(Reuters) - Mastercard Inc joined rival Visa Inc in reporting a bigger-than-expected quarterly profit, as a strong holiday season led to a surge in transactions on its payments network, sending its shares up 5 percent before the bell.
U.S. holiday season was the strongest in six years, as a strong economy prompted more people to use their credit and debit cards for shopping, helping both Visa and Mastercard.
Low unemployment rates and rising wages also helped consumer sentiment in the quarter, which in October hit its highest in nearly two decades.
Mastercard's "gross dollar volume" - which refers to the dollar value of transactions processed - rose 9.5 percent to $1.55 trillion worldwide in the fourth quarter ended Dec 31. It processed 24.7 billion transactions in the quarter, up 21 percent on a local currency basis.
However, growth in cross-border payments, or transactions made by overseas cardholders, slowed at both the companies, suggesting that customers were cutting back on travel plans due to growing political uncertainties.
Mastercard's cross-border payments on a dollar basis fell to 13.8 percent from 22.4 percent a year earlier.
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The January-March quarter is seasonally weak for overseas travel, and investors will now be focused on the impact of the geo-political events such as trade war, U.S. government shutdown and Brexit, Mizuho analysts wrote in a note.
Visa, which reported an 18 percent rise in quarterly profit on Wednesday, warned that its cross-border growth rate was in the low-single digit through the first three weeks of January, and that its second-quarter revenue growth would likely come in slightly below its earlier forecast.
Purchase, New York-based Mastercard's net income rose to $1.6 billion, or $1.55 per share, from $1.2 billion, or $1.14 per share, a year earlier. Analysts were expecting a profit of $1.52 per share. https://bsmedia.business-standard.combit.ly/2CSXq8t
Net revenue rose to $3.81 billion from $3.31 billion, brushing past analysts' estimates of $3.79 billion, according to IBES data from Refinitiv.
(Reporting By Aparajita Saxena in Bengaluru; Editing by Anil D'Silva)