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Visa Profit Climbs 89% on Reversal of Tax Reserves

Visa Inc. advanced 45 cents to $138.76 at 4 p.m. in New York. Photographer: Andrew Harrer/Bloomberg
Visa Inc. advanced 45 cents to $138.76 at 4 p.m. in New York. Photographer: Andrew Harrer/Bloomberg

Oct. 31 (Bloomberg) -- Visa Inc., the world’s biggest payments network, posted a fiscal fourth-quarter profit that beat analysts’ estimates as the company reversed $627 million in previously recorded tax reserves.

Net income for the three months ended Sept. 30 climbed 89 percent to $1.66 billion, or $2.47 a share, from $880 million, or $1.27, a year earlier, the Foster City, California-based company said today in a statement. Adjusted profit per share, which excludes one-time items, was $1.54, beating the $1.50 average estimate of 34 analysts surveyed by Bloomberg. Adjusted net income for the full year was $4.2 billion.

Consumer spending in the U.S., where Visa gets more than half its revenue, rose more than forecast last month, a sign that the biggest part of the economy was strengthening as the quarter ended. It was Visa’s last full period under the stewardship of Chief Executive Officer Joseph W. Saunders, 66, who steps down after today and hands control to Charles Scharf, the former head of retail banking at JPMorgan Chase & Co.

“Visa has a strong foundation for continued long-term growth as technology-enabled change continues to shape our global market,” Saunders said in the statement. “We see extraordinary opportunity for growth.”

Visa’s Outlook

Visa said annual earnings-per-share growth would be in the “high teens” in 2013, down from a 2012 forecast of “low twenties” provided in July, according to the statement. The company said client incentives could climb to 18.5 percent of gross revenues in 2013, compared with an earlier top range of 18 percent. Capital expenditures may climb to $475 million, up from an estimate of $400 million, Visa said.

Visa rose 1.2 percent to $140.51 at 4:38 p.m. in New York after the announcement. It has climbed 37 percent this year, the sixth-best performance in the 70-company Standard & Poor’s 500 Information Technology Index. MasterCard Inc. rose 1.8 percent to $460.93.

The company is working to derive more than half of its revenue from outside the U.S. by 2015, Saunders has said. Scharf, 47, may attain that goal with the help of a long-term global consumer shift to electronic payments from cash and checks, particularly in emerging economies.

Saunders, who led Visa since its 2008 initial public offering, will remain as executive chairman through March. He navigated challenges to the firm’s business model, including new U.S. rules on debit-card fees that eroded the company’s dominance of that business as it lost market share to MasterCard and other competitors.

MasterCard Results

MasterCard’s third-quarter profit climbed 7.7 percent to $772 million, the Purchase, New York-based company said today in a statement.

Visa’s operating revenue rose 15 percent to $2.73 billion from a year earlier, beating the $2.67 billion estimate of 31 analysts.

Visa has repurchased stock and increased the dividend as the company moves closer to resolving a seven-year legal battle with merchants over credit-card “swipe” fees.

The settlement of the proposed class-action lawsuit against banks, MasterCard and Visa probably is worthy of preliminary approval, U.S. District Judge John Gleeson in Brooklyn, New York, said last week. Visa has said its share of the settlement would be about $4.4 billion. MasterCard has said the accord could cost the company $790 million.

Processed Transactions

MasterCard, ranked No. 2 globally by processed transactions, risks losing its standing as the second-biggest payments network in terms of total spending to Shanghai-based China UnionPay Data Co.

UnionPay’s share of combined credit- and debit-card purchase volume for the first half of 2012 rose to 25 percent from 21 percent a year earlier, while MasterCard’s climbed to 22 percent from 21 percent, according to the Nilson Report, a payments-industry newsletter. Visa’s share declined to 46 percent from 49 percent, while fourth-ranked American Express Co.’s fell to 7.2 percent from 7.5 percent.

Visa, MasterCard and New York-based AmEx were among companies to win partial support this year from World Trade Organization judges in a U.S. claim that China unfairly discriminates against foreign suppliers of electronic-payment services by imposing requirements on them that aren’t applied to domestic firms.

To contact the reporter on this story: Dakin Campbell in San Francisco at

To contact the editors responsible for this story: David Scheer at

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