MasterCard profit more than doubles as card use abroad rises

By MADLEN READ AP Business Writer

NEW YORK (AP) - MasterCard's profit more than doubled in the first quarter as more customers outside the United States used their credit and debit cards for purchases.

Cardholder spending within the United States rose, too, but at a more moderate pace, indicating that while Americans are increasingly turning to plastic in a weak economy, emerging markets are becoming especially lucrative.

The Purchase, N.Y.-based card processor said Tuesday it earned $446.9 million, or $3.38 per share for the January to March period. That is up from $214.9 million, or $1.57 a share, in the same timeframe last year.

Even after excluding the effects of a gain from terminating a customer business agreement and another gain from selling its remaining holdings in the Brazilian company Redecard, MasterCard's earnings per share totaled $2.59. That was above the average analyst estimate of $2 a share, according to Thomson Financial.

Shares rose $26.11, or 11 percent, to $268.61 in afternoon trading Tuesday after rising to a 52-week high of $269.93 earlier in the session. The stock is up more than 20 percent since the beginning of the year.

MasterCard Inc. is like Visa Inc., in that it processes card payments, but its member banks issue the credit.

And like Visa - as well as American Express Co. and Discover Financial Services LLC, which have also released their profit reports for early 2008 - MasterCard has reported an increase U.S. cardholder spending.

Purchase volume with both credit cards and debit cards rose, driving MasterCard's U.S. gross dollar volume up 8.9 percent from a year ago to $259 billion, despite a decline in U.S. credit card advances.

CEO and President Robert Selander said during a conference call with analysts that he continues to see U.S. consumers shift away from luxury purchases, such as home furnishings, toward necessities like food and gasoline, which are rising in cost.

"We recognize that our customers are experiencing extraordinary challenging conditions," Selander said.

The company is working harder to get MasterCard debit and credit cards accepted by U.S. utilities, rental companies and health care providers - areas where many Americans even in times of economic turmoil spend the bulk of their income, but which have been slower to accept cards instead of checks.

"By opening up those merchant categories, the financial institution can capture more of the electronic payments space in the United States," said CFO Martina Hund-Mejean in an interview with The Associated Press.

Meanwhile, card use outside the United States surged faster than in the U.S., with gross dollar volume soaring 30 percent to $352 billion. Regions such as Latin America, South Asia, the Middle East and Africa saw particularly significant growth.

Revenue totaled $1.2 billion, up 29 percent from the previous year and above the average analyst estimate of $1.07 billion, according to Thomson Financial.

"We are encouraged by these results given investors' concerns regarding a major U.S. economic slowdown and, by extension, slower growth elsewhere," wrote KeyBanc analyst Anurag Rana in a note.

The effect of the dollar's tumble against other world currencies - particularly the euro and the Brazilian real - boosted MasterCard's revenue by more than 5 percent.

Cross-border card use - the use of cards by travelers in foreign countries - also benefited MasterCard.

"There's a healthy amount of Americans still traveling abroad," Hund-Mejean said. "There's business to be done all over the world. A lot of the business travelers are getting out of the United States, and they are spending."

Cross-border volumes rose nearly 24 percent, and a price increase in cross-border acquiring fees implemented in January also lifted revenue growth.