Global payments company Mastercard’s second-quarter net profit surged by nearly 22 per cent on an annual basis, driven by increased consumer spending and recovery in global tourism.
The New York-based company’s net profit jumped to $2.8 billion in the three months to the end of June. It was up almost 17 per cent on a quarterly basis.
Earnings per share increased 28 per cent to $3, the company said in a statement on Thursday.
Net revenue during the period rose about 14 per cent yearly to $6.3 billion but soared 11 per cent on a quarterly basis.
“Our positive momentum continued this quarter,” said Michael Miebach, Mastercard’s chief executive. “We delivered strong revenue and earnings growth supported by resilient consumer spending, particularly in travel and experiences, and the continued strength in services.”
The company’s total operating expenses increased 5 per cent year on year to $2.6 billion in the last quarter, primarily due to higher personnel costs, while operating income surged 21 per cent to $3.7 billion, Mastercard said
Mastercard's shares, which have jumped almost 17.3 per cent in the past year, rose 0.60 per cent to trade at $402.65 a share on Thursday at 6.35pm UAE time.
The company, which suspended business operations in Russia in March last year due to the Ukraine conflict, said that one of the key drivers of its growth was the surge in cross-border volume that increased 24 per cent yearly in the second quarter.
Gross dollar volume, a key measure of Mastercard's business, surged 12 per cent in the June quarter. GDV represents the aggregated dollar amount of purchases made and cash disbursements obtained with Mastercard-branded cards.
Total purchase volume, representing the aggregate dollar amount of purchases made with Mastercard-branded cards, rose 14 per cent during the period.
The company’s customers had issued 3.2 billion Mastercard and Maestro-branded cards as of June 30.
“Cross-border travel volume showed strong growth again this quarter, reaching 154 per cent of pre-pandemic levels,” said Mr Miebach.
“We had a number of notable wins with key customers as our innovative products and differentiated services position us as a partner of choice.”
Mastercard repurchased 6.5 million shares at a cost of $2.4 billion and paid $541 million in dividends to its shareholders in the second quarter.
The company also said quarter-to-date through July 24, it has repurchased 1.3 million shares at a cost of $497 million, which leaves $6.4 billion remaining under the approved share repurchase programmes.
On Wednesday, Mastercard's rival company Visa reported a 22 per cent yearly jump in its 2023 fiscal third-quarter net profit to $4.2 billion.
It was driven by a surge in payment volumes, cross-border transactions and a greater amount of customers opting to pay with cards instead of cash.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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