Mastercard allays spending concerns with profit beat

By Niket Nishant

(Reuters) -Mastercard beat second-quarter profit expectations on Wednesday and said spending was holding up, reassuring investors worried about customers' financial health after a swathe of companies warned of pressure on low-income households.

The strong performance was helped by robust growth in key international markets like Europe and Latin America, coupled with a healthy U.S. consumer, the company said on Wednesday.

"Mastercard's results, while not perfect, should give reassurance that the spending environment remains solid," said Logan Purk, technology analyst for Edward Jones.

Earnings from its chief rival Visa last week had "likely spooked some investors," he said.

A tight labor market has ensured job security for customers, allowing them to make purchases without restraint, even as the U.S. Federal Reserve keeps monetary policy tight.

Mastercard's profit rose 17%, to $3.3 billion for the three months ended June 30. Excluding one-time costs, it earned $3.59 per share, versus the estimate of $3.51, according to LSEG data.

Revenue rose 13%, to $6.96 billion, also beating estimates.

Trends in July were also strong. Cross-border volume, a gauge of travel demand that tracks spending on cards outside the country of their issue, climbed 17% over last year in July, similar to the second quarter.

The company's shares jumped as much as 5.6% to their highest since April, stretching their lead over Visa this year.

SLIGHT DECELERATION

While Mastercard's earnings were better than expected, they grew at a slower pace than in the first quarter.

Switched volume, which measures the value of transactions processed on Mastercard's network, were 10% higher than last year in the second quarter, compared with 12% in the year's first three months.

"This supports the overall view that consumer spending remains on solid ground, albeit slowing slightly," Purk said.

Several firms have flagged pressure on low-income customers as wage inflation moderates and elevated interest rates weigh on sentiment.

Commentary from payments companies is being watched closely for signs that the Fed's rate-hiking campaign is bearing fruit.

(Reporting by Niket Nishant in Bengaluru; Editing by Pooja Desai)