Tags: MasterCard | Profit | Spending | earnings

MasterCard Profit Climbs 38% as Spending Increases

Wednesday, 02 Nov 2011 09:46 AM

MasterCard Inc., the world’s second- biggest payments network, posted a third-quarter profit that beat analysts’ estimates as consumers increased spending with credit and debit cards.

Net income climbed 38 percent to $717 million, or $5.63 a share, from $518 million, or $3.94, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 29 analysts surveyed by Bloomberg was $4.82 a share. MasterCard climbed 8 percent to $361.12 in early trading at 9:04 a.m. in New York.

Chief Executive Officer Ajay Banga, 51, is pushing to wrest market share from larger rival Visa Inc. amid new U.S. regulations on so-called swipe fees, or interchange, charged to merchants for debit-card purchases. The rules also give retailers more say on how those transactions are processed, or routed, which may erode Visa’s dominance.

“We are pleased with our strong results this quarter, which were driven by several factors, including double-digit increases in volumes and processed transactions in most regions across the globe,” Banga said in the statement.

MasterCard has gained 49 percent this year through yesterday and is the top performer in the 75-company Standard & Poor’s 500 Information Technology Index. San Francisco-based Visa, which ranks fifth, has gained 28 percent.

Debit-card spending in the U.S. increased 23 percent to $97 billion and worldwide excluding the U.S. surged 35 percent to $62 billion. Credit-card spending worldwide rose 21 percent to $469 billion from $389 billion a year earlier.

Net Revenue Increase

Net revenue increased 27 percent to $1.8 billion from a year earlier, according to the statement. Operating expenses rose 23 percent to $816 million because of costs tied to acquisitions and investments in technology, the company said.

Worldwide spending on MasterCard- and Maestro-branded cards climbed 17 percent to $628 billion from the year-earlier period, based on local currencies, according to the statement. Spending by consumers outside their home countries surged 19 percent. Processed transactions rose 21 percent.

“We still prefer MasterCard to Visa as we believe MasterCard has more to gain than lose from debit interchange regulation and will exhibit better growth characteristics over the next 12 months,” Tien-Tsin Huang, an analyst at JPMorgan Chase & Co., said in an Oct. 21 note to clients. He has an “overweight” rating on MasterCard.

Visa said last week that quarterly profit rose 14 percent to $880 million, or $1.27 a share, as credit-card spending climbed faster than debit and affluent consumers stepped up purchases.

MasterCard repurchased 250,100 shares valued at $77 million in the third quarter as part of a buyback program that has $879 million remaining, the firm said.

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