Mastercard posts record profit on higher global spending

(Reuters) - Mastercard Inc MA.N on Tuesday posted a record profit and trounced Wall Street expectations, as it battled for consumers and global market share over other payment channels including its bigger rival Visa Inc V.N.

A Mastercard logo is seen on a credit card in this picture illustration August 30, 2017. REUTERS/Thomas White/Illustration

More people used credit, debit and commercial prepaid cards across Mastercard’s global network - pushing the value of transactions processed - known as ‘gross dollar volume’, up 11 percent to $1.35 trillion.

“In the U.S., we continue to see steady economic growth, low unemployment and inflation,” said Ajay Banga, chief executive officer of Mastercard, on a post-earnings call.

“Consumer sentiment is favourable.”

Last month, consumer spending in the United States had its largest increase in eight years, aiding payment processors such as Mastercard and Visa, which generate revenue by facilitating credit- and debit-card transactions.

Visa also beat market expectations last week, posting an 11 percent rise in quarterly profit on healthy consumer spending.

Mastercard shares hit a record earlier but lost ground and were down 1.3 percent at $147.02 mid-day. The drop was attributed to profit taking after a 20 percent rise from the previous quarter, according to Thomas McCrohan, managing director of Americas Research at Mizuho.

Mastercard has risen nearly 44 percent this year, as of Monday’s close, outpacing Visa, which was up 41 percent over the same period.

Mastercard's net income rose 21 percent to $1.43 billion or $1.34 per share in the third quarter ended Sept 30. Analysts on average were looking for $1.23, according to Thomson Reuters I/B/E/S.

Cowen analyst George Mihalos called the results “very strong” and said the company has “exceeded our expectations every quarter this year.”

Mastercard is taking measures to bolster security on its network and said safety remains a key priority. Many American companies are investing heavily in securing their systems against hackers.

“Our investments in technologies like biometrics, tokens, encryption and artificial intelligence are redefining the way both consumers and transactions are protected,” Banga said.

Mastercard has already started the process when it announced this month it would forgo signatures after purchases.

Total operating expenses rose 20.4 percent to $1.46 billion in the quarter, partly from costs related to buying digital payments company Vocalink.

Net revenue rose 18 percent to $3.40 billion and topped estimates of $3.28 billion.

Reporting By Aparajita Saxena in Bengaluru; Editing by Bernard Orr