Increased spending strengthens MasterCard

MasterCard Inc, the second-biggest payment-card network, said profit climbed 63 percent, beating analysts' estimates, as customer spending increased. The shares rose as much as 8 percent in premarket trading.

Third-quarter net income rose to $314 million, or $2.31 a share, from $193 million, or $1.42, a year earlier, the Purchase, New York-based company said yesterday in a statement. MasterCard earned $1.80 a share before gains of $70 million on the partial sale of its stake in Redecard SA in Brazil. The company said it will more than double the size of its share repurchase program.

MasterCard, which gets about half its revenue from customers outside the United States, benefited as the dollar fell to a record low during the quarter. The shares have risen more than fivefold since Chief Executive Officer Robert Selander took the company public in May 2006, capitalizing on consumers' growing preference for credit and debit cards over cash and checks.

"They have a greater international presence than competitors and it's growing at a pretty rapid pace," Sanjay Sakhrani, an analyst at KBW Inc. "That should help" if US consumer spending declines amid rising mortgage defaults and tighter credit, he said.

MasterCard fell 20 cents to $157.15 in New York Stock Exchange composite trading on Wednesday. The stock, which went public at $39 a share, has risen 60 percent this year. The shares changed hands for $169.75 before regular trading.

The company was expected to earn $1.42 a share, based on the average estimate of 14 analysts surveyed by Bloomberg.

Repurchase plan

MasterCard increased its plan to repurchase shares to $1.25 billion from $500 million, the company said in the statement. The company plans to complete the buyback program by June 30.

American Express Co, the third-largest US credit-card network, last week exceeded analysts' third-quarter earnings estimates as purchases rose 16 percent to $162.5 billion.

The company said that "affluent and high-spending" cardholders sheltered it from losses tied to record defaults on US home loans by the riskiest borrowers.

Bloomberg News

(China Daily 11/02/2007 page16)