Visa's biggest fears—Brexit, government shutdown, tariffs—are beyond its control

Visa CEO Alfred Kelly said the company's earnings, though solid, could suffer if if politicians in Washington and London don’t resolve their biggest issues.

“I was glad to see the opening of the U.S. government,” said Kelly during Visa’s quarterly earnings call on Wednesday afternoon. “It’s critical a deal gets done in this three week period.”

The politics shroud what is otherwise a positive story for Visa, which reported double digital growth in revenue, transactions and payments volume, an advance in its contactless push, its deal to support no-cash payments at about half of the concessions at the Super Bowl, and partnerships with local fintechs in Turkey, Singapore, Africa and other emerging markets.

“The next several months will provide more clarity as these issues are coming to a head,” Kelly said.

For the quarter ending December 31, Visa reported net income of $2.98, or $1.30 per Class A share, up from $2.52 billion, or $1.07 per share, in the prior quarter. That’s better than the Refinitive analyst estimate of $1.25 per share.

It’s still too early to know if the U.S. government shutdown, Brexit and the trade dispute between China and the U.K. will tarnish Visa’s 2019 performance, Kelly said, warning that second-quarter earnings could face headwinds. Other high-profile financial executives, such as JPMorgan Chase CEO Jamie Dimon, have said the government shutdown could reduce economic growth to zero if it persists. And Federal Reserve Chairman Jerome Powell on Wednesday said a "no-deal" Brexit could harm U.S. banks.

Kelly did not directly blame politics on what he referred to as a cross-border payment slowdown, instead mentioning outbound cross-border commerce was “very robust,” and inbound commerce’s growth rate was negative due to the strengthening U.S. dollar.

But he said the convergence of the U.S. government shutdown, which could resume later in February, a March 1 deadline for a U.S./China trade deal and the possibility of a “no deal” Brexit in March could hurt the economy — and, by extension, payments volume.

“It’s important that the geopolitical issues get addressed,” Kelly said. At the time of Wednesday's earnings call, none of these three issues — Brexit, the U.S. government shutdown and the tariff battle — were close to being resolved.

Payment companies have long been concerned about geopolitical turmoil, fearing the collaboration necessary to drive global digital commerce may impaired in many ways. There may also be a decline in international student payments, or harm to the London-based payment gateways that support international payments.

These fears have been mostly speculative thus far, though Kelly said the lack of resolution could impact specific payment categories such as travel.

“This involves two of the largest economies in the world, the U.S. and the U.K., and it has to have some impact on how people think about travel outside of their domestic country,” Kelly said.