Visa Posts Gains in Quarter; MasterCard Records Loss on American Express Settlement

Credit card firms Visa and MasterCard reported quarterly earnings that showed continuing growth, though MasterCard’s overall results were hammered by legal costs.

Visa, Inc. (NYSE: V), reporting after the market closed on Wednesday, reported net income for its fiscal third quarter of $457 million, or $0.59 per share.

Visa showed growth for several different measurements of its business: Payments volume grew 19 percent over the prior year to $652 billion; total volume, inclusive of cash volume, was $1 trillion, an increase of 22 percent over the prior year; total payment transactions increased by 15 percent over the prior year to 10.7 billion; total processed transactions, which are based on current fiscal third quarter results on Visa’s processing system, were 9.5 billion, a 13 percent increase over the prior year; and total Visa-branded cards in circulation rose 14 percent worldwide to 1.6 billion over the prior year.

“Despite a challenging economic environment in the United States and a softening in traditional credit card spending, the strength of Visa’s debit business drove solid growth in the region,” said Joe Saunders, Visa chairman and chief executive officer, in a prepared statement.

MasterCard, Inc. (NYSE: MA), reporting before the market opened Thursday, reported a $1 billion charge to settle an antitrust case with American Express Co. (“MasterCard to Pay American Express $1.8 Billion to Settle Antitrust Suit,” June 25).  The charge drove a second-quarter loss of $746.7 million, or $5.74 a share.

Excluding the charge, quarterly net income was $276 million, or $2.11 a share, the company said. In the year-ago period, MasterCard reported adjusted net income, excluding special items, of $195 million, or $1.43 a share.

“They have been growing, but what is interesting is the area of growth,” Adil Moussa, analyst for Aite Group, told insideARM. “Because the U.S. is a saturated market (in terms of card holders), they’re trying to push more acceptance.”

The areas where the card companies are concentrating their efforts are in business-to-business payments, public transportation (particularly taxis), higher education and utilities, according to Moussa.

A few years ago, there was a similar push into fast-food restaurants. Before the push, which featured the card companies paying for terminals in restaurants like McDonald’s and Burger King, it was rare for a fast-food establishment to accept a credit card. Now it’s nearly ubiquitous.

In addition to the efforts from the card companies, third party payment providers like ChargeSmart LLC ("New Program Allows Consumers to Pay Mortgage with Credit Cards," July 10) and Paymentus ("Property Taxes Latest New Market for Credit Card Processors," July 29) are also pushing credit cards further into previously untapped or barely tapped territories.

Moussa added that MasterCard’s corporate structure is better set up to handle risk because it takes in earnings from all parts of the world, enabling it to balance recessions and booms as well as currency risk. When Visa went public, it split into four separate companies, each with a different geographic focus.