MasterCard Defies Debt Crisis as Europeans Boost Card Spend

MasterCard Inc. (MA), which is under pressure from France to cut card payment fees, said European consumers are increasingly using credit and debit cards for purchases, dismissing the region’s sovereign debt crisis.

“Our business in Europe has been growing really well,” Ann Cairns, president of international markets at the company, said in an interview in Dubai. “The sovereign debt issue isn’t affecting consumer confidence in the way that it might.”

The Purchase, New York-based company said it’s benefiting from strong consumer spending in the Nordic countries, the Netherlands, Germany and Eastern Europe. At the same time, consumers are also turning away from cash in favor of plastic.

Mastercard is expanding even as Europe’s crisis enters unprecedented territory after the region’s finance ministers agreed March 16 to a tax on Cypriot bank deposits. Officials unveiled a 10 billion-euro ($13 billion) rescue plan for the country, the fifth since the debt crisis broke out in 2009.

Gross dollar volume in Europe, or the value of transactions processed by MasterCard, climbed 9.3 percent to $1.1 trillion on a local currency basis last year, according to the company’s annual statement. Mastercard expects an 11 percent to 14 percent net revenue compound annual growth rate this year, Cairns said, without giving more detail on its expectations for Europe.

Economic Contraction

Europe’s 17-nation economy will follow last year’s 0.6 percent contraction by shrinking 0.3 percent in 2013, the first back-to-back decline since the euro’s debut in 1999, according to forecasts from the European Commission.

“Our business isn’t just credit cards,” said Cairns, who manages all markets and customer-related activities outside the U.S. “We’re consumer payments and despite sovereign debt, consumer payments continue to grow in the economy.”

Global consumer expenditure is increasing 5 percent to 6 percent, “so there is a natural growth curve,” she said. “Only 15 percent of the world’s consumer payments are electronic, 85 percent are still cash and paper so there’s a big circle which is growing outwards.”

Mastercard net income beat analyst expectations in the fourth quarter, rising 18 percent to $605 million. The company was rated new “Hold” at BNP Paribas Equity Research by equity analyst Arvind Ramnani today. The 12-month target price is $560.00 per share. Shares closed down 1.5 percent at $519.37 on March 15 in New York. They have gained 5.7 percent this year.

Competition

The company is fending off competitors Visa Inc. (V), the world’s biggest payments network, and Shanghai-based China UnionPay as it seeks a larger share of the electronic payments processing market. Visa posted a 26 percent increase in fiscal first-quarter profit to $1.29 billion as consumer card spending accelerated, the bank said Feb. 6.

Mastercard is targeting developing countries such as Myanmar, Ghana, Nigeria and Angola for growth amid the global consumer shift from cash to plastic.

The company faces a renewed push by French regulators to lower the fees it charges merchants of bank-card transactions.

The French Competition Authority intends to “commence a formal proceeding and issue a statement of objections unless MasterCard offers commitments to reduce its interchange fees,” the company said in a Feb. 15 regulatory filing.

To contact the reporter on this story: Stefania Bianchi in Dubai at sbianchi10@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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