Increased consumer spending and card use worldwide drove quarterly profits higher for Visa Inc and MasterCard Inc , according to new financial reports from the two payments companies.
Visa, which operates the biggest network for credit and debit cards, said that payments, adjusted for changes in currency exchange rates, grew 6 percent in the three months through September from a year earlier and maintained the pace from the prior three months.
MasterCard, which has the second-biggest network, said its purchase volume grew 12 percent in the latest three months from a year earlier.
Both companies said growth in their businesses outside of the United States led the increases in payment volumes. Visa's gains were led by growth in its Asia and Pacific operations and MasterCard, too, showed big gains in its Asia, Pacific, Middle East and Africa segments.
Both companies are trying to capture new business from increasing consumer preferences for cards and digital payments instead of cash. At the same time, they are also experimenting with mobile payments systems partly out of fear of losing business to upstart technology companies.
Visa said profit, in what was its fiscal fourth quarter, rose to $1.7 billion from $880 million a year earlier. But that increase included an unusual boost of $627 million from reversing previously recorded reserves against having to pay additional taxes.
Excluding the one-time gain, Visa earned $1.0 billion, or $1.54 per share, in the quarter. Analysts on average had expected the company to earn $1.50 per share, according to Thomson Reuters I/B/E/S.
Visa also announced on Wednesday that its directors have authorized a new $1.5 billion share repurchase program, bringing to $2.3 billion the amount executives may spend to buy back stock for the company. Buybacks have been an important source of growth in earnings per share for the company.
Visa said it expects annual net revenue growth in the low double digits and adjusted earnings per share growth in the high teens in percentage terms for its new fiscal year.
"Visa delivered strong financial performance for the fourth quarter and full year, a result of our focus on growing our core business, accelerating expansion of our business outside the U.S.," outgoing Chief Executive Joseph Saunders said.
The company said last week that Charles Scharf, a former head of JPMorgan Chase & Co's retail financial services division, will succeed Saunders, effective November 1.
MASTERCARD GROWS IN EUROPE, INDIA
Like Visa, MasterCard benefited from strong growth overseas.
MasterCard's third-quarter net income rose 8 percent to $772 million, or $6.17 per share, from $717 million, or $5.63 per share, a year earlier.
Analysts on average were expecting earnings of $5.92 per share, excluding one-time items, according to Thomson Reuters I/B/E/S.
MasterCard revenue rose 5 percent to $1.92 billion, but fell short of the $1.94 billion analysts had expected.
MasterCard continues to expect second-half revenue growth to be lower than the levels it saw in the second quarter due to the timing of deals and global economic uncertainty, Chief Financial Officer Martina Hund-Mejean said on a conference call with analysts.
MasterCard has been boosting its presence outside the United States, cashing in on higher-growth markets in Asia and the Nordic countries.
"We think we can double our market share in the Nordic and Baltic regions for the next three years, further extending our presence in these markets that are actually doing relatively well," Chief Executive Ajay Banga said on the conference call.
In India, MasterCard signed deals with travel company Thomas Cook to provide foreign exchange prepaid cards, and with ICICI Bank and Western Union Co , for a reloadable prepaid card.
Customers of the two companies are chiefly banks that issue cards to consumers and make deals with merchants to accept cards for payments.
Shares of MasterCard, which is based in Purchase, New York, and has a market value of $56 billion, were up 1.8 percent at $460.93 at the close of New York Stock Exchange on Wednesday.
Shares of Visa, which is based in Foster City, California, and has a market value of $112 billion, rose as much as 1.6 percent to $141 in trading following the company's report after normal market hours.
Year-to-date, Visa shares were up 37 percent and MasterCard shares 24 percent late on Wednesday.
(Reporting by Jochelle Mendonca in Bangalore and David Henry in San Francisco; Editing by Sreejiraj Eluvangal, Supriya Kurane and Lisa Shumaker)