* Two card companies beat analyst estimates
* Visa adjusted quarterly profit rises 18 percent
* MasterCard quarterly profit rises 8 percent
By Jochelle Mendonca and David Henry
Oct 31 Increased consumer spending and card use
worldwide drove quarterly profits higher for Visa Inc and
MasterCard Inc , according to new financial reports from
the two payments companies.
Visa, which operates the biggest network for credit and
debit cards, said that payments, adjusted for changes in
currency exchange rates, grew 6 percent in the three months
through September from a year earlier and maintained the pace
from the prior three months.
MasterCard, which has the second-biggest network, said its
purchase volume grew 12 percent in the latest three months from
a year earlier.
Both companies said growth in their businesses outside of
the United States led the increases in payment volumes. Visa's
gains were led by growth in its Asia and Pacific operations and
MasterCard, too, showed big gains in its Asia, Pacific, Middle
East and Africa segments.
Both companies are trying to capture new business from
increasing consumer preferences for cards and digital payments
instead of cash. At the same time, they are also experimenting
with mobile payments systems partly out of fear of losing
business to upstart technology companies.
Visa said profit, in what was its fiscal fourth quarter,
rose to $1.7 billion from $880 million a year earlier. But that
increase included an unusual boost of $627 million from
reversing previously recorded reserves against having to pay
Excluding the one-time gain, Visa earned $1.0 billion, or
$1.54 per share, in the quarter. Analysts on average had
expected the company to earn $1.50 per share, according to
Thomson Reuters I/B/E/S.
Visa also announced on Wednesday that its directors have
authorized a new $1.5 billion share repurchase program, bringing
to $2.3 billion the amount executives may spend to buy back
stock for the company. Buybacks have been an important source of
growth in earnings per share for the company.
Visa said it expects annual net revenue growth in the low
double digits and adjusted earnings per share growth in the high
teens in percentage terms for its new fiscal year.
"Visa delivered strong financial performance for the fourth
quarter and full year, a result of our focus on growing our core
business, accelerating expansion of our business outside the
U.S.," outgoing Chief Executive Joseph Saunders said.
The company said last week that Charles Scharf, a former
head of JPMorgan Chase & Co's retail financial services
division, will succeed Saunders, effective Nov. 1.
MASTERCARD GROWS IN EUROPE, INDIA
Like Visa, MasterCard benefited from strong growth
MasterCard's third-quarter net income rose 8 percent to
$772 million, or $6.17 per share, from $717 million, or $5.63
per share, a year earlier.
Analysts on average were expecting earnings of $5.92 per
share, excluding one-time items, according to Thomson Reuters
MasterCard revenue rose 5 percent to $1.92 billion, but fell
short of the $1.94 billion analysts had expected.
MasterCard continues to expect second-half revenue growth to
be lower than the levels it saw in the second quarter due to the
timing of deals and global economic uncertainty, Chief Financial
Officer Martina Hund-Mejean said on a conference call with
MasterCard has been boosting its presence outside the United
States, cashing in on higher-growth markets in Asia and the
"We think we can double our market share in the Nordic and
Baltic regions for the next three years, further extending our
presence in these markets that are actually doing relatively
well," Chief Executive Ajay Banga said on the conference call.
In India, MasterCard signed deals with travel company Thomas
Cook to provide foreign exchange prepaid cards, and
with ICICI Bank and Western Union Co, for a
reloadable prepaid card.
Customers of the two companies are chiefly banks that issue
cards to consumers and make deals with merchants to accept cards
Shares of MasterCard, which is based in Purchase, New York,
and has a market value of $56 billion, were up 1.8 percent at
$460.93 at the close of New York Stock Exchange on Wednesday.
Shares of Visa, which is based in Foster City, California,
and has a market value of $112 billion, rose as much as 1.6
percent to $141 in trading following the company's report after
normal market hours.
Year-to-date, Visa shares were up 37 percent and MasterCard
shares 24 percent late on Wednesday.