MasterCard profit up 25 percent on overseas gains

May 2, 2012 - 6:16 PM

Earns MasterCard

FILE- This Sept. 21, 2011, file photo. shows a MasterCard sign on a revolving door in New York. MasterCard said Wednesday, May 2, 2012, its first-quarter profit rose 25 percent on a big spike in card use overseas. Its net income was $682 million, or $5.36 per share, on revenue of $1.8 billion. (AP Photo/Mark Lennihan, File)

NEW YORK (AP) — Shoppers in Latin America, the Asia Pacific and the Middle East powered a 25 percent increase in MasterCard's profit for the first three months of the year.

The Purchase, N.Y.-based payments processor reported income of $682 million Wednesday, or $5.36 per share, on revenue of $1.8 billion. That exceeded Wall Street's expectations of $5.29 per share on revenue of $1.73 billion.

Ajay Banga, MasterCard's chief executive officer, said the amount of purchases the company processed jumped 29 percent, the highest growth rate since the company went public.

MasterCard usage in the U.S. grew 14 percent as people spent more in restaurants and on apparel, hardware and electronics. Banga told analysts on a conference call that the U.S. economy would have to do better for that growth to continue.

"For this trend to continue for a sustained period of time, we're going to look for additional improvement in unemployment and a positive turn in housing prices," Banga said.

In the last couple of years, MasterCard Inc. has focused on expanding its international business by acquiring an international card processing system called DataCash and a global prepaid travel card manager called Access Prepaid Worldwide.

Both of those acquisitions have paid off in the quarter, contributing to 25 percent profit growth, said Banga.

In the Asia Pacific, Latin America, Middle East and Africa, usage of its cards grew 23 percent.

During the first quarter of 2012, MasterCard repurchased 652,500 shares at a cost of approximately $248 million. The company said it is authorized to repurchase another $556 million worth of stock.

MasterCard increased rebates and incentives, a common practice in the industry where processors offer banks and other issuers breaks to persuade them to switch the logos on the cards they offer their customers.

MasterCard's stock fell 1 percent, or $4.45, to close at $451.45 Wednesday.

In the quarter costs related to such incentives grew 24 percent, taking a bite out of the company's revenue. Analysts don't like to see too much of an increase in these costs because it weakens results.

In the short term the incentives seem to be working though — MasterCard doubled its share in U.S. debit cards in the first quarter compared to the same period last year.

The company said it plans to achieve an annual revenue growth rate of 12 percent to 14 percent, and earnings per share growth of at least 20 percent.

Chief Financial Officer Martina Hund Majean said the first quarter results also benefited from an extra day in the 2012 leap year and also from an increase in card usage from people who received their tax refunds on prepaid cards.