Visa's Net Income Jumps 71%

By KATHY SHWIFF and KEVIN KINGSBURY Visa Inc.'s fiscal second-quarter net income surged 71% amid a prior-year litigation provision as results topped analysts' expectations despite falling consumer spending. Visa and its chief rival, MasterCard Inc., are insulated from credit woes arising from increasing delinquencies because they don't lend to consumers. They make money from the fees they charge banks to process card payments on the plastic these banks issue. But as the recession has deepened, consumer spending has slowed, eating into the fees the processors earn from transactions. For the quarter ended March 31, Visa reported net income of $536 million, or 71 cents per Class A share, up from $314 million, or 39 cents per Class A share, a year earlier. Excluding items such as the litigation reserve, earnings rose to 73 cents from 52 cents. Revenue climbed 13% to $1.65 billion. Analysts' latest estimates were for per-share earnings of 64 cents on revenue of $1.61 billion, according to a poll by Thomson Reuters. Payments volume, representing spending on Visa cards, dipped 1% as a drop in the U.S. more than offset gains elsewhere. The number of Visa-branded cards grew 8% world-wide to more than 1.7 billion while the number of transactions processed on its network climbed 9%. Visa's data on payments volume and transactions lag a quarter. Therefore, the payments and transactions volumes reported in the fiscal second quarter are as of the end of December. Visa reiterated its earnings and reduced revenue forecast for 2009 and 2010 while boosting its operation-margin targets for the years. MasterCard reports results Friday. American Express Co. last week said customers reduced spending by 16% in the first quarter, sending the company's quarterly net income down 56%. Unlike other card companies, which either issue plastic or process the transactions, American Express does both. Write to Kathy Shwiff at kathy.shwiff@dowjones.com and Kevin Kingsbury at kevin.kingsbury@dowjones.com