Submitted by Fox First at Ten on October 31st
By DANIEL WAGNERAP Business Writer
MasterCard's net income rose strongly in the third quarter as its overseas business thrived, the company said Wednesday.
The payments company's business grew by virtually every measure. It processed 8.7 billion transactions, an increase of 24 percent over last year. Excluding the U.S., people spent 15 percent more money using MasterCard-branded cards on a local-currency basis. Americans spent about 7 percent more using MasterCard plastic.
The overall volume of purchases rose 12 percent on a local currency basis to $676 billion.
MasterCard's business grew as it won new partnerships overseas and acquired a loyalty reward provider in the U.S. The company "won significant business in Europe this quarter with Nordea, Credit Agricole and CSOB in the Czech Republic," president and CEO Ajay Banga said in a statement.
Banga said there are plenty more opportunities to grow in emerging markets. The largest supermarket chain in East Africa is expected to deliver more than a million prepaid loyalty cards to customers, he noted. In the U.S. and Mexico, MasterCard has won contracts with several large government agencies, Banga said.
The payments network, based in Purchase, N.Y., said that its net income rose to $772 million, or $6.17 per share, from $717 million, or $5.63 per share in the same period a year earlier.
Revenue rose 5 percent, to $1.92 billion, in the three months ended Sept. 30 from $1.82 billion a year ago.
MasterCard is doing better partly because consumers have a more optimistic view of the economy and are spending more freely. The government said this week that Americans increased their spending in September by 0.8 percent, the most since February. That followed a 0.5 percent gain in August.
The spending appears to be driven by a brightening economic outlook. The University of Michigan reported Friday that its final consumer sentiment index hit a five-year high in October. Falling gas prices and a slightly better job market were credited with lifting consumers' outlook.
Spending by consumers drives nearly 70 percent of the economy. It is crucial for MasterCard's bottom line in the U.S., where its business has grown far more slowly than overseas.
Another reason why MasterCard's future looks brighter: It is closing in on a final settlement in a massive class-action lawsuit brought by retailers. MasterCard, Visa and major banks have agreed to pay retailers $7.25 billion for alleged fee fixing. Despite pushback from some large retailers, the deal is expected to gain court approval in the coming months.
MasterCard already has taken charges to reflect the costs of that and related lawsuits, which are expected to cost a total of $790 million. The company took a write-down of $770 million in the fourth quarter of last year and another $20 million charge in this year's second quarter.
MasterCard said it bought back 500,000 shares of common stock for $216 million in the third quarter. Repurchasing stock is a way of returning value to shareholders by reducing the number of shares outstanding.
So far this quarter, the company has repurchased another 255,000 shares for $119 million, it said.
The earnings result beat analysts' expectations, while revenue fell just short, according to a survey by FactSet.
MasterCard's stock rose $7.95, or 1.8 percent, to close at $460.93 Wednesday.
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Daniel Wagner can be reached at www.twitter.com/wagnerreports.
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