Mastercard Incorporated (MA) Q3 2010 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Third Quarter MasterCard Inc's. Earnings Conference Call. My name is Jeremy, and I will be your coordinator for today. [Operator Instructions] At this time, I'd like to turn the presentation over to your host for today's call, Ms. Barbara Gasper, Head of Investor Relations. Ma'am, you may proceed.

Thank you, Jeremy. Good morning, everyone, and thank you for joining us today, either by phone or webcast, for a discussion about our third quarter 2010 financial results. With me on the call today are Ajay Banga, our President and Chief Executive Officer; and Martina Hund-Mejean, our Chief Financial Officer. Following some comments from Ajay and Martina, highlighting some key points about the business and our third quarter results, we will open up the call for your questions. This morning's earnings release and the slide deck that will be referenced on this call can be found in the Investor Relations section of our website at mastercard.com. The earnings release and slide deck have also been attached to an 8-K that we filed with the SEC earlier today. A dial-in replay of this call will be available for one week through November 9 as well as posted on our website for 30 days. Finally, as set forth in more detail in today's earnings release, I need to remind everyone that today's call may include some forward-looking statements about MasterCard's future performance. Actual performance could differ materially from what is suggested by our comments here today. Information about the factors that could affect future performance are summarized at the end of our press release as well as contained in our recent SEC filings. With that, I will now turn the call over to Ajay Banga. Ajay?

Thanks, Barbara, and good morning, everyone. Before Martina gets into the details of the results, I thought I would comment on some of the operational drivers in the quarter as well as some recent business highlights. So in this third quarter, we saw net revenue growth of 4.7% on an as-reported basis or 7.3% on a constant currency basis. GDV, gross dollar volume, grew 8.45% on a local currency basis, and cross-border volume grew 15.4%, continuing the momentum from the first half of the year. Processed transaction growth was slightly positive for the quarter. And there, we are tempered by the continued roll-off of several U.S. and U.K. debit portfolios. But excluding those deconversions, underlying transaction growth was about 13%. These factors and cost savings are kind of put together would allow us to deliver an operating margin of 53.6% this quarter, a four percentage point expansion over last year's third quarter. And all of this have fueled net income growth of 14.6% or about 19% on a constant currency basis. Reflecting relative economic growth trends, our volume growth outside the U.S. outpaced growth in the U.S. The Asia/Pacific and Latin America regions just continue to deliver strong double-digit growth, driven by both domestic and cross-border volumes as the economic expansion is persisting in these markets. And while it's true that a number of the Asian and Latin American economies are showing good growth in domestic demand, the fact is that consumption in the U.S. and Europe still accounts for more than half of global PCE [personal consumption expenditure]. And so for Asia and Latin America to keep growing at these rates for an extended period, we really need to see consumption pick up again in the U.S. and in Europe. Now aside from that, purchase volumes in Europe remain…

Thanks, Ajay, and good morning, everyone. Let me begin on Page 3 of the deck, which shows our reported results. Net revenue grew 4.7% over last year's third quarter to $1.4 billion. On a constant currency basis, net revenue grew 7.3% driven by volume increases. This includes growth of 15.4% in cross-border volumes and 8.5% in gross dollar volumes, or GDV, on a local currency basis. Approximately seven percentage points of revenue growth came from pricing, including the effect of cross-border rebates, and this was essentially offset by a net increase in rebates and incentives related to new and renewed customer agreements. The 4.1% decline in operating expenses versus last year's third quarter was primarily due to lower severance as well as savings due to reduced headcount. Our operating income was $766 million for the quarter and resulted in a quarterly operating margin of 53.6%, a 4.2-percentage-point improvement over the year-ago quarter. Our effective tax rate declined to 32.3% primarily due to the repatriation of some foreign earnings and a lower state tax rate, offset by some other discrete adjustments. We delivered net income of $518 million, up 14.6% over the third quarter of 2009 and up 19% on a constant currency basis. Earnings per share were $3.94 on a diluted basis. We previously mentioned that the acquisition of DataCash would have a 5% dilutive impact for the full year, split across the third quarter and the fourth quarter. We saw $0.02 of this dilution come through in the third quarter and expect the remaining $0.03 to impact the fourth quarter. Also, we separately said that there could be a potential impact of up to $0.05 from hedging transactions we entered into to protect against adverse currency movements on the transaction price. We saw a $0.03 negative impact from this…

Thanks, Martina. Before we move to the Q&A session, I'd like to briefly point out Appendix B in the slide deck this quarter, which reflects an update in our treatment of U.S. versus rest of world revenue. We are changing the treatment of the intercompany fee that is paid from Europe to the U.S. The key takeaway for you is that the percentage of our revenue coming from outside the U.S. is slightly higher, further evidence of MasterCard's global presence. But there is no impact to total revenue. We're now ready to begin the Q&A session. And in order to get to as many people as we can during our allotted time frame, we ask that you limit yourself to a single question and then queue back in for additional questions. Jeremy?

[Operator Instructions] And at this time, your first question will be from the line of Jason Kupferberg of UBS.

Just wanted to ask a question on the latest U.S. debit wins. And obviously, good to hear about Sovereign as well. Now I think at the analyst meeting, you guys had said that as these new wins kick in, they won't fully offset some of the run-offs you been coping with. But can you start to give us some sense of when collectively these new debit wins will start to kick in, really, at a full run rate as investors start thinking about how to model 2011?

Jason, as you know, usually, that takes a little bit of time. They already talked about the SunTrust deal, and we talked about the debit actually starting in, in the latter part of the third quarter as well as into the fourth quarter. So we actually believe that we'll probably hit our full stride kind of midyear of next year. And I think for all of the other deals that we've been talking about, you pretty much should assume that kind of length in terms of getting the cards into the market and for people to actually activating them and then using them. So as I talked about, we'll still feel a little bit of a headwind in the first part of 2011, like the first six months from the deconversions, but then that's going to come off in the latter part of the year. And in that latter part of the year, you will also see the benefits from the new deals coming in.

Can you guys just clarify quickly what percent of your U.S. PIN [personal identification number] debit business in terms of volume is exclusive?

Jason, we don't really talk about that or give any disclosure on that.

And your next question will be from the line of Adam Frisch with Morgan Stanley.

Ajay, given the regulatory environment and the consensus view that it's going to get more rigorous over the next couple of years. Can you provide some color on your views around your use of pricing increases and its impact to growth versus more organic drivers, like emerging markets, e-Commerce, all the things that you talked about recently?

Yes, sure, Adam. I don't know that it's the result of the regulatory increases as much as my general perspective on the business. We're in a growth industry. In the sense that if cash is still 85% of retail transactions around the world and even in developed markets as we talked about on Investor Day, cash still has a fairly strong proportion of retail sales, and I believe that to be the bigger opportunity. And if you want to focus on that, and the right way to focus on that is to find consumer-friendly solutions that answer their needs as to why they should no longer used cash for what they use it for today. And mostly these cash transactions tend to be, in the developed world, for small-ticket items. And that's why I'm interested in contactless. That's why I'm interested in the mobile phone, and those kind of things. In the developing world, those cash transactions are not only for small-ticket items. They could be because of the absence of acceptance in certain parts of the world. That's why I'm so interested in the Indian unique identifier project, which takes acceptance to so many small cities and villages in the Indian system. It could be because in some ways, cash allows a certain amount of tax, let's say planning to use a politically correct word, for a number of these emerging markets. So a number of the central banks and the governments in these emerging markets are actually keen to drive down the use of cash to improve the transparency of their economy and their tax revenues. So I kind of look at all these factors coming together. And I switch back to mobile phones, contactless, acceptance, promotions that explain why you should use a card or a different form factor of electronic payments as compared to cash is kind of heavily driving a lot of our energy. I love to answer your question but that's my effort is. Pricing to me is something you use when you see opportunities for strategic spaces in the markets that either give you a better margin in that market or give you the chance to compete more sensibly in some of these markets. I don't view pricing as an end in itself.

You've been CEO now for a couple of months. And aside from the obvious changes and your style and the way you communicate to the outside world, it's fairly difficult to gauge what else has changed in MasterCard since you took over. So can you give us some color on some of the internal changes you've driven that can give us a better understanding into how MasterCard may look or operate in the next few years?

Well, let's see, what are we doing internally? Everything from recruiting and promoting a number of people into jobs that allow this focus that we're talking about to show up. So we've got a whole bunch of people focused on new channels and new clients and customers, we call that our business development function. So a portion of our sales force, both existing people and new people, have been redirected towards that, hence, the effort against governments and telcos and transit operators and merchants as businesses. We've also invested some amount of resources in beefing up our capability in the e-Commerce and mobile space. We're looking at our entire data and figuring out how to make more use of that data. In our Advisors' [MasterCard Advisors] space, we have reclassified Advisors business to bring it closer to our sales force in a number of the regions, so that we can bring what I consider to be a competitive advantage with Advisors at the front end of our sales force. A number banks, as we talked about on Investor Day, do not have access to thousands of people who will give them great insight into portfolio management, we can do that. We have Advisors sales force. Similarly, we've created MasterCard Labs as a way of driving innovation. I think the earlier conversation we had about mobile phones and e-Commerce and those kinds of biometrics in India for payments requires a company that was otherwise very focused on the perfection of its delivery, the reliability of our clearing authorization and settlement system to find a way to take some thoughtful risks on investing in ideas. Out of 10 ideas, eight will probably not do well. And I'm going to have to learn how to cut the cord a little bit fast and smart, while investing in the other two. And so there's a lot of things going here, Adam, and I just gave you a few examples of channels and products and innovation and the kind of people that are focused on it. There's also a great interest that I have, in my own way of looking at business, where I believe that business is earned at the client's office and with their customers. And so, I'm determined to be out there meeting my clients, meeting regulators, meeting opinion leaders and helping to make regulators and opinion leaders on the ground in different countries view MasterCard as a part of the way they grow commerce in their country, rather than a foreign company that merely exist to be able to facilitate its own profitability. I think a lot of -- what I just said has a lot of stuff buried in it, but this is something you'll see unfolding over the next couple of years. I want to make real meaning of the slogan, heart of commerce, not just a statement, a real meaning of that slogan. That's what MasterCard wants to be, at the heart of commerce.

And your next question will be from the line of Sanjay Sakhrani with KBW. Sanjay Sakhrani - Keefe, Bruyette, & Woods, Inc.: Just had a quick question on rest-of-world debit volume. Those have looked strong for some time now, and I was wondering how much of that was organic versus new customer acquisitions? And then just one accounting clarification question for Martina. The 26% to 27% rebate guidance for the year, that basically assumes the accounting change happens in the fourth quarter and not for the first three quarters, right?

Yes, Sanjay. For your last quarter question, you're absolutely right. It just happens in the -- in the fourth quarter, we are collapsing the contra-revenue related to the cross-border rebates into the gross revenues. Net revenue will not change, and then we'll all be in that 26% to 27% range. From our rest-of-world debit point of view, as you know, it's been growing very nicely. And there is a mix in there in terms of that people are actually utilizing our cards more to do those kind of transactions as well as we did have some business wins in there as we talked a little earlier about.

Yes, Sanjay, on that debit front, if you look at the data that's in our press release, you'll see Q3 '09, rest of world, 27% up; Q3 '10, rest of world, 30% up. Nine months is 25% in '09, 31% in 2010, and I guess that's where your question is coming from. It's a little different region of the world. They're starting to get a deeper understanding of how quickly debit is being embraced by consumers in different part of the world if that's where your mind is going. I'd say Europe, debit has always been a part of their life. And a large part of our transaction growth in Europe, which is healthy by the way, is coming from not just new wins but also the fact that SEPA [Single Euro Payments Area] is allowing us to see and process much more transactions. And we're being able to get into a situation like the Barclaycard example in Germany, which by the way is the sixth such bank in Germany where Maestro only is now on their debit card. So Europe, it's about winning space in the competitive space, because debit is already pretty well established. Although I still look on Europe as a growth area because of the amount of cash still used there. So that's Europe. Asia and Latin America, I would say debit is less established as a way of life for consumers, but it's getting there. Australia is much more so than, say, in India would be. India is still very much ATM withdrawal machine than a POS [point of sale] usage machine. So is Mexico, much more in ATM withdrawal machine than a POS usage machine. And so you look at transaction growth, you've got cash inside there as well. So look at purchase growth, you'll begin to see what I'm looking for.

And your next question will be from the line of David Hochstim with Buckingham Research.

I wonder if you can give us some sense of your expectations for China. I mean, the MOU [Memorandum of Understanding] and I guess maybe negotiations by our government to help open up China. I mean, how realistic is it to expect that China could become a bigger and bigger steady business like India or Brazil?

So David, China is already a relatively attractive business for us. But the way I think about China is, while it's relatively attractive and is profitable and it's growing, that's just larger part at the end of the rainbow that you're referring to, which is the domestic processing business. My view about the MOU with China Union Pay is, first of all, I want to make sure that the business we do well today in China, which is the cross-border business both for Chinese traveling overseas and for people traveling into China and for the e-Commerce space, that is consolidated upon and grown attractively. This MOU with CUP [China Union Pay] focuses, one, on the e-Commerce space but, too, on that cross-border space. And in fact, as Walt said on Investor Day, out of the nine co-brands that came out of China in the last, I don't know, nine, 10 months roughly, I may be wrong by a month or two here or there but roughly that number, we've won all of them. And that's partly to do with our relationship with CUP and how we're working together as partners. Now do I think that, that will lead to some dramatic opening up of the Chinese market where the domestic sector will become open to companies like us and our competitors? I don't know. That's something that the Chinese government has to sort through in terms of their willingness to open that sector. There's so much going on in the governmental space between our government here and the Chinese government, so I don't know how to handicap where that'll come out. But my approach to that is we'll see what happens. Let's keep the partnership going. Let's build on what we are good at. Let's make sure it grows even faster. Let's be making them even more impregnable position in that space. And as the partnership develops, let's see where that goes. I just don't know how to handicap it any other way.

And I guess the revenue guidance doesn't really assume a lot of domestic business for the next two or three years?

No, it does not. But it does assume that we keep doing well on this cross-border and e-Commerce space and that this partnership with CUP remains a solid good partnership.

And next, you have a question from the line of Tien-Tsin Huang with JPMorgan. Tien-Tsin Huang - JP Morgan Chase & Co: Of course, it's pretty clean, but I'll ask about the rebates and incentives. I'm curious if the cost to win and renew clients has changed at all, and if you're seeing clients change their preferences between upfront rebates versus ongoing fee relief?

Tien-Tsin, it's Ajay. I'll start off, and Martina can add on. But have I seen change as these renewals are going on? Not really in the last -- I wouldn't say anything in last three months, but I've been here a year and half now. And I'd say my general impression is, each of these deals is a very hard-fought deal. There is not just a couple of competitors at the other end, there is the economics of it. There's the value you bring from different products you place with them inControl, EMS [Expert Monitoring Service], fraud solutions, Advisors, all that comes into what I call an integrated pricing opportunity, along with an integrated solution that we're trying and propose to our issuer clients. I think that if you look out in the future, I think that trend of tough negotiations will only increase because that's every business has got pressure on its margins. And I think our job is to really find ways to: one, grow the overall size of the pie, hence, my focus on cash; two, to grow my share because I happen to be a lower share in some markets than some of my bigger competitors; and three, to find intelligent ways to package solutions, which allow me some pricing space. And that's kind of where I am trying to work my way through this. But it is the reality that everybody got tough negotiations. We've got a lady behind here who does our budgeting contracts for us. Trust me, try negotiating with her and you will see, she's on your case, and that's true for every company. Tien-Tsin Huang - JP Morgan Chase & Co: I'm curious if there's a change between the upfront rebates versus ongoing fee relief, but my real follow-up question was more around the DOJ settlement. Obviously, that was a good outcome. I know it's not going to change your rules much, but I'm curious if you're going to see more discounting activity from the merchants. And also I'm curious if you think there's any way that this settlement could change the outlook for the merchant litigation case. If we can get an update on that as well, that'd be great.

So I guess, two portions there. The first portion was about the DOJ settlement and where I think that discounting will change. I don't actually know that for sure. I can speculate that there will be, in certain cases, a probability of some more discounting for the usage of cash. But to tell you the truth, the total volume of our business that I think will be impacted by that discounting still remains very, very small in my mind, while the second one basically ended up in the right place with, let's say, nearly a clarification of the way we were conducting our business. Having had the experience of having it conducted that way for a while, I don't know that it's going to change a great deal with the settlement. You know what I mean? That's where I'm coming from. And so I don't feel I'm staring at some big change in the way cash is used versus our cards were used. I also think that all the other demographic and social circumstances are still a very strong tailwind, even in the United States, to go away from cash. And I think that younger people, people with more education, more affluence, I see that as another little tailwind, in addition to our experience of having already had this kind of practical rule in the market before the DOJ settlement. So that's kind of a long answer to a simple question, but it's a complex topic, right. And the second part, the MDL [Multi District Litigation] case, nothing new has happened between, let's say, earnings are between the September Investor Day and today. The court heard these oral arguments back in November 2009. They have not ruled on those motions. There is court-recommended mediation going on right now. That mediation is confidential. It's tough for me to tell you where that we'll end up because I would be violating that confidentiality. Do I see some progress in it? Yes. But do I see that going to a place where I can be confident that I see light at the end of the tunnel? Not yet. So that's kind of where we are with the MDL. Will the DOJ settlement impact the MDL litigation case? I don't know yet, but I don't know how to handicap these kind of things. I would rather not to venture into that space and just deal with it as it comes along.

And so your next question is from the line of Andrew Jeffrey with SunTrust.

You've obviously got some momentum in U.S. debit which is encouraging. Ajay, do you think that -- I know we don't know specifically what the Fed is going to say about exclusivity, but do you think, just from a competitive standpoint, given your sort of distant second historical share in U.S. debit, that as customers look at or potential customers look at what could happen to these in terms of its exclusive business? So that's factoring into their decisions now to deal with MasterCard but it isn't so much of an issue or maybe they figure the volume is going to be heading your way regardless? Or would you cite more your answer to Tien-Tsin as being sort of the key differentiator that MasterCard brings to the table as you take share in the U.S.?

I understand what you're saying, Andrew. Here's the thing, the clarity around where the financial reform bill was going into full exclusivity idea that came in to the bill, really, happened only a couple months ago if you think back in time. It feels like a lifetime, but it's only a few months ago. A lot of the debit wins we are talking about in reality is what has been going on for a year. SunTrust took a year to go from initial conversations to real success. Sovereign Bank has been going on from a couple of months since I joined the company. I can recall discussions of our Executive Committee around Sovereign Bank. I remember Delta being a discussion from around the time I joined the company. So I would say to you, some of the wins we've got are just good old hard work around what we bring to the party, what our capabilities are and what -- for example, in SunTrust case, they have publicly gone out and said that the reason we won their business was because of the capabilities that MasterCard Advisors brought to the party in terms of portfolio management, and I think those are the kind of things that are helping us. Now going forward, if anything, I'd like to see a little tailwind in that as we get some clarity around the exclusivity. I just don't know what that clarity will be. So I don't know how to predict where it'll go.

And then rest-of-world debit, again, great share gains there. Is that just market share platform or is there anything you could elaborate on in that regard?

No, rest-of-world debit is just -- there are two, three things going on. One is we're learning on debit as we go along as a company, and we're trying to make real progress in Asia and Latin America with a number of our clients there. We've got segmented offers in debit. We're actually bringing our entire marketing might to the debit table. In Australia, we went through a exercise of really understanding what youth in Australia were looking for from their debit circumstance. And we found that music, youth and debit kind of created a nice holy alliance, and we went after that in a very clever way with a partnership with the a local bank. And that's given us an enormous gains in Australia. So it's really hard work country by country on the debit space. I'd say in Europe, it's a little different. In Europe, it's about making sure that we start getting some benefits from SEPA, and SEPA is a long haul. So don't get me wrong. It doesn't change in one month or six months, but over the course of two or three years. As Javier said at Investor Day, we think that SEPA gives us a real chance to see more transactions, as well as see more of them, on Maestro-only cards or MasterCard-only debit cards as against a co-branded with a local scheme.

And your next question will be from the line of Craig Maurer with CLSA. Craig Maurer - Credit Agricole Securities (USA) Inc.: I wanted to ask a follow-up on Europe. We've heard a lot of good new account conversions to MasterCard or Maestro only, and we don't get to see all that detailed information in terms of your major competitor over there. So one, I was hoping you could comment on perceived market share if that's changed at all. And two, if you can comment on perhaps the discussions with the banks in Europe and their attitude toward going to a MasterCard-only solution versus what was trying to be pushed by the EC [European Commission] in terms of a pan-European system, if you'd call it.

So two parts to that. The first part is about perception of market share. And I'd say that my general impression from the last year and a half of traveling in Europe is that we're seeing us being the real player on debit, and that we are seeing us picking up some momentum in terms of the SEPA opportunity. I don't think anything would've changed more dramatically than that in a year. One thing I've learned about this business over time is that it takes time to change it upwards or downwards. The debit losses in the U.S. that are rolling off right now are the result of losses two years ago. And the wins we've got just now in Martina's reply to the first question are really stiff that'll roll on over the course of a year, a year and a half. So I'd say nothing would've changed that dramatically in the course of this year. The aspect of banks versus going to a local European solution as against something else, there's always constant dialogue with European banks. And to first of all say our European banks thinking about it will probably be a misnomer because each of them has a different perspective, and that in itself tells you why it's not that easy to get one solution for the whole of Europe. And the second thing is that the proof of the pudding will be in the eating, right. And we've got real answers in the Netherlands, where, as you know, MasterCard Maestro usage has now reached record numbers, and we're making progress in a number of these markets and even in Belgium as well as in other markets of Continental Europe. So I'd say to you that I believe that the economic rationale of taking a global…

Not really. We've been talking to Itaú for a while, and it's basically an effort to get all their transactions switched to us. And as consequence, we can see many more and give them many more value-added products for their portfolio. It's more to do with that conversation than anything else.

And your next question will be from the line of Tim Willi with Wells Fargo.

You have mentioned a couple different times on this call the role of MasterCard Advisors. Could use just sort of frame for us any kind of improvement that clients see in a portfolio, whether that be debit or credit, U.S. or rest of the world? Just sort of a sense for the relative uptake and utilization improvements that people see when they utilize Advisors, when they use utilize the research and rethink how to improve their card portfolio. Are we talking sort of 10% kind of utilization rates? or 20%, 30%? Any way to frame that and think about that uplift?

Tim, I don't think I can give you that. That's really something you were to ask the banks. It's their private data, and I would be making a big mistake by passing that to you. But I will tell you this, where I was coming from in Advisors, some of the bigger banks around the world, in the U.S. and elsewhere, they clearly have excellent individuals in their company who have devoted a large part of time trying to understand their data and manage their portfolios right from more efficient acquisition of clients to utilization, to portfolio management, to bankruptcy prediction, to charge-off prediction, to loyalty schemes and so on. Other than the other hand don't have those resources, those are the ones we focus on much more. Having said that, even the bigger ones, when they do their information, they do it based on their own card portfolio. What I can bring to the party, so as anonymized data, is a much bigger perspective of many more cards, not just the ones that are already in their portfolio, which may give them a somewhat unipolar view of what to do with their book. And so those are the two aspects of Advisors that I'm trying to put forward as a competitive edge when our sales force goes to speak to everybody from credit unions to large banks in the U.S. as well as overseas. But I'm sorry, I'm not at liberty to give you a sense of the improvement in a bank's number. That would be inappropriate of me.

And at this time, I will bring forward the line of Rod Bourgeois with Bernstein.

Ajay, I just wanted to inquire. As we compete under the Durbin regulation, is MasterCard planning to gain debit market share by competing more aggressively on price or by using non price ways to get your brand on more debit cards and also to attract merchant's routing decisions? So can you give us some perspective on how the debit market share gains will be achieved and the balance of strategy from pricing versus non price factors?

First of all, [indiscernible] I'm not going to go very far down that road because I cannot till I get some clarity on what exclusivity or the changed exclusivity means. But frankly, all the options we've looked at have a combination of both those things. Even to get merchants to give preferred routing will require a combination of value-added products that they in turn perceive as important to them as well as some pricing benefits. Everybody is negotiating tougher, as I said, these days and earlier. So it's a combination of both. I don't know whether it'll be more weighted to one or the other. The way I look at my life right now is that all I've got here is the possibility of upside. I don't have that business. I'm trying to look at where that business could be positioned with me over a period of time. I would like to get more of it with strategic value-added products and less of it with pricing, but let's see how the game gets played out over the next year or two here.

And so, Ajay, on that topic, I mean, the banks are looking at lowered interchange in their debit portfolio. So as existing contracts come up for renewal, are you expecting more intense sort of pricing concession requests in these upcoming renewals? Since banks are looking at lower debit interchange, maybe they're going to ask for some pricing concessions across both the debit and sort of credit portfolios on the network fee side. Is that something that you're anticipating? Or is that being worried about something that's not likely to transpire?

I'd say to you that if you look at the volume of impact on their revenue line that has come out of the CARD Act, and I don't yet know what that impact will be in the case of the financial reform bill because I don't know what that number will be. But different banks have already begun to estimate, as you know, what that number could be. We're talking a very large number of dollars. If you were to add up all the issuer processing fees that would make from banks of that size and scope, you're talking about, even if they were to negotiate back with me till the cows come home, you're talking of a very small difference in that number of revenue that they've lost. What I saw in Australia, when it happened in Australia, and I was at Citibank those days, on the other side of the fence was that the impact had to be made with many other things. One being how you look at a checking account fees, which, as you can see, is already beginning to happen. In fact, right now, they're getting fees on bank accounts that go past checking accounts. They go to different elements of the feature functionality of a checking account. They happen with what you do with debit rewards and how you price those. They'll happen with how you price different services that you give. You may get a pricing on ACH [Automated Clearing House] debit store bank account, which today aren't price that way, which in a number of countries are priced by the way. If you talk to ING DIRECT in the Netherlands, they will tell you that ACH debits are priced. Here, they are not. So there's a series of revenue items that banks will look that I believe are more substantial in size than if you were to talk to some of the leading bankers in this country, they would tell you -- and there's some of the, have been publicly quoted to say, "They already have really good pricing from the networks." And I, therefore, am a little less worried about that. I'm much more interested in providing them with more opportunities for thinking through how to make up their revenue as the next couple of years unfolds. I really believe that that's my role as their partner.

So but bottom line, there's some worry that pricing will need to be more aggressive in upcoming renewals but it's still not clear to what extent?

Bottom line, there's less worry than you think that I have on what you just said.

And then finally, if I can just ask real quick. There's various arguments that two signature brands should be required on debit cards under the Durbin amendment. And I know from a MasterCard standpoint that might be a nice feature if the Fed rules that way. What's your best argument that two signature brands should be required on all debit cards?

No comment, I cannot discuss that right now. And this is waiting for the Fed to come back, it will be completely inappropriate for me to go out on that limb.

Just before Ajay is going to go to his closing comments, I just want to reflect on one thing that we had up in our disclosure this morning. As you know, we ended the quarter with cash and cash equivalents and other liquid investments of about $3.6 billion. And you will recall that our Board of Directors had approved a $1 billion share repurchase in mid-September, just before our Investor Community Day. And at this point, we have not repurchased any shares under the program. As I stated at the Investor Community Meeting, there may be times, whether because of earnings or other corporate activities, that we're not able to do those share repurchases. With that, let me hand over to Ajay.

So let me leave you with a few closing thoughts. And as Martina said, we're on track to meet our 2010 financial objectives, and we remain optimistic for the future to deliver the longer-term financial performance that we first outlined at this recent Investor Meeting in September. I believe that we are at the heart of a growth sector. And while we recognize that the industry is changing, we're not going to simply look to see our way through challenges that may arise but are able to convert on the underlying opportunities that they present. As we reviewed in detail in our Investor Meeting, we believe we have the right growth strategy in place to grow our core business, diversify our customers and geographies and build new businesses in e-Commerce and mobile and other areas. We will partner and invest in innovation that complements our assets, our skills and our position in the payment space. We will be flexible. We will execute this global strategy at a very local level, and this should enable us to continue to deliver strong results. And we are building momentum. We have won some good deals and signed some really interesting partnerships across affluent, debit, prepaid, commercial, mobile, e-Commerce. I think all I could say is I look forward to these contributing next year and beyond, along with others still in the pipeline. And thank you for your time today, and thank you for your support.

Thank you for your participation in today's call, ladies and gentlemen. This does conclude the presentation, and you may now disconnect. Have yourselves a wonderful today.