Mastercard sees spending return as economies open after coronavirus gloom

By Noor Zainab Hussain

(Reuters) - Mastercard Inc <MA.N> said it expects consumer spending to gradually return to "pre-COVID" levels as people start using their cards again on clothing and domestic travel with countries easing lockdown measures that have brought the world to a standstill.

The world's second-largest payment processor on Wednesday reported better-than-expected first-quarter earnings and said it has started seeing early signs of spending levels stabilizing.

The novel coronavirus pandemic has shut down large parts of the global retail industry as stores remain shut and shoppers stay at home to avoid catching the highly contagious illness.

The outbreak has also hammered the global economy, pushing companies to layoff employees by the millions. That, in turn, could weigh on credit card issuers as more people default on their payments.

"We believe we are currently in the stabilization phase in most markets. The next phase is normalization, where governments gradually relax mitigation practices," Mastercard's Chief Executive Officer Ajay Banga said on a post-earnings call.

Sectors such as mass entertainment and long-haul travel will probably take longer to normalize than sectors with pent-up demand such as home improvement and healthcare, said Banga.

Mastercard said spending in the third week of April improved across all regions, helped in part by the fiscal and monetary stimulus provided to economies floored by the pandemic.

Instilling caution, however, Mastercard said it would temporarily suspend its 2020 share repurchase.

Shares of the world's second-largest payment processor were up 6.3% at $281.23 in late morning trade.

NO CRYSTAL BALL

The company also reported a 40% growth in contactless transactions worldwide in the quarter, saying recent consumer insights show these spending habits will last beyond the pandemic.

"I don't have a crystal ball ... But I do think we will see certain trends will stand out. The world will be more digital and the secular shift to electronic payments will accelerate," Banga said.

Mastercard's net income fell to $1.7 billion, or $1.68 per share, in the first quarter ended March 31 from $1.9 billion, or $1.80 per share, a year earlier, hurt by a rise in losses on equity investments and other costs.

On an adjusted basis it earned $1.83 per share, beating analysts' estimates of $1.73 per share according to Refinitiv IBES.

(Reporting by Noor Zainab Hussain in Bengaluru and Sinéad Carew in New York; Editing by Supriya Kurane)