Mastercard sees spending return as economies open after coronavirus gloom

[NEW YORK] Mastercard said it expects consumer spending to gradually return to "pre-Covid" levels as people start using their cards again on clothing and domestic travel with countries easing lockdown measures that have brought the world to a standstill.

The world's second-largest payment processor on Wednesday reported better-than-expected first-quarter earnings and said it has started seeing early signs of spending levels stabilising.

The novel coronavirus pandemic has shut down large parts of the global retail industry as stores remain shut and shoppers stay at home to avoid catching the highly contagious illness.

The outbreak has also hammered the global economy, pushing companies to layoff employees by the millions. That, in turn, could weigh on credit card issuers as more people default on their payments.

"We believe we are currently in the stabilisation phase in most markets. The next phase is normalisation, where governments gradually relax mitigation practices," Mastercard's Chief Executive Officer Ajay Banga said on a post-earnings call.

Sectors such as mass entertainment and long-haul travel will probably take longer to normalise than sectors with pent-up demand such as home improvement and healthcare, said Mr Banga.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Mastercard said spending in the third week of April improved across all regions, helped in part by the fiscal and monetary stimulus provided to economies floored by the pandemic.

Instilling caution, however, Mastercard said it would temporarily suspend its 2020 share repurchase.

Shares of the world's second-largest payment processor were up 6.3 per cent at $281.23 in late morning trade.

The company also reported a 40 per cent growth in contactless transactions worldwide in the quarter, saying recent consumer insights show these spending habits will last beyond the pandemic.

"I don't have a crystal ball ... But I do think we will see certain trends will stand out. The world will be more digital and the secular shift to electronic payments will accelerate," Mr Banga said.

Mastercard's net income fell to US$1.7 billion, or US$1.68 per share, in the first quarter ended March 31 from US$1.9 billion, or US$1.80 per share, a year earlier, hurt by a rise in losses on equity investments and other costs.

On an adjusted basis it earned US$1.83 per share, beating analysts' estimates of US$1.73 per share according to Refinitiv IBES. 

REUTERS