Visa Earnings Drop on Charges Tied to Europe Acquisition -- 3rd Update
July 21 2016 - 7:30PM
Dow Jones News
By Josh Beckerman
Visa Inc.'s quarterly earnings fell 76%, hurt by charges tied to
the acquisition of its European operations, while its revenue and
payments volume rose.
"While little has changed in the global economic environment,
and cross-border commerce continues to be challenged by a strong
U.S. dollar, domestic consumer spend across the globe remains
strong and resilient," Chief Executive Charlie Scharf said.
The credit-card issuer also added $5 billion to its stock
buyback plan and unveiled a digital payment alliance with PayPal
Holdings Inc. intended to make it easier for PayPal customers to
pay with Visa cards.
Like rival MasterCard Inc., Visa is a payments network that
processes credit-card and debit-card transactions. It doesn't set
interest rates on cards or charge fees to consumers.
Visa has stepped up its digital efforts as consumers migrate to
electronic payments. Visa and others have supported Apple Inc.'s
Apple Pay service, and Visa invested in mobile-payments startup
Square Inc.
Under Visa's deal with PayPal, consumers will be able to
instantly withdraw and move money from their PayPal and Venmo
accounts to their bank account via Visa debit cards. Furthermore,
PayPal won't encourage Visa cardholders to link their PayPal
account to a checking account.
The deal is expected to increase the number of transactions made
on Visa-branded cards.
In all, Visa reported a profit of $412 million, or 17 cents per
Class A share, for its fiscal third quarter ended June 30, down
from $1.7 billion, or 69 cents per Class A share, a year earlier.
Excluding one-time items related to its acquisition of Visa Europe
Ltd., earnings were 69 cents a share.
Revenue rose 3.2% to $3.63 billion, up 6% on a constant-dollar
basis, driven by improved payments volume.
Analysts polled by Thomson Reuters projected earnings of 66
cents a share on revenue of $3.65 billion.
Payment volume increased 10% on a constant-dollar basis to $1.3
trillion, while the number of processed transactions rose 10% to
19.8 billion.
"The consumer has remained remarkably steadfast in the face of
significant global instability," said Mr. Scharf.
Cross-border volume rose 5% on a constant-dollar basis.
Operating expenses, excluding items such as the Visa Europe
purchase, fell 7% to $1.17 billion, reflecting lower personnel and
marketing costs.
Visa purchased the European operations in June, a deal initially
valued at up to 21.2 billion euros ($23.4 billion) that was
designed to bring its global operations under one roof.
The company has been facing increasingly adversarial
relationships with retailers over issues including fees and the
transformation to chip cards in the U.S.
In June, a U.S. appeals court threw out a record-setting $7.25
billion antitrust settlement between Visa and MasterCard and
millions of retailers after determining that some merchants weren't
adequately represented.
Meanwhile, Wal-Mart Stores began blocking the use of Visa credit
cards at three Canadian stores this month in a fee dispute, while
another Wal-Mart conflict involves Visa's complaints that the
retailer secretly configured payment terminals so that only
personal identification numbers could be used.
Shares of the company, which reiterated its earnings and revenue
guidance for the year, about 0.2% in after-hours trading.
Robin Sidel contributed to this article.
Write to Josh Beckerman at josh.beckerman@wsj.com
(END) Dow Jones Newswires
July 21, 2016 19:15 ET (23:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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