April 28 (Bloomberg) -- Visa Inc., the world's largest credit-card network, said profit rose 28 percent in the company's first earnings report since its record $19 billion initial public offering last month. The shares fell 7 percent after the results didn't meet the most optimistic predictions.

Net income climbed to $314 million, or 39 cents a share, in the quarter ended March 31, from $246 million a year earlier, the San Francisco-based company said today in a statement. Adjusted net income was 52 cents a share, beating the 45-cent average estimate of 16 analysts surveyed by Bloomberg.

Visa has advanced about 72 percent in the six weeks since its IPO as investors clamor for the company handling the most credit and debit transactions. Visa and No. 2-ranked MasterCard Inc., which has surged 522 percent since its 2006 IPO, are benefiting from consumers' increasing preference for using plastic over cash and checks.

``Expectations for Visa, because of the overdone run-up in the stock price, were likely beyond what Visa could have reached,'' Craig Maurer, an analyst at New York-based Calyon Securities, said in an interview. He rates the company ``buy.''

The results were released after the close of regular U.S. trading. The company fell $5.34 to $70.29 at 6:07 p.m.

Total operating revenue rose 22 percent to $1.45 billion. Visa expects earnings per share to grow at least 20 percent and revenue to grow 11 percent to 15 percent annually for the next three years. It also expects to produce at least $1 billion in extra cash a year.

Overseas Growth

Credit-card purchases and cash advances rose 21 percent to $1.1 trillion in the quarter ended Dec. 31, the company said. Total Visa cards in use globally rose 16 percent to 1.6 billion. The company reports these figures one quarter in arrears.

Visa's transactions grew 44 percent in the region comprising Central Europe, the Middle East and Africa, 33 percent in Latin America and the Caribbean and 28 percent in the Asia Pacific region, outpacing the 11 percent growth in the U.S.

The company's IPO raised $17.9 billion on March 18, the most for a U.S. company, and the tally passed $19 billion after more shares were sold to satisfy demand. It was the world's second-largest public offering after Industrial & Commercial Bank of China Ltd.'s $22 billion debut in 2006.

The listing completed the transformation of Visa and MasterCard from not-for-profit associations owned by banks to independent companies that serve banks as customers. Visa's six biggest bank owners made at least $3.17 billion from selling part of their stakes, according to data compiled by Bloomberg.

Rising Defaults

Unlike rivals American Express Co. and Discover Financial Services, Visa and MasterCard are insulated from rising U.S. defaults because they don't make loans to cardholders. MasterCard has more than doubled in trading in the past year, while American Express dropped 23 percent and Discover 34 percent.

First-quarter results from credit-card lenders show consumer defaults and overdue payments rising as the U.S. economy slows. Capital One Financial Corp., the McLean, Virginia-based card issuer, said its outlook worsened with $6.7 billion of loan losses were expected through March 2009.

Moody's Investors Service has a negative outlook on credit- card lenders as defaults ``will most certainly'' rise this year. Stressed consumers are tapping plastic as access to home-equity loans falls off, New York-based Moody's said in a Feb. 1 report.

Visa set aside $3 billion from the IPO to cover future legal settlements. The network and its bank customers agreed last year to pay $2.25 billion to settle an American Express suit alleging that Visa stifled competition by preventing banks from offering rival cards. Visa faces similar allegations brought by Discover Financial Services.

Card Transactions

Visa also faces about 50 U.S. suits from merchants alleging it unfairly sets fees that increase costs for consumers. The so- called interchange fees set by Visa are paid by retailers and shared between the merchant's bank and cardholder.

Consumers will use credit and debit cards for 55 percent of all U.S. transactions by 2011, rising from 40 percent in 2005, according to the Nilson Report, an industry newsletter based in Carpinteria, California.

Visa processed 60 percent of the $5.2 trillion spent on general purpose payment cards around the world in 2006, more than the 32 percent controlled by MasterCard, according to Cowen and Co. analyst Moshe Katri.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net

Last Updated: April 28, 2008 18:58 EDT