First-quarter payment network profits among the global U.S.-based Major 4: Visa [V], Mastercard [MA], American Express [AXP] and Discover [DFS], rose 11.2% year-on-year (YOY), and now growing at an 11.03% CAGR, based on the past five years.
The Major 4 reported a combined first-quarter (1Q/19) (after tax) profit of $7115 million, compared to $6573 million for 4Q/18 and $6397 million for 1Q/18, according to data collected by CardData.
While, the Major 4 posted a 68.3% YOY gain in 2017, an 18.6% decline in 2016 and 0.3% decrease in 2015, the figures are skewed by the merger of Visa and Visa Europe in 2016. Nevertheless, it is fair to say major payment network after-tax profits are growing an annual rate of 11%, according to analysis by Senior Analyst, Robert McKinley.
Major 4 Payment Network Profits/Loss
Visa’s global after-tax net income increased by 14.3% YOY to $2977 million for 1Q/19, compared to $2977 million for the prior quarter, and $2605 million one-year ago. Visa profits are currently growing a 17.72% CAGR. In the first-quarter of 2015, Visa reported $1550 million in after-profits.
Mastercard’s global after-tax net income rose 24.8% YOY to $1862 million for the first-quarter, compared to $899 million for 4Q/18, and $1492 million for 1Q/18. Mastercard profits are currently growing a 16.24% CAGR. In the first-quarter of 2015, Mastercard reported $1020 million in after-profits.
American Express global after-tax net income slipped 5.1% YOY for 1Q/19 to $1550 million for 1Q/19, from $2010 million for the prior quarter, and a $1634 million for the year ago quarter. American Express profits are currently growing a 0.41% CAGR. In the first-quarter of 2015, American Express reported $1525 million in after-profits.
Discover global after-tax net income increased 9.0% YOY to $720 million for the first-quarter, compared to $687 million in 4Q/18, and $666 million for 1Q/18. Discover profits are currently growing a 5.50% CAGR. In the first-quarter of 2015, Discover reported $586 million in after-profits.
Global Major 4 Gross Dollar Volume
Global Payment Card GDV (Gross Dollar Volume) for Visa [V], Mastercard [MA], American Express [AXP] and Discover [DFS] payment cards (credit + debit) increased 8.2% globally YOY on a currency adjusted basis (FX) for the first-quarter (1Q/19), compared to 10.4% YOY FX in the prior quarter. On a nominal U.S. dollars basis (NFX), global, Major 4 Network GDV, for 1Q/19 edged up 2.4% YOY, compared to 5.8% for 4Q/18.
The Major 4 Networks posted $4595 billion in global GDV for 1Q/19, compared to a revised $4835 billion in the prior quarter and a revised $4489 billion for the year ago quarter, according to figures collected by CardData.
Visa Q1 Notes
Net income in the fiscal second quarter was $3.0 billion or $1.31 per share, increases of 14% and 17%, respectively, over prior year’s results. Exchange rate shifts versus the prior year negatively impacted earnings per share growth by approximately 1.5 percentage points. All references to earnings per share assume fully-diluted class A share count.
Net revenues in the fiscal second quarter were $5.5 billion, an increase of 8%, driven by continued growth in payments volume, cross-border volume and processed transactions. Exchange rate shifts versus the prior year negatively impacted reported net revenues growth by approximately 1.5 percentage points. The Company adopted the new revenue accounting standard effective October 1, 2018, which positively impacted reported net revenues growth by 0.8 percentage points.
Mastercard Q1 Notes
Mastercard’s first-quarter 2019 results, versus the year-ago period:
Net revenue increased 9% as reported, or 13% on a currency-neutral basis, driven by the impact of the following factors:
An increase in switched transactions of 17%.
A 12% increase in gross dollar volume, on a local currency basis, to $1.5 trillion.
An increase in cross-border volumes of 13% on a local currency basis.
These increases were partially offset by an increase in rebates and incentives, primarily due to new and renewed agreements and increased volumes.
Total operating expenses decreased 5%, or 2% on a currency-neutral basis. Excluding the impact of Special Items, adjusted operating expenses increased 2%, or 5% on a currency-neutral basis, primarily related to the company’s continued investments in strategic initiatives.
Other income (expense) was favorable versus the year ago period, primarily due to higher investment income driven by higher interest rates.
The effective tax rate for the first quarter of 2019 was 15.5%, versus 17.3% for the comparable period in 2018. Excluding Special Items, the adjusted effective tax rate for the first quarter of 2019 was 16.8%, versus 17.7% for the comparable period in 2018, primarily due to discrete benefits related to share-based payments.
As of March 31, 2019, the company’s customers had issued 2.5 billion Mastercard and Maestro-branded cards.
American Express Q1 Notes
First-quarter consolidated total revenues net of interest expense were $10.4 billion, up 7 percent from $9.7 billion a year ago. Excluding the impact of foreign exchange rates, adjusted revenues net of interest expense grew 9 percent.3 The increases were broad-based and reflected higher Card Member spending, loan volumes and fee income.
Consolidated provisions for losses were $809 million, up 4 percent from $775 million a year ago. The increase reflected continued growth in the loan and receivable portfolios and higher net lending write- offs, partially offset by a smaller reserve build compared to a year ago.
Consolidated expenses were $7.6 billion, up 11 percent from $6.9 billion a year ago. The increase reflected, in part, higher customer engagement costs. Operating expenses were up 10 percent from a year ago,4 primarily driven by the litigation-related charge.
The consolidated effective tax rate was 20.8 percent, down from 21.5 percent a year ago.
Discover Q1 Notes:
Direct Banking pretax income of $879 million increased by $68 million from the prior year driven by higher net interest income, partially offset by an increase in the provision for loan losses and higher operating expenses.
Total loans ended the quarter at $88.7 billion, up 7% compared to the prior year. Credit card loans ended the quarter at $70.8 billion, up 8% from the prior year. Personal loans increased $121 million, or 2%, from the prior year. Private student loans increased $230 million, or 2%, year-over-year, and grew $655 million, or 9%, excluding purchased student loans.
Net interest income increased $205 million, or 10%, from the prior year, driven by loan growth and net interest margin expansion. Net interest margin was 10.46%, up 23 basis points versus the prior year. Card yield was 13.42%, an increase of 57 basis points from the prior year as a result of increases in the prime rate, partially offset by a change in portfolio mix and higher interest charge-offs. Interest expense as a percent of total loans increased 59 basis points from the prior year, primarily as a result of higher market rates.
Other income decreased $22 million, or 6%, from the prior year, driven by higher promotional rewards cost.
The 30+ day delinquency rate for credit card loans was 2.45%, up 12 basis points from the prior year and 2 basis points from the prior quarter. The credit card net charge-off rate was 3.50%, up 18 basis points from the prior year and 27 basis points from the prior quarter. The student loan net charge-off rate, excluding PCI loans, was 0.79%, down 38 basis points from the prior year. The personal loans net charge-off rate of 4.53% increased by 50 basis points from the prior year. Net charge-off rates were generally higher because of the seasoning of recent years’ loan growth and supply-driven credit normalization.
Provision for loan losses of $809 million increased $58 million from the prior year due to higher net charge-offs, partially offset by a lower reserve build. The reserve build for the first quarter of 2019 was $94 million, compared to a reserve build of $116 million in the first quarter of 2018.
Expenses increased $57 million from the prior year primarily as a result of higher employee compensation and information processing expenses. Employee compensation increased as a result of higher average salaries. Information processing increased due to ongoing investments in infrastructure and analytic capabilities.
CardData Offers 80+ Reports, 400+ Charts, 4,000+ Data Points with Individual Reports Starting at $99 and Annual Subscriptions to All Reports Starting at $2495. New Clients or re-Establishing Clients Receive $500 Off Annual Subscription Rate Using Code: CF500 (expires 5/31/19)
Major 4 Global Payment Card Network After-Tax Income
1Q/15: $4681 million
1Q/16: $4667 million
1Q/17: $3800 million
1Q/18: $6397 million
1Q/19: $7114 million
Visa Global After-Tax Income
1Q/15: $1550 million
1Q/16: $1707 million
1Q/17: $ 430 million
1Q/18: $2605 million
1Q/19: $2977 million
Mastercard Global After-Tax Income
1Q/15: $1020 million
1Q/16: $ 959 million
1Q/17: $1081 million
1Q/18: $1492 million
1Q/19: $1862 million
American Express Global After-Tax Income
1Q/15: $1525 million
1Q/16: $1426 million
1Q/17: $1237 million
1Q/18: $1634 million
1Q/19: $1550 million
Discover Global After-Tax Income
1Q/15: $586 million
1Q/16: $575 million
1Q/17: $564 million
1Q/18: $666 million
1Q/19: $726 million