MasterCard Net Rises to Record as Card Use Increases (Update1)

MasterCard Inc., the second-biggest
U.S. credit-card company, said profit climbed 70 percent to a
record as consumers charged more purchases.

First-quarter net income rose to $214.9 million, or $1.57 a
share, from $126.7 million, or 94 cents, a year earlier, the
Purchase, New York-based company said today in a statement.
MasterCard was expected to earn $1.16 a share, based on the
average estimate of 12 analysts surveyed by Bloomberg.

Transactions jumped 19 percent during the quarter as
consumers continued to switch from cash and checks to credit and
debit cards. MasterCard shares have almost tripled since Chief
Executive Officer Robert Selander took the company public a year
ago. Visa International Inc., the world's biggest credit-card
company, also plans an initial public offering.

``This was a very strong quarter,'' analyst Craig Maurer at
Calyon Securities, the investment-banking arm of Credit Agricole
SA, said in an interview. ``They had great revenue, great
transaction growth, great expense control.''

Revenue rose 24 percent to $915.1 million, while expenses
climbed 8.2 percent to $601.2 million on costs to hire more
workers and defend against lawsuits.

Shares of the company advanced to $122.25 in early trading,
from $114.85 at the close yesterday on the New York Stock
Exchange. They were offered at $39 apiece in the May 2006 IPO.

`Bullish' on Prospects

MasterCard credit- and debit-card spending increased 16
percent to $509 billion on a local-currency basis, and
transactions jumped to 4.2 billion, the company said.

Cash and checks fell from 77 percent of U.S. consumer
payments in 1995 to 50 percent in 2005, while cards rose from
around 21 percent to 40 percent during that period, analyst
Timothy Willi of A.G. Edwards & Sons Inc. wrote in a note to
clients this week, citing data from the Nilson Report in Oxnard,
California.

Nilson estimates that by 2010, card-based payments will
account for about 56 percent of consumer payments, while cash and
checks will be down to 29 percent.

``We are bullish on the long-term prospects for
MasterCard,'' Willi wrote. ``Consumers, businesses and government
are making cards their preferred method of payment.''

Advertising and market development expenses dropped to
$178.5 million from $182.7 million a year earlier. Maurer at
Calyon said American Express Co., which reported earnings April
19, has also cut back on marketing.

``The card companies see limited opportunities to drive any
incremental business in the current market,'' Maurer said.

Profit Margin

Shares of MasterCard slid 9.7 percent on Feb. 9, the biggest
drop since the IPO, after Selander declined on a conference call
with analysts to forecast continued growth in profit margins.

A lawsuit accusing MasterCard of anticompetitive behavior,
brought by rival card networks American Express and Discover
Financial Services, ``could put downward pressure on shares,'' as
could the expected initial public stock offering of Visa
International, according to analysts at JPMorgan Chase & Co.

The lawsuit is scheduled for trial in federal court next
year.

MasterCard in April 2006 began charging card issuers for all
foreign transactions using U.S.-issued cards. It used to assess a
fee only if it converted the related currency to U.S. dollars.

To contact the reporter on this story:
Joseph N. DiStefano in New York at
.