The joint venture Global Payments Inc.’s entered into in Spain late last year with one of Europe’s top banks delivered better-than-expected revenue and helped drive fiscal fourth-quarter earnings, the merchant processor’s top executive told analysts during a July 21conference call to discuss the quarter’s earnings.
Global Payments formed the venture in November with La Caixa, Spain’s third largest bank with a network of 5,500 branches and more than 8,000 ATMs (
“I continue to be pleased with our joint venture in Spain,” Global Payments Chairman and CEO Paul Garcia told analysts. “We have begun investing in sales strategies, like those we successfully employ in the [United Kingdom], and we have added over 50 salespeople.”
David Mangum, the processor’s senior executive vice president and chief financial officer, during the call also cited the Spain venture as helping international revenue increase by 49% during the quarter from a year earlier.
The processor also reported strong performance in North America (
Global Payments executives chose not to speculate on the effect the Federal Reserve Board’s decision to cap debit card interchange fees that takes effect Oct. 1 might have on the company’s bottom line. The Fed approved the final rule on interchange fees, as directed by the so-called Durbin amendment to the Dodd Frank Act, late last month (
“All (current) expectations, of course, exclude the impact of the Durbin amendment,” Garcia said, noting the full impact of the rate reduction has not played out yet. “Although we clearly have our own internal strategy, until all of the pieces play out with all of those players, we can’t fully comment. I think it is safe to say it is positive, period.”
Merchant acquirers pay card issuers interchange when their cards are used to make purchases. Acquirers then pass along the expense to their merchant customers as part of the discount rate. Nothing in the Durbin amendment stipulates that acquirers, or merchant processors, must pass along all the reduction in debit interchange, though analysts believe market pressures will encourage them to do so, especially over time.
A company strategy continues to be increasing revenue from independent sales organizations, a point Global Payments President Jeffrey S. Sloan made earlier this year when citing future opportunities (
U.S. revenue during the quarter increased 16%, to $282 million, compared with a year earlier, a continued acceleration from a 15% year-over-year increase in the third quarter, analyst David Koning of Robert W. Baird & Co. noted in a report.
Koning reports that Global’s strong year-over-year growth in the U.S. was being fueled by revenue growth from independent sales organizations, which Global Payments management expects to continue at a double-digit pace, along with similar growth in the gaming industry.
The situation for Global in Canada continues to stabilize after the company faced initial difficulties related to raising prices there in 2010, Koning said. Revenue in Canada during the quarter increased 8%, to $87 million, according to the fourth-quarter report.
“While the company is still feeling pressure from the shift to larger, less-profitable merchants, the region is showing signs of stabilization,” Koning noted.
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