S&P upgraded Purchase, New York-based MasterCard’s long- term counterparty rating by one level to A- from BBB+ and didn’t change the firm’s short-term A-2 rating, the ratings company said in a statement today.
MasterCard Chief Executive Officer Ajay Banga is expanding the firm’s presence in emerging markets through acquisitions while more customers choose plastic over cash for their purchases. Under Banga, 51, who has declared a “war on cash,” MasterCard has posted $3 billion in profit since the beginning of 2010.
“The upgrade reflects the company’s excellent profitability and robust cash-flow generation through the economic cycle,” S&P analyst Vikas Jhaveri said in the statement. “The company has maintained a conservative financial profile during the past several years and continues to build its capital base.”
MasterCard gained 36 percent this year through yesterday, compared with a 14 percent increase for San Francisco-based Visa Inc. (V), the biggest payment network. S&P’s 500 Information Technology Index, which tracks the performance of 75 stocks, fell 9.1 percent.
S&P said it may lower MasterCard’s ratings if the company’s future profitability was threatened by “regulatory actions” and litigation tied to new rules under the Dodd-Frank Act that reduced the amount banks can charge merchants for debit-card transactions.
MasterCard and Visa set the fees on the transactions, known as interchange, and pass the money to card-issuing banks, including JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC)
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