Financial services firm Visa (NYSE: V) is set to release its latest quarterly earnings in the week ahead, after a recent groundswell of M&A, as well as amid an overall uptick in the level of U.S. household debt

The California-based credit card giant has been generally gobbling-up companies, as well as forming strategic investments and partnerships, to help advance its payment network’s operational capabilities.

In mid-September, for example, the firm said it completed its purchase of Verifi, with an aim to strengthen its dispute resolution capabilities; and earlier in 2019, it touted a host of other acquisitions, including cross-border payment servicer Earthport; the token services and ticketing businesses of Rambus; as well as next-gen payment software provider Payworks.

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Overall, Visa CFO Vasant Prabhu had said that the company’s recent purchases “significantly enhance our capabilities, extending our reach to over 99% of global bank accounts in 88 markets, facilitating tokenization of all types of transactions beyond our own, streamlining dispute resolution, and enabling omnichannel payment processing” through Visa’s e-commerce platform CyberSource.

In its fiscal third-quarter earnings release, Visa generated US$5.8bn in net revenues, an 11% year-on-year increase, amid an 11% rise in adjusted net income to US$3.1bn and a 14% spike in adjusted earnings per share of US$1.37.

For its fiscal full-year 2019, Visa said it expects annual net revenue growth in the low double-digits, while in the three months to September, market participants anticipate earnings of around US$1.45 per share on revenues of a little more than US$6bn.

Against this backdrop, shares of Visa have returned close to 35% year-to-date in 2019, with its stock up around 44.15% since its latest 52-week low set December 24, 2018. However, the company’s equity had fallen close to 1.9%, with rival Mastercard (NYSE: MA) off more than 2.0% intraday Friday, after weak Chinese economic data spurred renewed jitters about potential ramifications for global growth.

The Financial Select Sector SPDR Fund (NYSEARCA: XLF), which has among its holdings titans such as Berkshire Hathaway (NYSE: BRK-B), J.P. Morgan Chase (NYSE: JPM) and Citigroup (NYSE: C) was up around 0.18% ahead of the weekend, according to the IBKR Trader Workstation.

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Higher Credit

Further bolstering Visa’s upbeat financial profile, Moody’s Investors Service in April had upgraded the company’s credit rating to ‘Aa3’ from ‘A1,’ partly based on optimism that its growth will be “fueled by faster growth opportunities internationally, which provides some resilience to an economic downturn in the U.S.”

Also, Moody’s expects that Visa will “remain committed to a conservative debt capital structure with adjusted debt to EBITDA maintained at 1.5x or less, with a balanced capital allocation policy of strategic M&A and shareholder returns.”

Moody’s analyst Stephen Sohn recently noted that he expects Visa to produce double-digit revenue and profit growth on a constant currency basis, with operating margins over 60% and post-dividend, annual free cash flow in excess of US$10bn over the next two years.

Visa is slated to announce its fiscal fourth quarter and full-year 2019 financial results on Thursday, October 24.

Household Borrowing Boom

Meanwhile, the firm’s financial profile is also underpinned by increasing levels of consumer credit.

According to the New York Fed’s Center for Microeconomic Data (CMD), aggregate household debt balances had increased by US$192bn in Q2 2019, a rise of 1.4%, to almost US$13.9tn. The balances have been “steadily rising” for five years and are now US$1.2tn higher, in nominal terms, than the previous peak of US$12.7tn set in Q3 2008.

The CMD said that auto loan originations staged a “small increase” year-on-year to US$156bn; mortgage originations had a “marked increase” from the prior quarter to US$474bn; and the aggregate credit card limit “crept up” for the 26th consecutive quarter, with a 1.1% increase from Q1 2019.

Also, outstanding student loan debt, which fell US$8bn from the prior quarter to US$1.48tn in Q2, remains at an astronomical level. The CMD observed that 10.8% of aggregate student debt was 90+ days delinquent or in default in Q2 2019, with the transition rate into 90+ delinquency at nearly 10%, “a deterioration” of 0.5% from the previous quarter.

In late July, Visa CFO Prabhu pointed out that that volume growth of U.S. payments at the company registered 9% in FYQ3’19, up 1 point over the prior quarter, driven in part by “higher consumer credit growth.”

In fact, payments volume at Visa for the three months ended June and March 2019 grew 9% and 8% year-on-year, respectively, with total processed transactions in FYQ3’19 up 12% to 35.4 bn and cross-border volume growth up 7%.

Earnings results from some big U.S. banks further highlighted the upward trend in consumer borrowing.

J.P. Morgan Chase, for instance, with recently agreed to extend its partnership with Visa through the end of 2029, attributed increases in its Consumer & Community Banking (CCB) division in large part to an uptick in home lending, credit cards, and auto loans.

In the latest quarter, the bank posted an 8% rise in credit card loans, while credit card sales volume surged 10%, and merchant processing volume went up 11%.

Investors will likely be keeping an eye on the rising levels of consumer credit, amid the Federal Reserve’s more dovish stance toward monetary policy.

In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of the U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more.