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MasterCard posts 3Q profit jump of 15 percent

MasterCard posts 3Q profit jump of 15 percent

MasterCard Inc. on Tuesday said increased use of credit and debit cards, especially overseas, helped lift its third-quarter profit by 15 percent.
The payments processor recorded a net income of $518 million, or $3.94 per share, for the three months ended Sept. 30. That compares with $452 million, or $3.45 per share, in the year-ago quarter.
Revenue rose 5 percent to $1.43 billion, from $1.36 billion last year.
Analysts polled by Thomson Reuters, on average, were expecting profit of $3.54 per share, on revenue of $1.41 billion.
The results lifted MasterCard shares Tuesday. The stock added $6.64, or 2.3 percent, to $245.63.
MasterCard said usage of credit and charge cards in the U.S. dipped 0.7 percent, to $132 billion. Domestic debit card usage dropped 5 percent, to $108 billion.
MasterCard said the declines can be explained by changes at the banks that issue its cards. The company lost deals with several major banks, most notably the former Washington Mutual, which was taken over by JPMorgan Chase during the height of the financial crisis in 2008. Chase has been converting its customers to cards bearing Visa logos, a process that is expected to be completed by the middle of 2011.
Chief Financial Officer Martina Hund said excluding the "roll-off" effect, debit card use rose nearly 16 percent in the third quarter.
MasterCard has struck new deals with several banks, and the number of cards in use bearing the MasterCard logo rose to 1.6 billion during the quarter. But several of those deals, including ones with SunTrust Banks and Sovereign Bank, will take time come online. Hund said it will be the fourth quarter of 2011 before the overlap between lost business and new deals has evened out.
Visa Inc.'s debit card network is much bigger than MasterCard's, and debit has overtaken credit in both the number of purchases and dollar spent on the cards in the past few years. That trend has accelerated as consumers cut their debt. At the same time, consumers are shifting more spending to plastic and away from cash and checks, making the number of cards in use even more important.
Thomas McCrohan, an analyst with Janney Capital Markets, said deals with smaller banks like SunTrust and Sovereign don't make up for the huge market share loss with WaMu. "It doesn't fill the hole," he said, noting that WaMu was MasterCard's biggest debit customer.
But UBS analyst Jason Kupferberg said that MasterCard's strategy in going after small and midsized banks is aimed at chipping away Visa's dominance. "I think they realize that it's much more difficult to win one of the giant issuers," he said. "What they're really focusing on is, where can they find potential customers that are more realistic for them to win?" Adding banks like SunTrust and Sovereign means the company is starting to see some success, he said.
Meanwhile, declines in card usage in the U.S. were offset by a surge in spending on both credit and debit cards worldwide. Credit and charge card use jumped 9 percent globally to $317 billion. Debit card use shot up 29 percent to $128 billion. Particularly strong gains were seen in the Asia/Pacific region and Latin America, CEO Ajay Banga said during a conference call to discuss the results.
Overall, spending with MasterCard branded cards rose 8 percent to $685 billion. Through October, transaction growth and volume picked up some pace from the third quarter, the company said on the call. McCrohan called that encouraging news.
One bright spot in the U.S. is commercial credit, where Hund said spending is improving, with gains seen from small businesses to large corporations.
Consumer trends so far this quarter are also improving, but not as fast, she said. Weak spending in the U.S. reflects the ongoing skittishness of consumers who are worried about jobs.
MasterCard, based in Purchase, New York, said deals the with banks for new and renewed agreements to distribute its cards offset gains from price increases for processing transactions.


Updated : 2020-12-04 12:54 GMT+08:00