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UPDATE 3-Mastercard profit beat clouded by slump in overseas spending

(Adds comments from earnings call)

April 29 (Reuters) - Mastercard Inc reported a steep drop in overseas spending on its cards due to the pandemic that overshadowed a first-quarter profit beat, sending the payments processor’s shares down more than 2%.

Cross-border volume, a key measure that tracks spending on cards beyond the country of issue, tumbled 17% globally for Mastercard from travel curbs and border restrictions to fight the health crisis. That compared to an 11% fall at rival Visa Inc.

“The biggest headwind for Mastercard continues to be cross-border volumes,” Brett Horn, a senior equity analyst at Morningstar, wrote in a client note.

The fees that MasterCard collects from such transactions declined 23%, with intra-Europe cross-border volumes falling 11%.

The company, however, struck an optimistic tone for domestic travel.

“We expect domestic travel to improve progressively throughout the year in countries with strong vaccination programs,” Chief Executive Officer Michael Miebach said.

Payment companies are set to see an uptick in volumes as speedy vaccine rollouts unleash pent-up demand.

U.S. airline spending doubled over the last four weeks relative to where it was earlier in the quarter, Mastercard Chief Financial Officer Sachin Mehra said.

Mastercard reported a return to top line growth for the first time in four quarters. Net revenue grew 4% to $4.2 billion from last year, also beating estimates of $3.99 billion.

The company also processed more transactions in the first three months of the year, spurred by U.S. government stimulus and vaccinations.

Gross dollar volumes, which represents the dollar value of the transactions processed, rose 8% on a local currency basis from a year earlier.

The company reported an adjusted profit of 1.74 per share, beating analysts’ average estimate of $1.57, according to Refinitiv IBES data.

Reporting by Sohini Podder and Niket Nishant in Bengaluru; editing by Tomasz Janowski and Sriraj Kalluvila

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