February 9,2009
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News: MasterCard Doing Better.
After beating analysts' profit estimates, the MasterCard credit card association has managed to show the greatest rise in three months on Wall Street. How did they do it? They raised the price of processing international credit card purchases. Their profit over the fourth quarter, not including a settlement charge was $1.87 a share. This showing far surpassed the estimate of 21 analysts in a Bloomberg survey which only predicted a $1.62 average. MasterCard's revenues rose 14% to $1.2 billion that quarter. More than half of the rise was attributed to cross-border credit card transactions. Composite trading on the New York Exchange ascended by 14%.
In attempts to reach profit targets in spite of by the crumbling U.S. economy, MasterCard has been cutting expenses. Much of this association's revenue comes from fees collected between financial institutions with credit card transactions. MasterCard's quest is to shine through, even in the worst economic environment our nation has experienced in the last two or three decades while the credit card lenders flounder.
By comparison, MasterCard's biggest competitor, VISA has done well, only not as well as MasterCard. As the nation's largest credit card network, VISA was able to post a rise of 9.4% at the same time. This followed VISA's announcement of a 35% rise in revenues for this year's first fiscal quarter. Their profit rose to $574 million. All this at a time when our nation's credit card consumers have backed off to less credit card spending than has happened in 17 months.
MasterCard has been able to cut operating expenses in areas like consulting costs, travel and advertising. They've trimmed off 16% of their expenses this way. It doesn't hurt that the worldwide debit and credit card market continues to climb, either. With a 3.1% rise in purchase volume and a 7.6% rise in new accounts, this has served to cushion losses in the US.