Mastercard Profit Tops Estimates as Card Spending Increases

  • Net income climb 6.7% to $983 million, or 89 cents a share
  • Revenue increases 13% to $2.69 billion, beating estimates

Mastercard Inc., the second-largest U.S. payments network, posted profit that beat analysts’ estimates as customer card spending increased.

Second-quarter net income climbed 6.7 percent to $983 million, or 89 cents a share, from $921 million, or 81 cents, a year earlier, the Purchase, New York-based company said Thursday in a statement. Profit excluding a litigation charge was 96 cents a share, the firm said, compared with the 90-cent average estimate of 30 analysts surveyed by Bloomberg.

“The underlying fundamentals of our business have not changed, they are good,” Chief Financial Officer Martina Hund-Mejean said in a phone interview. “We’re going to continue to execute in terms of what we said we would be doing.”

Mastercard, led by Chief Executive Officer Ajay Banga, is benefiting as more people replace cash and checks with electronic payments. The firm has begun investing in payments technology beyond the plastic cards many consumers know, from a refrigerator that can order groceries to a robot named Pepper that can take customers’ orders at Pizza Hut.

Revenue Climbs

Revenue increased 13 percent to $2.69 billion from a year earlier, beating the $2.59 billion estimate of analysts in the Bloomberg survey, as expenses jumped 15 percent to $1.31 billion. Purchase volume increased 9.4 percent to $897 billion, the company said.

Mastercard shares gained 1.3 percent to $95 at 8:45 a.m. in early trading in New York. The stock slid 3.7 percent this year through the close of regular trading Wednesday.

Rebate and incentive spending increased as consumers now demand better rewards and merchants continue to seek improved terms, forcing card networks and banks to sweeten terms on fees and rewards.

Mastercard announced last week that it agreed to pay 700 million pounds ($921 million) for a controlling stake in VocaLink Holdings Ltd., the U.K.-based payments firm that handles most of the country’s payroll and household bill processing. Mastercard expects the all-cash transaction to crimp profits for as long as two years after the purchase is completed.

The deal, Mastercard’s biggest since going public in 2006, will give the company a bigger foothold in Britain. Larger rival Visa boosted its presence there with this year’s purchase of Visa Europe for more than $20 billion.

Visa, the largest payments network, posted fiscal third-quarter profit last week that beat analysts’ estimates as consumer card spending increased. American Express Co., the biggest credit-card issuer by purchases, said quarterly profit climbed 37 percent to $2.01 billion, helped by a $1 billion gain from the sale of its Costco Wholesale Corp. portfolio.

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