Visa Inc. on Wednesday said it still expects its revenue to increase as much as 15 percent and its earnings to rise more than 20 percent this year. But it warned that growth will slow in 2012 after new regulations on the fees banks can charge for debit card transactions kick in.
The San Francisco payments network operator repeated an earlier forecast for its current fiscal year, which ends Sept. 30, for revenue growth between 11 percent and 15 percent and earnings-per-share growth of greater than 20 percent.
Next year, however, Visa said it expects its revenue growth to slow to the high-single-digit to low-double-digit range. The company expects earnings-per-share growth to slow to the mid-to-high teens.
Analysts, on average, were forecasting 11 percent revenue growth and 16 percent earnings growth for 2012.
The slowdown will reflect the rules announced by the Federal Reserve last week that kick in on Oct. 1 and next April. The first will limit the fees that banks can charge retailers for processing debit card transactions. The second will give merchants the power to decide which network handles their transactions.
Together, the two could drive down the revenue for the banks that are Visa's customers. While transaction fees are not paid directly to Visa, it's expected that the network operator will have to reduce some of the fees it charges banks. And since it operates the biggest debit card networks, giving merchants choice to go to other processors will also have an impact.
"We expect that fiscal 2012 will bear the weight of the regulations financially, and in fiscal 2013 revenue growth will regain momentum off of 2012s level," CEO Joseph Saunders said during a conference call to discuss the forecast.
Because Visa's fiscal year ends in September it was able to keep its forecast for the current year. Since the Fed moved the date the fee cap will kick in from July 21 to Oct. 1, it will have no impact on Visa's results for fiscal 2011.
U.S. debit revenue accounts for about 20 percent of the company's overall revenue, Saunders said during the call.
The CEO said Visa prepared for different scenarios while it waited for the Fed to decide on the new debit rules. Now that they are in place, Visa can go forward with its plans.
But Saunders declined to spell out how the company will respond, deferring specifics to late July, when it reports fiscal third-quarter financial results, and October, when it reports for the full year.
He did say, however, that "providing some level of incentives to specific merchants may be an effective strategy" to ensure Visa receives profits from their ability to choose processing networks.
"We will compete vigorously to maintain (the) Visa routing preference and have several strategies we will put into action to achieve this outcome," Saunders said.
For the current year, Visa's forecast translates to revenue of between $8.95 billion and $9.11 billion and earnings of at least $4.84 per share.
That is, however, short of Wall Street's forecasts.
Analysts, on average, are looking for $9.16 billion in revenue, with estimates ranging from $9 billion to $9.3 billion, according to FactSet. They are expecting earnings of $4.91 per share, with estimates ranging from $4.75 to $5.04.
Visa also said that it has completed its $1 billion share repurchase program announced in April. It bought back about 12 million shares at an average price of $77 per share.
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