Quarterly profit rises 28% at Visa
Use of credit, debit cards is growing
NEW YORK - Visa Inc., the world's largest credit-card network, said profit rose 28 percent in its first earnings report since its record $19 billion initial public offering last month.
Net income climbed to $314 million, or 39 cents a share, in the quarter ended March 31, from $246 million a year earlier, the San Francisco company said. Adjusted net income was 52 cents a share, beating the 45-cent average estimate of 16 analysts surveyed by Bloomberg.
Visa has advanced about 72 percent in the six weeks since its IPO as investors clamor for the company handling the most credit and debit transactions.
Visa and number two-ranked MasterCard Inc., which has surged 520 percent since its 2006 IPO, are benefiting from consumers' increasing preference for using plastic over cash and checks.
"The consumer is still spending and perhaps continues to move an even greater portion of their everyday purchases onto cards," Christopher Mammone, an analyst at Deutsche Bank AG, said in a research note. He rates Visa a "buy."
The results were released after the close of regular US markets.
Visa's IPO raised $17.9 billion on March 18, the most for a US company, and the tally passed $19 billion after more shares were sold to satisfy demand. It was the world's second-largest public offering, after the Industrial & Commercial Bank of China Ltd.'s $22 billion debut in 2006.
The move completed the transformation of Visa and MasterCard from not-for-profit associations owned by banks to independent companies that serve banks as customers. Visa's six biggest bank owners made at least $3.17 billion from selling part of their stakes, according to data compiled by Bloomberg.
Unlike rivals American Express Co. and Discover Financial Services, Visa and MasterCard are insulated from rising US defaults because they don't make loans to cardholders. MasterCard has more than doubled in trading in the past year, while American Express dropped 23 percent and Discover 34 percent.
First-quarter results from credit-card lenders show consumer defaults and overdue payments are rising as the US economy slows. Capital One Financial Corp., the McLean, Va.-based card issuer, said its outlook worsened as $6.7 billion of loan losses were expected in the year through March 2009.
Moody's Investors Service has a negative outlook on credit-card lenders as defaults "will most certainly" rise this year. Stressed consumers are tapping plastic as access to home-equity loans falls off, New York-based Moody's said in a Feb. 1 report.
Visa set aside $3 billion from the IPO to cover future legal settlements. The network and its bank customers agreed last year to pay $2.25 billion to settle an American Express Co. suit alleging that Visa stifled competition by preventing banks from offering rival cards.
Visa faces similar allegations brought by Discover Financial Services.
Visa also faces about 50 suits in the United States from merchants alleging it unfairly sets fees that increase costs for consumers. The so-called interchange fees set by Visa are paid by retailers and shared between the banks of the merchant and cardholder.
Consumers will use credit and debit cards for 55 percent of all US transactions by 2011, rising from 40 percent in 2005, according to the Nilson Report, an industry newsletter.
