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Fidelity National Information Services, better known as FIS, reported second-quarter results Wednesday that showed revenue growth slowing in the payments processor’s banking division, echoing a similar trend at rival Fiserv.
FIS said that second-quarter revenue for its banking solutions group climbed 1% to $1.7 billion over last year, according to a Wednesday press release on the results. In the first quarter of the year that unit’s revenue grew at a higher 2% rate, the company reported in April.
The Jacksonville, Florida-based company’s banking solutions unit will be its biggest division after the spin-off by early next year of its Worldpay merchant payment services business. FIS’s division serving capital markets clients is its third-largest.
When it comes to selling services to bank clients, the FIS second-quarter results reflect the pressures of selling to bank customers in the current economic environment and echo stress also reflected in the second-quarter financial report of its chief rival Fiserv. Brookfield, Wisconsin-based Fiserv reported last week that its revenue from its banking division declined 2%, compared to the same period last year.
U.S. banks have been buffeted over the past year by slowing economic growth and the impact on customers of higher interest rates. Several bank failures over the past year, including that of Silicon Valley Bank, have had ripple effects across the industry. Some companies in the payments sphere have been hit with the fallout.
FIS is betting on the growth of its banking unit as its largest operation after the sale of a majority stake in its Worldpay unit to the private equity firm GTCR.
At the moment, bank clients are seeking to shore up their businesses by focusing on deposit-gathering, FIS CEO Stephanie Ferris said on a call with analysts. Still, she’s counting on being able to sell more digital payments products and related services to the banks, she said.
Nonetheless, FIS is shouldering a $23-billion backlog, according to a slide presentation that accompanied its quarterly report. In a call with analysts Wednesday regarding the results, the company’s executives were pelted with several questions about the backlog. Ferris said the backlog was likely to stay about the same for the rest of the year.
The FIS weakness in the banking unit also showed up in the second-quarter non-recurring revenue where it reported a 10% decline relative to the quarter last year, according to the presentation.
Similarly, Fiserv reported revenue from its financial technology division declined to $784 million for the second quarter, down from $803 million for the period last year, though its profit margin increased.
Overall, FIS second-quarter gross profit rose nearly 5% to $1.56 billion over the year-earlier period, as revenue rose just under 1% to $3.75 billion on a 6% increase in global payment volume.
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