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Robust consumer spending boosts Visa's second quarter results
Robust consumer demand boosts Visa's second-quarter results, Robinhood hires UK CEO ahead of a planned launch in the country, and LendingClub will report its earnings after the market close
Visa’s earnings demonstrated that consumers, both in the US and internationally, are fine and keep spending, so, perhaps, the recent market rally has some legs to it. This spending can, of course, be fueled by borrowing, but this is not a bad thing for Fintech lenders. More on that in today’s newsletter:
Robust consumer spending boosts Visa's second-quarter results,
Robinhood hires UK CEO ahead of the planned launch in the country, and
LendingClub will report its earnings after the market close
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Consumer Spending Boosts Visa's Second Quarter Results
Visa (NYSE: V) reported stronger-than-expected card-spending growth in the second quarter (fiscal third quarter), with payments volume rising 7.7% YoY to $3.17 trillion, surpassing analysts' estimates of $3.14 trillion. The increased spending was attributed to robust consumer demand for travel and dining out. The company's revenue rose 12% YoY to $8.1 billion, and adjusted net income increased 7% YoY to $4.5 billion, or $2.16 a share. “Consumer spending remained resilient, driving growth in payments volume and processed transactions,” commented Visa’s CEO, Ryan McInerney, on the company’s results.
Despite concerns about a slowdown and the potential impact of exchange rate fluctuations, Visa’s management remains optimistic about the company’s performance. Thus, the company expects the fourth fiscal quarter (third calendar quarter of 2023) net revenue growth of around 10%, as well as “low double-digit net revenue growth and mid-teens EPS growth” for the full fiscal year. Visa stock (+15.24% YTD) has underperformed both, the S&P 500 Index (+18.96% YTD) and its rival Mastercard (+15.94% YTD), this year. Mastercard will report its second-quarter earnings on Thursday.
Robinhood Hires UK CEO
Robinhood (NASDAQ: HOOD), has appointed Jordan Dane Sinclair as the new CEO of its UK entity, Bloomberg reported yesterday. The UK's Financial Conduct Authority has approved his appointment, and Robinhood plans to launch its brokerage services to individual UK retail investors later this year. Sinclair previously served as a Managing director for Europe at Freetrade, another local retail stock-trading app, and as a Director for Group Strategy and Corporate Development at Barclays. The company is also looking for UK-based regulatory experts and operations lead with experience in securities and brokerage, according to the job listings on its website.
Robinhood initially tried to enter the UK market in 2020, and more recently in 2022, through an acquisition attempt of London-based crypto trading firm Ziglu, which was later scrapped. The UK market has traditionally been challenging for US stock-trading apps due to competition from established players and new challengers like Freetrade, Lightyear, and Revolut. Nevertheless, Robinhood’s rival, the investing platform Public.com, is also launching its offering in the UK, allowing retail investors to trade more than 5,000 stocks and access research and data services. Robinhood reported having 23.1 funded accounts in its first quarter 2023 filing.
LendingClub to Report Second Quarter Results
LendingClub (NYSE: LC) will report its second-quarter results today after the market close setting the stage for other consumer lenders such as SoFi (NASDAQ: SOFI) and Upstart (NASDAQ: UPST). In the first quarter of 2023, the company reported a 29% YoY decline in loan originations on weaker demand from institutional investors for its loans and tighter credit underwriting standards. Revenue declined by 15% YoY to $245 million, and the company posted a Net income of $13.7 million, compared to a Net income of $40.8 million a year ago. LendingClub guided for $1.9 - 2.1 billion in originations in the second quarter of 2023.
LendingClub’s stock has underperformed the Nasdaq Composite index and its peers. Thus, while LendingClub shares are up 15% YTD, Upstart’s shares gained 376% YTD and SoFi shares gained 102% YTD. Upstart’s stock has benefited from the company securing long-term funding commitments, while SoFi gained on the student loan repayment moratorium finally coming to its end. Nevertheless, second-quarter origination volumes will reveal if any of those events translated into financial results or improved guidance. In the first quarter, Upstart reported a 78% YoY decline in origination volume, while SoFi’s origination volumes increased by 7% YoY.
I was trying to understand why Mastercard (NYSE: MA) massively outperformed Visa (NYSE: V) stock (+621% vs. 448%) over the last ten years, and discovered that Mastercard delivered a mean Return on Equity of 91%! Mastercard uses leverage more aggressively than Visa, so its Debt-to-Equity ratio was 233% in the first quarter of this year, compared to just 65% for Visa. In any case, this is truly impressive!
🇺🇸 New York, NY, United States
🇺🇸 San Francisco, CA, United States
🇬🇧 London, United Kingdom
🇬🇧 London, United Kingdom
Fair Lending Program Director
🇺🇸 Multiple locations, United States
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Cover image source: Visa
Disclaimer: Information contained in this newsletter is intended for educational and informational purposes only and should not be considered financial advice. You should do your own research or seek professional advice before making any investment decisions.