PURCHASE, N.Y. – MasterCard, one of two stocks widely held by credit unions, reported this morning that fourth quarter earnings plunged 95% to $19 million because of a $495 million after-tax charge the cards giant recorded for potential settlement of another antitrust settlement with merchants.
MasterCard said it took a $770 million pre-tax charge for the potential settlement of civil litigation with merchants who claim Visa and MasterCard conspired to suppress competition by banning merchants from steering customers to cheaper forms of payment. The two companies agreed last year to settle similar antitrust charges brought by the U.S. Department of Justice. A settlement of the merchants’ case may be as much as $4 billion.
The potential settlement weighs heavily on credit unions because both card companies plan to convert credit unions’ and banks’ shares to fund the settlement. The two companies also used credit unions’ and banks’ shares to fund $3 billion in payments to Discover Financial and American Express to settle a separate antitrust suit in 2008.
The charge cut deeply into MasterCard's fourth-quarter profit. The company posted net income of $19 million, compared with $415 million, in the 2010 fourth quarter.
Excluding the charge, MasterCard said it earned $514 million.
Fourth quarter revenue rose 20% to $1.73 billion, from $1.44 billion in the prior year.
Debit card use rose more than 18% during the quarter, with card holders making $139 billion in purchases.
For the full year, MasterCard reported a 21% increase in revenue to $6.71 Billion, and a 3% rise in net income to $1.91 billion.
