Mastercard to Slow Expense Growth Amid a Pause in Buybacks

(Bloomberg) -- Mastercard Inc. shares rose after the company vowed to slow expense growth as the global collapse in overseas travel crimped spending on its network.

The firm is reviewing costs as it seeks to lessen the impact of the coronavirus pandemic on its business. Operating expenses rose 7.3% to $1.8 billion in the first quarter, Purchase, New York-based Mastercard said Wednesday in a statement. But the company said expenses in the second quarter would only rise by a percentage in the “low single digits” as the firm pares spending on items including travel promotions.

“We’re carefully managing our expenses, but we will continue to invest in areas that differentiate our company,” Chief Executive Officer Ajay Banga told investors on a conference call on Wednesday.

Mastercard shares rose as much as 7.7% Wednesday. The stock has sagged 5.6% this year, compared with a 0.2% decline for the 71-company S&P 500 Information Technology Index.

Cross-border spending on cards -- among the most lucrative transactions for Mastercard and its rival Visa Inc. -- fell 3% in the quarter, the first decline in at least two years. The company said that the trend continued this month, with such transactions falling 49% in the week ended April 21.

Spending on Mastercard’s network advanced 5.4% to $1.15 trillion, above the $1.13 trillion average of analyst estimates compiled by Bloomberg. Still, the company said it would suspend its share repurchase activity “due to the continued uncertainty around the duration and severity related to the Covid-19 pandemic.”

Appliances, Subscriptions

The firm has seen a pick-up in spending on its cards after the U.S. government began sending out stimulus checks in recent weeks. Mastercard is also hopeful that spending on debit and prepaid cards will hold up in the crisis.

“We’ve started to see more recently, in the last few weeks, the spend has gone into other categories like clothing, like home improvement and appliances,” Chief Financial Officer Sachin Mehra said in a telephone interview. “We’re seeing recurring subscription services” get a boost as well, he said.

Banks have begun to reach out to Mastercard for data and analytics around how to manage their card portfolios, including steps to tighten customers’ lines of credit.

“They don’t take a one-size-fits-all approach of ‘Let’s cut credit lines all together,’” Mehra said. “We mine the data to say this is the profile of the customer you’ve got in question, here’s what you want to consider from a credit and underwriting standpoint.”

©2020 Bloomberg L.P.

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