By Andrew R. Johnson
Visa Inc. (V) posted an 88% increase in profit in the fiscal
fourth quarter as the world's largest payments network handled more
transaction volume and experienced a tax-related benefit.
Visa, which last week announced long-time J.P. Morgan Chase
& Co. (JPM) executive Charles Scharf would succeed Joseph
Saunders as chief executive officer on Nov. 1, has benefited from
consumers' shift to electronic payments from cash and checks.
However, growth has slowed in recent quarters as new debit-card
rules have given its competitors an edge and economic conditions
domestically and abroad remain cloudy.
The Foster City, Calif.-based company said Wednesday it earned
$1.66 billion, or $2.47 per share, up from $880 million, or $1.27
per share, a year earlier. On an adjusted basis, the company earned
$1 billion, or $1.54 per share, though that excludes the reversal
of previously recorded tax reserves that had increased net income
by $627 million.
Operating revenue increased 14.6% to $2.73 billion.
The adjusted earnings results beat the average estimates of
analysts, who were expecting the company to earn $1.50 per share on
$2.68 billion of revenue.
MasterCard Inc. (MA), Visa's biggest competitor, earlier
Wednesday reported results that beat analysts' earnings estimates
but missed revenue expectations, noting payments-volume and
transaction growth slowed further in the most recent quarter.
"Visa delivered strong financial performance for the fourth
quarter and full year, a result of our focus on growing our core
business, accelerating expansion of our business outside the U.S.
and investing in next-generation technologies that will define the
future of payments," Mr. Saunders said in a statement.
Visa said it processed 14 billion transactions in the quarter,
up 2% from a year earlier. The dollar volume of payments made by
cardholders increased 6% on a constant-dollar basis to $1 trillion.
That compares to a 1% increase in transactions in the previous
quarter and a 6% increase in payments volume.
The company also said its board of directors authorized a new
$1.5 billion share-repurchase program for Class A shares, which
will be in place through October 2013.
The company is angling to grow its business outside the U.S.,
and has set a goal of deriving more than half its revenue from
international markets by 2015, which has become a bigger focus as
new rules have taken a bite out of Visa's business in the U.S. Mr.
Scharf, who previously ran J.P. Morgan's retail banking operations
for several years, is expected to continue that focus once he
assumes the CEO role, which has been held by Mr. Saunders since
2007.
Mr. Saunders plans to stay with the company as executive
chairman until his contract expires in March.
Visa and MasterCard don't lend or issue cards to consumers;
rather they operate networks that process transactions for banks
that issue cards and those that work with merchants.
The company updated its guidance for fiscal 2013, projecting
adjusted annual earnings per share in the high teens and annual net
revenue growth in the low double digits.
It previously had forecasted adjusted annual earnings per share
in the low twenties and annual net revenue growth in the low double
digits for fiscal 2012.
Visa's business has been hit by new rules over how debit-card
transactions are processed. The Durbin amendment, a provision of
2010's Dodd-Frank financial overhaul law, required banks that issue
debit cards to include multiple processing networks on their cards
as of April 1. In the past, many of Visa's clients had exclusive
relationships with the company, meaning all their transactions
flowed over its network. Banks that had those agreements, such as
Bank of America Corp. (BAC), have since had to add additional
processing networks to their debit cards to comply with the
rules.
For the fiscal third quarter, Visa reported a 9% decline in its
debit-payments volume in the U.S., calling it the "trough" for U.S.
debit declines.
The rule has given a leg up to competitors, including MasterCard
and smaller debit-processing networks such as STAR, NYCE and Pulse,
which is owned by Discover Financial Services (DFS).
MasterCard on Wednesday attributed half of its 24% increase in
processed transactions during the most recent quarter to new debit
wins resulting from the rules.
To protect its turf as the industry's largest processor of
debit-card transactions, Visa rolled out a new pricing strategy
intended to entice merchants' business. Part of the move includes
making increased incentive payments to merchants.
Visa disclosed in May that the U.S. Justice Department was
probing the strategy for potential anticompetition violations,
though analysts recently said Visa appears to be ramping up its
program, according to their industry checks.
Visa shares were up 1.3% at $140.58 after hours Wednesday.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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