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Visa quarterly profit jumps 73 percent

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MARK JEWELL | July 29, 2009 06:54 PM EST | AP

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BOSTON — Visa Inc. on Wednesday said its fiscal third-quarter profit jumped nearly 73 percent, as recent cost-cutting helped offset declining payment processing volume driven down by the recession.

Executives with the world's largest electronic payment network said they see recent stabilization in the economy. They offered a slightly more optimistic outlook for Visa's fiscal fourth quarter, citing recent moderation in the payment volume decline.

"The velocity of the downturn has slowed," Chief Financial Officer Byron Pollitt told analysts on a conference call, adding that it was too early to characterize the shift as a broad economic turnaround.

San Francisco-based Visa reported net income of $729 million, or 97 cents per share, for the three months ended June 30. That's up from a profit of $422 million, or 51 cents per share, in the year-ago period.

Excluding one-time items including a gain from Visa's sale of an interest in its Brazilian affiliate, Visa's adjusted quarterly profit was $507 million, or 67 cents per share.

Analysts surveyed by Thomson Reuters expected a profit of 67 cents per share. Analysts' estimates typically exclude one-time items.

Visa's revenue rose 2 percent to nearly $1.65 billion, slightly above analysts' forecast of about $1.64 billion.

Visa said operating expenses fell nearly 15 percent to $824 million in the latest quarter after a cost-cutting campaign trimmed personnel and marketing costs. Adjusted for one-time items, the decline in operating expenses was more modest, at 9 percent.

The reduced expenses boosted the company's profit margin. But that gain was partly offset by a 5 percent decline in payments volume, to $617 billion for the three months ended March 31, excluding the effects of currency fluctuations. Visa reports some operational results on a three-month lag.

U.S. payments volume fell 2.5 percent from the year-ago period.

But Chairman and CEO Joseph Saunders said Visa was encouraged that dropping volume has recently eased, remaining in "a relatively tight range," with declines of 2 percent to 4 percent throughout this calendar year.

Accounting for currency movements, payments volume continued to grow in all other regions outside the U.S. in the latest quarter. Other regions of the world are increasingly embracing credit and debit payments over cash and checks.

Total cards carrying the Visa brands rose 6 percent over a year ago, to more than 1.7 billion.

Visa earns revenue primarily from fees it charges to process payments made with credit and debit cards, which has enabled it to weather the recession better than banks that issue credit cards and make loans.

Visa continued to report increasing U.S. reliance on debit transactions rather than credit in the latest quarter, as consumers become more conservative.

Visa also has recently seen U.S. consumers spend less per transaction, although Pollitt told analysts Wednesday that trend leveled off in the fiscal third quarter.

Visa had previously forecast fiscal fourth-quarter revenue would grow in the low single digits in percentage terms. But Saunders said Wednesday that gain is "more likely to be in the mid-single digit range," based on recent results and the company's updated outlook.

For the full year, Visa reaffirmed expectations for revenue growth in the high single digits. For next year, that growth is forecast at the lower end of the 11 percent to 15 percent range, depending on the pace of economic recovery.

Visa slightly raised another aspect of its forecast, with expectations for an annual adjusted operating profit margin in the low 50 percent range through next year. That's up from the company's previous guidance of the high 40 percent to low 50 percent range.

Visa reported earnings after its shares rose 48 cents to close at $66.78. In after-hours trading, shares fell 73 cents, or 1 percent, to $66.05. The stock has traded in a 52-week range of $41.78 to $78.90.

The latest period was Visa's fifth full quarter as a public company. Visa went public in March 2008 in the biggest U.S. IPO ever. The launch came just as the U.S. economy fell deeper into a recession that is turning out to be longer-lasting and more far-reaching than most analysts had expected.

(This version CORRECTS Corrects lede and headlines to show earnings gain of nearly 73 percent, sted 72 percent. UPDATES with comment from earnings conference call, other details. ADDS photo numbers.)