Visa’s Profits Likely Rose on Higher Transaction Volumes, Credit Card Usage

Visa (V), the world’s biggest electronic payments provider, will likely report higher revenues and profit on increased transaction volumes in the first quarter, as households rely more on credit cards amid persistently high inflation.

Revenue and net income are projected to have risen 8.3% each from the same quarter last year, to $7.89 billion and $4.15 billion, respectively, according to estimates compiled by Visible Alpha. Higher transaction volumes in the latest quarter were a key driver of revenue growth. They were likely up 5% from the year-ago quarter to $3.55 trillion, with U.S. payment volumes projected to have risen 9.4%. The company is expected to report diluted earnings per share (EPS) of $1.98, up 11% from the same period last year. Visa will report earnings after markets close Tuesday.

High inflation and dwindling savings led U.S. consumers to put more on credit cards last year. U.S. credit card debt hit a record just shy of $1 trillion in the fourth quarter, surpassing the pre-pandemic peak of $927 billion. The $61 billion increase from the previous quarter was the biggest seen in data going back to 1999.

Delinquency rates are also climbing alongside credit card interest rates, driven in part by the Federal Reserve’s anti-inflation rate hikes. About 4% of credit card debt is now in serious delinquency, defined as failing to pay for 90 days or more. The average credit card interest rate hit 20.92% in the first quarter, the highest since the Fed began tracking data in 1994, with the average introductory APR on new cards rising to 22.15%.

It’s a stark divergence from the early days of the pandemic, when government stimulus checks and stay-at-home orders gave households a financial cushion and allowed them to pay down credit card debt. The result at the time was a loss in revenue for Visa and other payment providers. The company reported a 25% year-over-year decline in net income in the fourth quarter of 2020 as transaction volumes fell steeply early in the pandemic.

Visa shares are up more than 12% year-to-date, compared to a 3% decline for the broader S&P 500 Financial Sector over the same period. They’ve also outperformed rival payments provider Mastercard (MA), whose shares have risen 8% year-to-date.