Mastercard CEO warns of long-term perils of trade wars, Brexit

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Mastercard's strong performance is dampened by threats from trade disputes and Brexit, both of which could cause the company pain in the future.

As tariffs accelerate, cross-border commerce, online transaction processing and collaboration are all under fire as the costs of sourcing and goods potentially increase.

The impact of tariffs has not yet trickled down to actual payments volume, so Banga's concern was more cautionary than material.

"Trade barriers could impact economic growth long term," said Mastercard CEO Ajay Banga during Thursday morning's earnings conference call. "We're concerned about the impacts of Brexit."

Mastercard has not changed its outlook because of the tariffs—it affirmed growth targets in the high teens, though foreign exchange could provide "headwinds" over the next quarters. "We are monitoring certain macroeconomic factors that have not shown up in the numbers," Banga said.

As for Brexit, those negotiations recently turned volatile and the U.K.'s technology industry, which includes fintechs and other startups that reduce cash in favor of digital payments, has worried about Brexit's impact on the U.K. economy since the initial referendum vote.

Mastercard has investments in the U.K. including a partnership with Worldpay to push Pay by Bank—which Mastercard acquired as part of its acquisition of Vocalink, the U.K. payments operator.

The collaboration can help with PSD2 and faster payments, according to Banga. While the European outlook remains strong—Banga noted consumer confidence in the Nordics is high, for example—the U.K. outlook is less certain.

"Consumer confidence in the U.K. is declining and there's a decline in U.K. retail sales growth year over year," Banga said.

Under questioning, Banga addressed an outage in early July that impacted parts of Europe and North America. The outage was shorter in duration than Visa's outage earlier in the month. Visa CEO Alfred Kelly addressed Visa's incident during his company's earnings call on Wednesday evening.

Like Kelly, Banga minimized the impact—saying the outage would not affect Mastercard's earnings. He also objected to the characterization of the incident as an "outage."

"It was for a short period of time. There was extra traffic at server sites," Banga said. "It was not really an outage, but a slowing down of approval rates."

For the quarter ending June 30, Mastercard's net income rose to $1.6 billion, or $1.50 per share, from $1.2 billion, or $1.10 per share the prior year. The card brand's revenue was $3.67 billion, up from $3.1 billion the prior year. Adjusted earnings per share rose to $1.66 from $1.10, which was better than FactSet analysts' expectations of $1.53 per share.

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