MasterCard profit beats expectations as costs fall

       MasterCard Inc reported higher-than-expected quarterly earnings on Tuesday as the world's second-largest credit card network aggressively trimmed marketing expenses and raised fees to banks, and consumers used their debit cards more.
       However, MasterCard anticipated marketing expenses would increase 20%in the fourth quarter, and rebates and incentives - which remained flat in the third quarter - would go up significantly in the last three months of the year.
       MasterCard's third-quarter net income was $452 million, or $3.45 per share,compared with a loss of $194 million, or $1.48 per share, a year earlier.
       Excluding special items, the credit card network posted earnings per share of $3.48, beating analysts' forecast of $2.94, according to Thomson Reuters I/B/E/S.
       The company said special items for the third quarter of 2009 represented $6.2 million of litigation settlement charges.
       The special item for the third quarter of 2008 represented an $827.5 million net pre-tax charge related to an antitrust litigation settlement.
       Revenue rose 2% to $1.4 billion, and also beat analysts' forecast, boosted by higher fees charged to banks and increased consumer use of credit and debit cards.
       These factors were partially offset by the impact of slightly lower cross border volumes.
       Operating expenses declined 13% to $685 million, as the company trimmed advertising and marketing spending 29%and reduced personnel and administrative costs 7.9%.
       Processed transactions grew 7.6% in the quarter to 5.8 billion boosted by a more intense use of credit and debit cards in Asia Pacific, Middle East, Africa and Latin America.
       MasterCard's gross dollar volume was up 0.3% on a local currency basis to $633 billion.
       The company also benefited from a lower tax rate.
       MasterCard's effective tax rate was 32.9% in the third quarter, down from 39.7% a year ago.
       "There are some positive signs emerging," chief executive Robert Selander told Reuters in an interview.
       He said worldwide cross-border volumes showed low single digits growth in October, compared with a 3% decline in the third quarter. In addition, US processed volumes grew slightly in October compared to low single-digit declines in the third quarter.
       Selander also said an improvement in retail sales in September and in credit and debit card spending in October was encouraging, but warned that more job losses and a historically low consumer confidence would slow any recovery.
       "I think it's not going to be an overly buoyant season," he told Reuters in an interview.
       "We are seeing improvements relative to prior months, and given that it was a weak fourth quarter last year, we think it will be viewed as good as or better than last year by the time the season is done," Selander added.
       The company reiterated that it did not expect to meet its average revenue growth target of 12% to 15%, but affirmed its forecast of more than 20% net income growth.
       Investors expectations were high about MasterCard's profits, after the company's larger rival, Visa Inc, reported betterthan-expected quarterly earnings last week.
       The world's largest payment network reported a profit of $514 million, or 69 cents per share, on revenue of $1.87 billion. That compares with a year-ago loss of $356 million, or 45 cents per share, on revenue of $1.71 billion.