MasterCard Profit Tops Estimates as Consumer Spending Rises

Jul 31, 2014 10:54 am ET

(Updates with comments on Russia starting in sixth paragraph.)

July 31 (Bloomberg) -- MasterCard Inc., the second-largest U.S. payments network, posted profit that beat analysts’ estimates as card spending increased.

Second-quarter net income rose 9.8 percent to $931 million, or 80 cents a share, from $848 million, or 70 cents, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 30 analysts surveyed by Bloomberg was 77 cents.

Chief Executive Officer Ajay Banga, 54, is investing in new technologies as the pace of digital payments accelerates amid a global shift from cash and checks to electronic transactions. MasterCard is also scooping up smaller firms abroad to help expand its reach outside the U.S.

Results reflect “another quarter of solid performance, driven by healthy volume and revenue growth,” Banga said in the statement.

Revenue increased 13 percent to $2.4 billion as card spending climbed by a similar rate to $821 billion and cross- border volumes, or spending by consumers outside their home countries, rose 16 percent, MasterCard said. Higher personnel costs pushed operating expenses up 15 percent to $994 million, surpassing the 12 percent estimate of Tien-tsin Huang, a JPMorgan Chase & Co. analyst.

Russia Sanctions

MasterCard is “exploring multiple options” to comply with changes Russia is making to its domestic payments system in response to economic sanctions, while also seeking to “fulfill its U.S. obligations,” Banga said on a call with analysts.

“We expect only minimal impact from the current Russia situation on our 2014 results,” Banga said.

In May, Banga said Russia accounted for about 2 percent of MasterCard’s business. He estimated today that the changes in Russia could cut about $50 million from MasterCard’s annual revenue.

MasterCard fell 1.1 percent $75.05 at 10:36 a.m. in New York. The shares have slid 10 percent this year, compared with a 1.4 percent retreat for American Express Co. and Visa Inc.’s 4.5 percent decline. Discover Financial Services, the fourth-biggest U.S. payments network, has gained 10 percent.

Visa, the world’s biggest payments network, said July 24 that net income for the three months ended June 30 climbed 11 percent to $1.36 billion, beating analysts’ estimates. The company lowered its revenue forecast for the year amid a strengthening U.S. dollar and tepid growth from cross-border transactions in regions including Russia, Ukraine and the Middle East.

American Express, the biggest U.S. credit-card issuer by purchases, said July 29 that second-quarter profit increased to $1.53 billion as the company completed the spinoff of its business-travel unit.