Visa and Mastercard Have Reason to Join Trump's Dollar Lament

(Bloomberg) -- President Donald Trump likes to complain about the U.S. dollar’s rally. Now, Visa Inc. and Mastercard Inc. have reason to hate it too.

Both of their stocks dropped Thursday after the world’s largest payment networks said an appreciating American currency reduced spending by foreigners in the nation.

“It’s fairly early days on the strong dollar still but the inbound into the U.S. -- so people buying from the U.S. -- has decreased from a growth perspective,” Martina Hund-Mejean, chief financial officer of Mastercard, said in a telephone interview. Especially in Brazil, “people have less purchasing power, so of course that impacts cross border.”

The U.S. Dollar Index, a measure of the greenback’s performance against other major currencies, rose 5 percent in the second quarter, the largest quarterly advance since the end of 2016. The dollar has appreciated in recent months amid a trade war initiated by Trump.

The stronger dollar helped limit the increase in Mastercard’s cross-border volume to 19 percent in the three-month period that ended in June, down from 21 percent growth in the first quarter. At Visa, growth slowed to 15 percent from 21 percent.

Visa said the sharp drop by Latin American currencies relative to the dollar “significantly” crimped that region’s outbound spending. Hund-Mejean said her company saw less inbound commerce into the U.S. from the Asia-Pacific region.

“We see the U.S. dollar as the key near-term risk for” Visa and Mastercard, Donald Fandetti, an analyst at Wells Fargo & Co., said in a note to clients.

Visa’s stock fell as much as 2.2 percent Thursday, while Mastercard slumped up to 4.5 percent. Both pared their losses, but were still down midday.

It wasn’t all bad news for the companies. Both topped analysts’ estimates for revenue and earnings in the quarter. Visa’s overall purchase volume also surpassed forecasts, while Mastercard’s total volume fell short.

Visa boosted its overall growth forecast, saying it expects adjusted profit for its fiscal year, which ends in September, to increase by a percentage in the “low 30s” compared with its previous forecast in the “high 20s.” Mastercard left its projection for full-year adjusted revenue and operating expenses unchanged.

Here are other key metrics from Visa and Mastercard’s earnings, which the companies announced in separate statements on Wednesday and Thursday, respectively:

  • Visa’s net income jumped 13 percent to $2.32 billion, or $1 a share, from $2.06 billion, or 86 cents, a year earlier. On an adjusted basis, profit was $1.20 a share, more than analysts’ estimates of $1.08.
  • Mastercard’s net income climbed 33 percent to $1.6 billion, or $1.50 a share, from $1.2 billion, or $1.10, a year earlier. Adjusted per-share earnings were $1.66, topping analysts’ estimates of $1.53.

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