MasterCard Inc. expects its net income to rise at least 20 percent this year, helped by a small boost from foreign exchange and a modest decline in expenses.
The company also on Wednesday said it does not expect a serious impact on revenue from a new law limiting merchant fees on debit card use, and late Tuesday announced a new share buyback program.
The forecast issued Wednesday would put the Purchase, New York-based payments processor's net income at about $1.76 billion for 2010. The forecast is slightly below the average projection for net income of $1.77 billion, from analysts polled by Thomson Reuters. Wall Street estimates range from $1.62 billion to $1.83 billion.
Long-term, MasterCard Inc. said it's aiming for revenue growth between 12 and 14 percent for 2011 to 2013, and earnings per share growth of 20 percent.
The forecast came during MasterCard's annual meeting, during which executives outlined their growth strategies for the next few years.
The gains will come from worldwide growth of card- and electronic-based payments systems, reflecting what CEO Ajay Banga called the "war on cash." The company noted that 85 percent of all transactions worldwide are still done in cash, which presents huge growth opportunities for credit and debit cards, prepaid cards, mobile payments and other payment technologies.
MasterCard said the recent financial regulatory legislation provision that limits the fees charged to merchants for accepting debit cards will not have a "material impact" on its business, and in fact presents growth opportunities.
Tim Murphy, president of core products, told investors that U.S. debit, the portion of the business directly affected by the legislation, represents about 15 percent of total net revenue.
MasterCard reported revenue for 2009 of $5.1 billion, which would mean U.S. debit was about $764.8 million.
But Murphy noted that revenue is partially insulated from the legislation by ongoing contracts and the fact that network fees are small compared to the interchange fees — the fees actually regulated in the new law. Experience has shown that when other countries, like Australia, adopted similar fee restrictions, the impact to MasterCard was small. Instead, the banks that issue cards make up any losses through fees charged to consumers or service cutbacks, he said.
He also noted that the law calls for every card issued to link to more than one payment network to give merchants a choice. Because MasterCard lags its larger rival Visa Inc. in the U.S. debit card business, this part of the regulation presents an opportunity for growth, Murphy said. For every dollar the network exclusivity rule removes from MasterCard's revenue, he said the company could gain $3 through expansion.
The company does not believe that the regulations regarding debit fees will spread to credit cards, in part, because the consumer credit environment is struggling.
Separately, MasterCard said late Tuesday its board approved a share repurchase program for up to $1 billion of stock, effective immediately.
In morning trading, MasterCard shares added $9.22, or 4.6 percent, to $208.96.
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