MasterCard Profit Climbs as Consumers Boost Spending

MasterCard Inc., the world’s second- biggest electronic payments network, posted a first-quarter profit that beat most analysts’ estimates as consumer spending rebounded and expenses were held in check.

Net income rose 24 percent to $455 million, or $3.46 per share, from $367.3 million, or $2.80, in the same period a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of analysts surveyed by Bloomberg was $3.15. Revenue advanced 13 percent to $1.3 billion.

Chief Executive Officer Robert W. Selander is winding down his tenure at MasterCard, marked by earnings growth amid a worldwide consumer shift to electronic payments from cash and checks. Selander, 59, will be succeeded July 1 by former Citigroup Inc. executive Ajay Banga, 50, who ran all of the bank’s businesses in Asia, MasterCard’s fastest-growing market.

“The global economy has reached a self-sustaining momentum,” Selander said in a conference call with analysts.

MasterCard climbed $3.87, or 1.5 percent, to $254.61 at 10:54 a.m. in New York Stock Exchange composite trading. The stock closed yesterday at $250.74, down 2.1 percent this year.

Banga’s Task

Banga will try to reverse MasterCard’s loss of market share to its larger rival, San Francisco-based Visa Inc., which said last week that quarterly net income surged 33 percent to $536 million. Visa’s share of global purchase transactions climbed to 64.79 percent in 2009 from 64.09 percent in the previous year, according to the Nilson Report, an industry newsletter. MasterCard’s fell 52 basis points to 26.5 percent.

Source: MasterCard Inc via Bloomberg

Ajay Banga, incoming president and chief executive officer of MasterCard Inc., left, stands with Robert W. Selander, outgoing chief executive officer of MasterCard Inc., in this undated handout photograph released to the media last month. Close

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Source: MasterCard Inc via Bloomberg

Ajay Banga, incoming president and chief executive officer of MasterCard Inc., left, stands with Robert W. Selander, outgoing chief executive officer of MasterCard Inc., in this undated handout photograph released to the media last month.

“We are very fortunate to be part of an industry where the secular shift from paper to electronic forms of payment will drive growth through different economic cycles,” Banga said. “We will invest our resources in initiatives designed to accelerate our business in key markets around the world and to drive growth beyond that secular momentum.”

A rebound in consumer spending is accelerating revenue and profit growth for MasterCard and Visa. Consumer spending, which accounts for about 70 percent of the U.S. economy, rose 3.6 percent last quarter.

MasterCard’s processed transactions climbed 4.6 percent to 5.37 billion and total spending by cardholders, adjusted for currency fluctuations, climbed 8.7 percent to $473 billion. A slide in U.S. credit-card spending, which fell 3.1 percent to $110 billion, may have reversed toward the end of the quarter, according to Selander.

“During the month of March, we saw positive growth in processed U.S. credit volume for the first time in approximately 18 months,” Selander said. “This trend continued through the first four weeks of April.”

Operating expenses rose 2.2 percent to $608 million. Advertising and marketing expenses dropped 3.8 percent. Rebates and incentives associated with new and renewed customer agreements climbed 31 percent to $440 million.

To contact the reporter on this story: Peter Eichenbaum in New York at peichenbaum@bloomberg.net

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