As consumers started spending more in the first quarter, they were not hesitant to use their credit cards as Visa and MasterCard earnings show, with better than anticipated profits and higher transactions volume.
MasterCard today reported first quarter earnings of $455 million, or $3.67 a share, compared with $367 million, or $2.80 a share a year ago. Net revenue was $1.3 billion, a 13.1 percent increase versus a year ago.
Visa, the larger of the two payment networks, last week reported a profit of $713 million, or $0.96 per share, for its fiscal second quarter 2010, ended March 31. Net revenue was at $2 billion, a 19 percent jump over the prior year.
Both exceeded Wall Street analysts’ estimates. The strong showing by the two top card processors reflect a resurgence in consumer spending of 3.6 percent in the first quarter, the biggest surge since early 2007, based on figures released by the U.S. Commerce Department last week.
MasterCard and Visa results may also signal a possible bottoming of a prolonged reduction in consumer loan balances since the onset of the financial crisis. The Federal Reserve said revolving credit – mostly credit card debt - fell 13.1 percent to $858.1 billion in February, the 16th decrease in 17 months.
“We are starting the year with strength across several of our business drivers, including healthy cross-border volumes, which contributed to our solid first quarter results,” said Robert W. Selander, MasterCard chief executive officer.
MasterCard’s worldwide purchase volume was up 8.7 percent to $473 billion on a local currency basis, compared to the first quarter of 2009. The number of processed transactions rose 4.6 percent to 5.4 billion, versus the same period in 2009.
Visa reported total processed transactions, which represent transactions processed by VisaNet, of $10.6 billion, a 14 percent increase over the prior year. Visa’s payments volume growth, on a constant dollar basis, was 13 percent over the prior year at $745 billion.
“We are increasingly optimistic that economic growth will gradually improve,” said Joseph Saunders, chairman and chief executive officer of Visa. “At the same time, we remain diligent about how we manage our business and finances throughout the current economic environment.”
