Shares of Visa (V) are off $7.65, or 9%, at $78.08, and Mastercard (MA) is down $22.01, or 10%, at $210.30, after the Senate voted 64 to 33 to cut so-called swipe fees placed on debit card transactions.
The measures, sponsored by Senator Dick Durbin (Dem., Illinois), would allow the Fed Reserve to cap fees imposed by Visa and Mastercard on merchants when they process transactions, fees that can at times be higher than the value of the transaction itself.
Durbin, attacking the “outrageous” fees, remarked that “In a time of recession, when we need small businesses to step up and create jobs, this is a way to move forward,” according to the Journal’s Greg Hitt and Michael Crittendon.
In a note on the matter this morning, FBR Capital analyst Scot Valentin notes that Visa gets 32% of its global payment volumes from U.S. debit card transactions, while MasterCard gets 18% of its global purchase volumes from the U.S.
Investors were placing a “relatively low probability of passage” on the measure, he writes — a big negative surprise, then.
However, he notes that banks, which issue the actual card, will “bear the majority of the financial brunt of any potential reduction in interchange fees.”
So how are the card issuers doing this morning?
Bank of America (BAC) is down 22 cents, or 1.3%, at $16.65; Citigroup (C) is down 7 cents, or 1.7%, at $4.02; Capital One (COF) is down $2.09, or 5%, at $42.82; and Discover Financial Services (DFS) is off 53 cents, or 4%, at $14.26.
Valentin advises buying Visa and MasterCard on the dip, writing:
We would use a substantial sell-off in either stock as a buying opportunity as we continue to believe the secular shift from paper forms of payment to plastic/electronic underpins the companies’ above average long-term earnings growth rates.
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