MasterCard Profit Beats Estimates as Spending Climbs

MasterCard Inc. CEO Ajay Banga
MasterCard Inc. Chief Executive Officer Ajay Banga, who took over the top job at the start of the quarter, is repurchasing shares and targeting markets beyond the U.S. to boost revenue growth. Source: MasterCard Inc via Bloomberg

MasterCard Inc., the world’s second-biggest payments network, posted third-quarter profit that exceeded most Wall Street estimates as more consumers paid with credit and debit cards.

Net income climbed 15 percent to $518 million, or $3.94 a share, from $452 million, or $3.45 a share, in the same period a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 29 analysts surveyed by Bloomberg was for earnings of $3.54 a share.

Chief Executive Officer Ajay Banga, who took over the top job at the start of the quarter, is targeting markets beyond the U.S. to boost revenue growth. He’s trying to accelerate the worldwide consumer shift from cash and checks to plastic while taking market share from larger rival Visa Inc.

“We are at the heart of a growth sector,” Banga, 50, said today in a conference call with analysts. “While we recognize that the industry is changing, we’re not going to simply look to see our way through challenges that may arise, but we’re going to convert on the underlying opportunities that they present.”

Net revenue increased 4.7 percent to $1.43 billion as operating expenses dropped 4.1 percent to $662 million.

MasterCard advanced $6.99, or 2.9 percent, to $245.98 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have fallen 3.9 percent this year.

Global Spending

Worldwide spending on MasterCard and Maestro-branded cards climbed 7.9 percent to $514 billion based on local currencies, the company said. Spending by consumers outside their home countries surged 15 percent. Processed transactions rose 0.6 percent to 5.8 billion. Visa last week posted fiscal fourth-quarter net income of $774 million, a 51 percent increase, as processed transactions and total card spending rose.

Shares of MasterCard and San Francisco-based Visa had declined more than 20 percent earlier this year as Congress included caps on debit-card interchange, or “swipe,” fees, in the Dodd-Frank financial-regulatory overhaul. Both companies are awaiting word from the Federal Reserve on how the central bank will interpret Congress’s mandate to regulate the fees.

Antitrust Action

“Until we see it, it’s impossible to predict the outcome to either MasterCard or the entire payments industry,” Banga said in the conference call. “We expect a first draft of the Fed’s position sometime in December.”

Last month MasterCard and Visa settled a U.S. antitrust lawsuit by agreeing not to bar merchants from steering customers to cheaper card brands and alternative payment forms. A separate antitrust case brought by merchants is pending in federal court.

MasterCard has signed new deals, including a contract with Banco Santander SA subsidiary Sovereign Bank to convert a U.S. portfolio of about 2 million debit cards from Visa, Chief Financial Officer Martina Hund-Mejean said in a telephone interview today.

“That will be flipped in the first half of 2011,” she said. MasterCard also won a contract that will expand the number of its cards issued by UBS AG’s wealth-management division, Hund-Mejean said.

Visa and MasterCard have both announced plans to buy back up to $1 billion in stock each. Visa, which completed an earlier $1 billion stock repurchase in the three months ended Sept. 30, said last week that it may buy more shares during the next year. MasterCard hasn’t yet bought back stock under the repurchase program it announced on Sept. 14, Hund-Mejean said today.




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