Mastercard Profit Boosted by Card Customers Traveling Abroad

(Bloomberg) -- Mastercard Inc. was a hit with tourists last quarter.

Customers spent more with the firm's plastic when they traveled abroad in the first three months of the year, aided by a weakening U.S. dollar. Cross-border volume on Mastercard's network climbed 32 percent in the quarter, the fastest clip in at least two years, the Purchase, New York-based firm said Wednesday in a statement.

As cross-border spending climbed, the firm raised its guidance for full-year revenue growth to a percentage in the “low 20s.” It previously said revenue would grow at “the low end of high-double digits.”

Mastercard rose 2.8 percent to a record $185.33 at 11:41 a.m. in New York. The shares have jumped 22 percent this year, compared with the 5.1 percent advance of the 69-company S&P 500 Information Technology Index.

“People love to buy stuff here and they're spending more in the U.S.,” especially with the weaker dollar, Chief Financial Officer Martina Hund-Mejean said in a telephone interview. “We also have seen some strong outbound purchasing behavior by Americans who are either traveling or purchasing goods overseas.”

That cross-border growth will probably moderate due to a drop-off in consumers using their credit-cards to fund cryptocurrency purchases, Hund-Mejean said. In the first quarter, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. said they would halt purchases of Bitcoin and other cryptocurrencies on their credit cards because they didn't want the credit risk associated with the transactions.

Hund-Mejean said the firm's cross-border volume growth was helped by Chinese lenders once again issuing credit cards with foreign-payment networks such as Mastercard. That had been curtailed by the People's Bank of China.

High Expectations

Total spending on the firm's network climbed 20 percent to $1.04 trillion, topping the $1.01 trillion estimate from analysts at Oppenheimer & Co.

“The investments are in the areas they need to be,” said Tom Plumb, president and fund manager at Wisconsin Capital Management, which owns shares of Mastercard. “Everyone expected them to have a very good quarter and this is beyond even what the highest expectations were.”

A weaker U.S. dollar boosts Mastercard's profits outside the U.S., where the firm gets most of its revenue. The company has been lowering fees and sweetening rewards in a bid to ink card deals with banks, especially in Europe, where competition has intensified since Visa Inc.'s $20 billion purchase of Visa Europe in 2016.

Visa said last week that it also benefited from a weaker U.S. dollar in the first three months of the year as foreign spending in the U.S. increased at a double-digit pace for the first time in more than four years. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, dropped 3 percent during the quarter, the fifth consecutive quarterly drop.

Here are other key metrics from the quarterly results:

• Net income rose to $1.49 billion, or $1.41 a share, from $1.08 billion, or $1, a year earlier. That exceeded analysts' $1.24 average estimate.
• Operating expenses climbed 43 percent to $1.76 billion, the company said, driven in part by an increase in costs related to “strategic initiatives,” which include technology investments. That topped the $1.58 billion average of 12 analyst estimates compiled by Bloomberg.
• Mastercard spent $1.49 billion on rebates and incentives for banks to issue cards on its network in the quarter. That came in lower than the $1.54 billion analysts expected.

--With assistance from William Mathis

To contact the reporter on this story: Jenny Surane in New York at jsurane4@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Steven Crabill

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