MasterCard Profit Tops Estimates as Customers Spend More

MasterCard Inc. (MA), the second-biggest payments network, rose as much as 4.3 percent after posting first-quarter profit that beat analysts’ estimates on increased customer spending.

Net income rose 14 percent to $870 million, or 73 cents a share, from $766 million, or 62 cents, a year earlier, the Purchase, New York-based firm said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was for adjusted profit of 72 cents a share.

Chief Executive Officer Ajay Banga is boosting dividends and repurchasing shares as MasterCard benefits from a global shift from cash and checks to electronic forms of payment. The company saw an increase in spending on credit and debit cards last quarter in regions including Latin America, Asia and the U.S.

“We do have some challenges with Russia and the European payments industry regulation,” Banga, 54, said in a conference call with investors after results were released. “But you know what? There are opportunities, too, around the world which we believe give us some balance.”

Revenue increased 14 percent $2.18 billion, the company said, topping the $2.14 billion average estimate of analysts in the Bloomberg survey. Worldwide purchase volume growth was 13 percent. Operating expenses increased 12 percent to $892 million as the company spent more on advertising and marketing, the company said. MasterCard repurchased $1.7 billion of shares in the quarter, according to the statement.

‘Small Impact’

MasterCard now sees a 6-cent to 8-cent dilution to earnings per share this year on costs associated with recent acquisitions of processing, mobile and loyalty businesses, Chief Financial Officer Martina Hund-Mejean said on the call. The earlier forecast was for 1 cent to 2 cents.

MasterCard gained 2.8 percent to $75.64 at 10:37 a.m. in New York after earlier reaching $76.71. The shares slid 9.5 percent so far this this year compared with the 1.9 percent advance of the Standard & Poor’s 500 Index.

Banja said he expects a “small impact” on 2014 results from U.S. tensions with Russia. The longer-term effects from sanctions and Russia’s efforts to impose new regulations on the payments industry are less clear, he said.

“It’s a complicated issue,” Banga said on the call, adding that MasterCard gets about 2 percent of total net revenue from the country. “It’s a good growth market, so I don’t like it, but it’s what’s happening. It’s what we have to deal with.”

Russia Sanctions

The U.S. imposed sanctions on Russian individuals and companies starting last month, prompting MasterCard and larger rival Visa Inc. (V) to stop processing payments for some banks. Russian President Vladimir Putin has recommended his country create its own payments system and change its laws.

Visa, the largest payments network, said last week that the sanctions may trim “several pennies” a share from fiscal 2014 earnings. Visa is “caught between the politics of the United States and the politics of Russia,” Chief Executive Officer Charlie Scharf said.

Visa Inc. said April 24 that first-quarter profit increased 26 percent to $1.6 billion as revenue gains missed expectations.

American Express Co. (AXP), the biggest U.S. credit-card issuer by purchases, said last month that quarterly net income rose 12 percent to $1.43 billion, exceeding analysts’ expectations. Discover Financial Services, based in Riverwoods, Illinois, reported April 22 that first-quarter profit slid 6.2 percent to $631 million.

Visa gained 1.7 percent to $206.08 in New York, while AmEx slid 0.4 percent to $87.11 and Discover dropped 0.7 percent to $55.53.

To contact the reporter on this story: Elizabeth Dexheimer in New York at edexheimer@bloomberg.net

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steven Crabill, Rick Green

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