November 3, 2009
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News: MasterCard Exceeds Expectations
While credit card customers are going bankrupt and lenders are losing millions in defaults, someone's making money. Last week we learned that Visa, the largest card network, reported performed better than expected and posted high profits. Today, we learn that MasterCard performed way above expectations as well. MasterCard, the second largest credit card network in the world, released third quarter financials which shows an income of $452.2 million $3.45 a share versus a $193.6 million or $1.48 a share loss a year ago which resulted from a $515.5 million after-tax charge related to a litigation settlement with Discover Financial. Experts had forecasted the giant credit card network to reach an average share increase to $2.93.
MasterCard's success can be attributed to the increase in debit transaction increase as individuals have been making the transition from credit card spending to debit. According to the report, MasterCard processed more than 5.8 million transactions; a 7.6 percent increased from last quarter. Revenues were also above the $1.35 billion forecast which grew nearly 2 percent to $1.36 billion. Purchase volume, or spending on MasterCard debit and credit cards, rose 0.4 percent in the third-quarter. The number of MasterCard branded cards in circulation remained constant with last year at approximately 964 million cards.
MasterCard and Visa have both fared better than consumers and credit card issuers during the recession and in the wake of the one of the highest unemployment rates in the nation's history. Neither card network extends credit; and, therefore does not experience the same risks that banks and issuers do. According to MasterCard's Chief Executive Officer, Robert Slander, the company's results indicate that the worst could be over. Although Slander believed the economic rebound might be less robust than hoped for, the Nilsson Report indicated in a recent newsletter that by the year 2012 electronic payments will account for more than 54 percent of the nation's purchases.