Visa profit falls as U.S. consumer spending weakens

Wed Oct 30, 2013 6:24pm EDT

Visa credit cards are displayed in Washington October 27, 2009. REUTERS/Jason Reed

Visa credit cards are displayed in Washington October 27, 2009.

Credit: Reuters/Jason Reed

(Reuters) - Visa Inc (V.N), the world's largest credit and debit card company, reported a 28 percent fall in quarterly profit due to a higher income tax provision and was slightly pessimistic about its outlook in the face of soft U.S. consumer spending.

Visa shares fell 3.1 percent to $197.50 in after-hours trade while those of rival MasterCard Inc (MA.N) fell 1 percent, ahead of its results on Thursday.

Visa said it expects constant dollar revenue growth of low double digits and a foreign exchange headwind of 2 percentage points over the next year. It said its expectations are slightly lower than they were in June.

It maintained its forecast for percentage growth per share in 2014 in the mid-to-high teens despite the continued slow pace of global economic recovery, and the growing impact of a strong U.S. dollar.

Visa also authorized a new $5 billion share buyback program and said it believed the Federal Reserve had a strong case in its appeal against a court ruling limiting the fees banks charge retailers for debit card use.

A successful appeal against the court ruling in July would protect an important revenue stream for card companies.

SLOWING U.S. GROWTH

Both Visa and MasterCard face slowing growth in the United States, their largest market.

U.S. consumer sentiment slid in September to its lowest in five months as consumer lending rates rose and shoppers eyed sluggish economic growth ahead, a survey showed.

Visa said its U.S. domestic payment volume dropped to 8 percent of global volumes in September from 11 percent in August.

Visa and MasterCard have been trying to capture new business in emerging markets where more customers are signing up for cards and digital payments instead of cash.

Net income attributable to Visa fell to $1.19 billion, or $1.85 per Class A share, from $1.66 billion, or $2.47, a year earlier.

Analysts on average, had expected the company to earn $1.85 per share, according to Thomson Reuters I/B/E/S.

Total operating revenue rose 9 percent to $2.97 billion but came in short of analysts' expectation of $3.02 billion due to a strong U.S. dollar.

Visa's results were hit by a $574 million income tax provision, compared with a benefit of $74 million a year earlier. The company gave no reason for the bigger tax bill.

Visa's payment volumes rose 13 percent to $1.1 trillion in the quarter.

Foster City, California-based Visa's shares have risen 35 percent since the beginning of the year, outperforming the broader S&P 500 Index .SPX, which has gained around 24 percent. They closed at $203.82 on the New York Stock Exchange.

(Editing by Don Sebastian and Rodney Joyce)