MasterCard Inc.'s fourth-quarter profit tumbled as the credit card company took a sizable charge tied to pending litigation with U.S. merchants, although increased card spending helped it turn in core earnings ahead of expectations.
The lawsuits have been an overhang for MasterCard and chief rival Visa Inc. of late as the card processors battle allegations that they have violated antitrust laws by fixing the fees retailers pay to accept their cards. A trial date for the cases has been set for September, although some analyst have speculated a settlement is likely to occur before then.
MasterCard on Thursday said it took the charge based upon the progress it has seen so far in mediation efforts.
MasterCard and Visa don't lend to customers but make money by processing card transactions for banks and merchants--a business that has been getting more lucrative, thanks in large part to consumers' continuing move to cards from cash and checks.
For the fourth quarter, spending on MasterCard-branded cards jumped 16% from a year earlier. Processed transactions climbed 23% and cross-border volumes were up 18%.
The company posted a profit of $19 million, or 15 cents a share, compared with $415 million, or $3.16 a share, a year earlier. Stripping out the $495 million after-tax charge tied to merchant litigation, MasterCard turned in a per-share profit of $4.03, topping the $3.91 expected by analysts polled by Thomson Reuters.
Net revenue rose 20% to $1.73 billion, matching analyst expectations.
Shares were up 2.3% to $366 in premarket trade. The stock is down 4.1% since the start of the year.
