PayPal profit slumps as COVID-19 weighs on spending

FILE PHOTO: The German headquarters of the electronic payments division PayPal is pictured at Europarc Dreilinden business park south of Berlin in Kleinmachnow, Germany, August 6, 2019. REUTERS/Fabrizio Bensch

(Reuters) – PayPal Holdings Inc (PYPL.O) posted a 87.4% slump in quarterly profit on Wednesday as COVID-19 lockdowns hit consumer spending and forced the payments processor to boost its credit loss reserves, sending its shares down 3.7% in extended trading.

The coronavirus outbreak has forced companies to lay off millions of employees, dampening consumer confidence and heavily impacting people’s ability to spend on non-essential items.

“In March, the deteriorating environment resulting from COVID-19 further impacted PayPal’s business, affecting both volumes and revenue generated from travel and events verticals as well as impacting credit income,” the company said.

PayPal processed $191 billion in payments in the first quarter, up 18% from a year earlier, but missed analysts’ estimates of $194.23 billion.

Operating income was reduced by a $237 million increase in credit loss reserves, the company said, even though it added it was seeing volumes recover in the second quarter, helped by a surge in ecommerce.

Net income fell to $84 million, or 7 cents per share, in the quarter ended March 31, from $667 million, or 56 cents per share, a year earlier. (bit.ly/2SHfpY2)

Reporting by Bharath Manjesh in Bengaluru; Editing by Arun Koyyur

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