Visa Inc. and MasterCard Inc., the world’s biggest payments networks, fell to 52-week lows after an analyst said federal caps on fees and pending litigation may limit their ability to raise prices.
Visa, the worst performer Monday in the Standard & Poor’s 500 Index, dropped $2.73, or 4 percent, to $65.36 at 1:19 p.m. in New York Stock Exchange composite trading. MasterCard declined 3 percent to $192.27. Both companies were downgraded to “market perform” from “outperform” by Sanford C. Bernstein & Co. analyst Rod Bourgeois.
“Investors will need to get used to substantially lessened pricing power,” Bourgeois said Monday in a research note. “We see a higher probability that Visa’s and MasterCard’s stocks will be ‘dead money.’”
Visa and MasterCard have plunged more than 20 percent this year as U.S. lawmakers approved caps on interchange, or “swipe” fees, charged to merchants on each debit-card transaction. San Francisco-based Visa and Purchase, New York- based MasterCard also are defendants in a federal antitrust lawsuit that may lead to lower interchange for credit-card transactions.
“If credit interchange were to be reduced, this would be another blow to sentiment for Visa and MasterCard,” Bourgeois said.
The Dodd-Frank Act directs the Federal Reserve to determine interchange rates that are “reasonable and proportional” to the cost of processing debit transactions. MasterCard and Visa, which now set the rates and pass the money to card-issuing banks, may face pressure from lenders seeking to renegotiate their contracts. Bank of America Corp. has said the debit caps could trim annual revenue by as much as $2.3 billion.
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