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Resilient consumer spending lifts Mastercard earnings
Fintech Headlines for April 27, 2023: Mastercard beats earnings expectations on resilient consumer spending, tensions between Coinbase and the SEC escalate, and FIS provides an update on Worldpay spin-off
U.S. GDP rose at an annualized rate of 1.1% in Q1 2023, reported the Bureau of Economic Analysis yesterday. GDP growth was well below the 2.0% estimate, which suggests that the Federal Reserve’s strategy of hiking rates is working and the economy is cooling down. Either that or strong earnings from the Big Tech companies, made the market rally yesterday. It was an interesting day in the Fintech world as well:
Mastercard earnings got a lift from resilient consumer spending in the U.S. and internationally,
Tensions between Coinbase and the Securities and Exchange Commission continued to escalate, and
FIS raised the full-year earnings guidance, as well as provided an update on the Worldpay spin-off
Resilient Consumer Spending Lifts Mastercard Earnings
Mastercard’s (NYSE: MA) first quarter 2023 earnings exceeded expectations as consumer financial health continued to be strong both in the United States and Internationally. Purchase volume increased by 12.3% YoY (and 17.0% YoY on a currency-neutral basis) to $1.71 trillion. International debit card purchase volume rose by 28.7% YoY on a currency-neutral basis, compared to just 3.7% YoY growth in the U.S. Credit card purchase volume rose by 17.3% internationally and 14.3% in the U.S. Cross-border volume increased by 29% YoY (or 35% YoY on a currency-neutral basis).
Mastercard's GAAP revenue rose by 11% YoY to $5.7 billion, while diluted earnings per share declined by 8% YoY to $2.47. On an adjusted basis, revenue rose by 12% YoY to $5.7 billion, and diluted earnings per share increased by 1% YoY to $2.80. “We delivered strong revenue and earnings growth this quarter, reflecting resilient consumer spending and the continued recovery of cross-border travel, “ commented Michael Miebach, Mastercard CEO, in the company’s earnings release. Visa reported its results on Tuesday, also beating earnings expectations on strong payment volume growth.
Data source: Operational Performance Data, Mastercard
Tensions Between Coinbase and SEC Continue to Escalate
Tensions between Coinbase (NASDAQ: COIN) and the Securities and Exchange Commission continue to escalate. Coinbase has issued a response to the Wells notice received from the SEC. As a reminder, in March, Coinbase received a formal notification from the agency about its intentions to sue the company over listing crypto assets, which the SEC considers to be unregistered securities. In its response, Coinbase argued that it has not broken any securities laws, does not list securities, and is prepared to go to court to defend its position.
Earlier in the week, the SEC Chairman, Gary Gensler, emphasized that the law is clear for cryptocurrency exchanges, indicating that they should register with the agency if they want to operate legally. In a video posted on Twitter, Gensler highlighted that many digital assets are securities and fall under the SEC's purview. He added that exchanges must comply with investor protection requirements, including disclosure and transparency. Besides registration with the agency, the existing securities laws require a separation between a broker and an exchange.
✔️ Coinbase responds to the SEC’s Wells notice
✔️ SEC’s Gensler says ‘the law is clear’ for crypto exchanges and that they must comply with regulators
✔️ Coinbase Warns SEC It Will ‘Exhaust All Avenues’ If Sued
✔️ Coinbase rejects U.S. regulator's claim it broke rules on crypto
✔️ Coinbase offers a fiery response to the SEC’s threat of enforcement action
FIS Raises Full-Year Earnings Guidance, Progresses Towards Worldpay Spin-Off
FIS (NYSE: FIS) reported its Q1 2023 results topping analysts’ expectations and its own guidance. Thus, GAAP revenue increased by 1% YoY to $3.51 billion, driven by growth in the Banking Solutions and Capital Market Solutions segments. Revenue from the Merchant Solution segment declined by 1% YoY to $1.11 billion despite the 7% YoY growth in transaction volume. The company reported GAAP diluted earnings per share of $0.24, up 20% from a year ago, and adjusted diluted earnings per share of $1.29, down 12% from a year ago. FIS raised its full-year guidance to $14.3 - 14.5 billion in revenue, and $5.76 - $6.06 in adjusted EPS.
The company also provided a brief update on the planned spin-off of its Merchant business, Worldpay. Thus, FIS’ management reported strong progress on separating commercial agreements between the two legal entities and securing regulatory approvals, as well as reiterated the intention to complete the transaction in early 2024. “We are very pleased with our strong start to the year, surpassing our financial targets for the first quarter, raising our full-year guidance and making meaningful progress with our previously announced spin-off of our Merchant business,” commented FIS CEO and President, Stephanie Ferris, in the company’s earnings release.
Image source: First Quarter 2023 Earnings Call Presentation, FIS
Chart of the Day
Mastercard crossed the 2 billion cards in circulation mark in Q4 2018 and is rapidly marching towards the next milestone of 3 billion cards. The company reported 2.79 billion cards at the end of Q1 2023, so, at the current growth rate, we should expect it to reach the 3 billion cards mark in early 2024.
Data source: Operational Performance Data, Mastercard
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Cover image source: Mastercard
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