MasterCard Inc's fourth-quarter profit soared 41 percent, beating expectations, as consumers around the world spent more money using credit and debit cards.

Revenue rose almost 11 percent to $1.44 billion, slightly above expectations, and grew from the previous quarter in all regions.

Based on the spending trends we have seen and the improving consumer confidence, I think I am cautiously optimistic that we will see continued improvements in 2011, MasterCard Chief Executive Ajay Banga told investors in a conference call on Thursday.

Cross-border volumes, which indicate that people are traveling more and using their cards in foreign countries, grew almost 19 percent in the fourth quarter.

MasterCard, like larger rival Visa Inc , is benefiting from the rebound in business travel leading the U.S. economic recovery. Starwood Hotels & Resorts Worldwide Inc , which also reported quarterly earnings on Thursday, is among the hotel companies and airlines that are reporting higher-than-expected profits as U.S. companies spend more money on employee travel.

The company also said the U.S. economic recovery will help its revenue grow more in 2011 than it did in 2010, despite the prospect of increased U.S. regulation.

The earnings showed some really nice fundamental progress, said Jim Tierney, chief investment officer of money management firm W.P. Stewart, whose assets under management include MasterCard shares.

These are signs both that banks are issuing cards, and cardholders are using their cards again, he said, so we're getting back to normal.

Shares rose 2.8 percent to $246.08 by midafternoon on Thursday.

'DISAPPOINTED' IN WASHINGTON

But threats from new regulation and ongoing legal challenges initially dampened investor enthusiasm on Thursday. Like Visa, MasterCard is facing several challenges to the fees it collects from merchants for processing credit and debit card transactions.

Earnings were good, as expected ... but the fundamentals weren't good enough to change the perception back from regulation to fundamentals, said Evan Staples, analyst with Chicago-based Nuveen Investments, which owns MasterCard shares.

The Federal Reserve has proposed rules under the U.S. Dodd-Frank law that would cut some $13 billion of the banking industry's $23 billion in annual debit card processing fee revenue. MasterCard and Visa are making a furious last-ditch effort in Washington to blunt the law's impact, but industry experts say that effort is likely too little, too late.

Banga said he was disappointed with the Fed's proposals and added that he has visited Washington several times in the past few weeks to meet with regulators and lawmakers.

I don't know if that will lead to any change, he told investors during a conference call on Thursday morning. I am planning as though it won't, but I'm going to try my best to help make a change happen.

Like Visa CEO Joseph Saunders the day before, Banga would not be specific about how MasterCard plans to offset the potential lost revenue. On Wednesday, Visa reported a 16 percent increase in quarterly profit, to $884 million or $1.23 per share.

The card industry is also facing a long-simmering merchants' antitrust lawsuit over processing fees. MasterCard said on Thursday that it had entered into an agreement with Visa and partner banks over how to divide the costs of a potential legal settlement or ruling against the industry.

The company is continuing to fight the lawsuit and said in a regulatory filing that it is not possible to determine the ultimate resolution of, or estimate the liability related to the lawsuit or related claims.

Staples called the agreement an incremental positive, but he said it would not eliminate investor uncertainty about the size or timing of a legal settlement. That uncertainty has helped make MasterCard shares cheap by historical standards, he said, as the company's shares are currently trading at about 14 times full-year earnings. In the past they have traded at more than 20 times full-year earnings.

The world's second-largest credit and debit card processing network, reported a quarterly profit of $415 million, or $3.16 per share, compared with $294 million, or $2.24 per share, a year earlier.

Analysts on average had expected $3.04 per share, according to Thomson Reuters I/B/E/S.

(Reporting by Maria Aspan; Editing by Gerald E. McCormick, Matthew Lewis, Phil Berlowitz)