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Lower costs help MasterCard handily beat profit estimates

A sign with a logo of MasterCard is seen on the door of a shoe shop in Stavropol January 13, 2015. REUTERS/Eduard Korniyenko

By Neha Dimri

(Reuters) - MasterCard Inc (MA.N), the world's No. 2 debit and credit card company, reported a better-than-expected quarterly profit as costs fell and shoppers spent more on its cards.

MasterCard's shares rose about 3.6 percent to a record-high of $93.59 in early trading on Wednesday. Larger rival Visa Inc's (V.N) shares also rose 1.7 percent.

"We are managing well, despite a mixed economic environment and challenging currency situation," Chief Executive Ajay Banga said in a statement.

Operating expenses fell about 1 percent to $879 million in the first quarter ended March 31, helped mainly by currency hedging.

The dollar (.DXY), which has gained about 22 percent in the past 12 months against a basket of major currencies, has hurt U.S. multinational companies.

"Continued revenue momentum, good cost control, executing on our tax strategies ... contributed to the performance," Chief Financial Officer Martina Hund-Mejean said on a post-earnings conference call.

The company said it expects net revenue growth rate to be in low single digits in 2015 due to a stronger dollar.

MasterCard and larger rival Visa Inc (V.N) get more than 60 percent of their revenue from outside the United States, making them vulnerable to currency fluctuations. Visa is expected to report first-quarter earnings on Thursday.

American Express Co (AXP.N), the world's largest credit card issuer, said earlier this month the dollar was partly to blame for its lower-than-expected quarterly revenue.

"(MasterCard) was able to overcome a drag from currency and grow volumes and earnings based on cost discipline," Wedbush Securities analyst Gil Luria said.

MasterCard's worldwide purchase volume increased 11.8 percent to $783 billion in local currency terms during the quarter, while cross-border volumes jumped 19 percent.

The company said on the call that it would be in a position to start operations in China by the end of 2016.

Last week, China said it would open up its market for clearing domestic bank card transactions to foreign firms.

MasterCard's strong association with Chinese bank card behemoth UnionPay is expected to help it reap more benefits than Visa in the Chinese market.

MasterCard's net revenue rose 2.7 percent to $2.23 billion.

Net income rose 17.2 percent to $1.02 billion, or 89 cents per share. On an adjusted basis, the company earned 91 cents a share, including a 2-cent acquisition charge.

Analysts on average had expected earnings of 80 cents per share on revenue of $2.28 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Neha Dimri in Bengaluru; Editing by Joyjeet Das and Saumyadeb Chakrabarty)