With Profit Slump, Ongoing Coronavirus-Led Travel Slowdown Warned By Mastercard

There will not likely be an overall pick up in travel spending anytime soon, Mastercard said on Wednesday while also warning that the timing and the availability of Covid-19 vaccines will be the determinant for a recovery in cross border volumes of travel.

There is still a significant impact of the pandemic on international travel, especially outside Europe, said the payments processor.

These comments from the company were very similar to what was opined previously by American Express which reported a 40 per cent drop in its quarterly profit last week while also warning that it would not be before the early 2022 that business travel would recover to any significant extent.

There was a 7 per cent drop in the stocks of Mastercard’ at $295.45 along with the stocks of its rival Visa Inc  which is expected to report results after market close.

“While we believe that cross-border will ultimately recover, it will take time for people to build their confidence in the safety of travel,” Mastercard’s finance chief Sachin Mehra told analysts on a conference call.

“We believe that is tied to the broad availability of vaccines and therapeutics, likely towards the latter part of next year,” he said.

Since employees in their millions have been laid off by companies because of the economic hit of the Cvoid-19 pandemic, it has hit the spending power of the employees hitting card businesses. Cross-border card transaction volumes have also been dealt a blow because of the hit to air travel due to the pandemic.

A drop of 36 per cent year on year in cross-border volumes on a local currency basis was reported by Mastercard. Declines of more than 30 per cent err corded for each of the first three weeks of the current quarter.

“Some” improvement in domestic travel during the quarter, including spending on lodging and sports, was however pointed at by the company’s Chief Executive Officer Ajay Banga.

Banga, who took charge just after the 2008-09 financial crisis, was speaking to analysts on his final earnings call before his transition to the role of executive chairman next year.

In the third quarter ended September 30, Mastercard reported a 28 per cent drop in its net income to $1.5 billion, or $1.51 per share. the company also reported profit excluding items at $1.60 per share wwihch was lower than the estimates of analysts at $1.66, according to IBES data from Refinitiv.

The company also reported a 14 per cent drop in its net revenue for the quarter which came in at $3.8 billion, while there was a 1 per cent rise in gross dollar volume, the dollar value of transactions processed, to $1.6 trillion.

Purchase volumes rose 2 per cent, returning to positive territory.

A forecast of 2.4 per cent growth in US retail sales excluding automotive and gas was made by the company for the holiday season and said that it expected consumer spending to come more from home furnishing, athleisure, clothing and electronics segments.

(Adapted from ChannelNewsAsia.com)

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