-teens EPS growth in fiscal year ‘23 despite concerns about a slowdown and an exchange rate drag,” Prabhu said.

Analysts are expecting an 11 per cent revenue growth and a 14.6 per cent jump in earnings per share, according to Refinitiv IBES data.

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Excluding one-time costs, Visa posted a profit of US$2.16 per share for the three months ended Jun 30, up 7 per cent from a year ago and above expectations of US$2.12.

However, the single-digit percentage growth was the smallest since the second quarter of fiscal 2021, when profit had contracted.

Shares of the San Francisco, California-based company were down nearly 1 per cent in aftermarket trading. REUTERS