You have to hand it to credit card companies. Through dismal U.S. employment conditions, weak consumer spending and outright hostility with merchants, they nonetheless produce big results for investors.
In the case of Visa Inc. and MasterCard Inc. , both stocks are flirting with record highs on Thursday. And both are about 25 per cent above their highs before the 2008 financial crisis -- when unemployment was low, homes were bank accounts and credit cards were seen by consumers as acceptable debt. There have been a number of scares since then, of course: Beside economic setbacks, regulators have targeted the interest rates credit card companies can charge on balances and, in the case of MasterCard, tensions with merchants over transaction fees have spilled into litigation.
You wouldn't know it from financial results, though. MasterCard shares surged more than 6 per cent on Thursday morning after it reported its quarterly rsults. It took a massive $495-million (U.S.) charge related to a lawsuit with merchants, which reduced its fourth-quarter earnings to $19-million -- but investors looked beyond what it sees as a one-time setback and focused instead on operating earnings of $4.03 a share.
Visa piggybacked on the gains, rising about 2.5 per cent on Thursday. It is expected to release its fourth-quarter results on Feb. 8. You can't blame investors for being enthusiastic: Credit card companies, it seems, are money machines.