This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Buy Visa After Durbin Drubbing: KBW

NEW YORK ( TheStreet) -- It's time to load up on shares of Visa (V - Get Report), according to KBW analyst Sanjay Sakhrani.

Visa's shares closed at $178.35 Wednesday, down 7% since July 30, which was the day before U.S. district court judge Richard J. Leon in Washington ruled that the Federal Reserve had "clearly disregarded Congress's statutory intent by inappropriately inflating all debit card transaction fees by billions of dollars and failing to provide merchants with multiple unaffiliated networks for each debit transaction."

Meanwhile, shares of MasterCard (MA - Get Report) rose 5% since July 30, to close at $629.98 Wednesday.

Judge Leon ruled against the Federal Reserve's final rules on the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which were implemented by the regulatory during the fourth quarter of 2011.

The Durbin Amendment requires caps on interchange fees charged by banks to process debit card transactions for merchants, and also requires "non-exclusivity" for the network processing the transaction.

The Federal Reserve's interpretation of the Durbin Amendment calls for merchants to have a choice on which network to use to process a debit card purchase, but only if the customer is required to use a PIN number at the point of sale.

In his ruling, Judge Leon wrote "First, the interchange transaction fee and network non-exclusivity regulations are fundamentally deficient. It appears that the Board completely misunderstood the Durbin Amendment's statutory directive and interpreted the law in ways that were clearly foreclosed by Congress."

The Judge's interpretation of Durbin is that merchants should be able to choose the processing network for each debit card purchase, whether or not the customer uses a PIN.

If Judge Leon's opinion on non-exclusivity for transaction networks sticks, it can only mean good news for MasterCard and bad news for Visa.

"Visa has more to lose than gain since it has 71% share in signature debit versus MasterCard at 29% in the U.S," according to JPMorgan analyst Tien-tsin Huang. "Assuming competition results in shift to 50/50 share and pricing stays rational, we conservatively see $540M of revenue that could shift from Visa (6% revenue hit or ~$0.51 in EPS) to MasterCard (9% revenue benefit or ~$2.74 in EPS)," Huang wrote in a July 31 note to clients.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
MA $93.84 -0.42%
V $67.87 -0.54%
AAPL $125.54 -0.71%
FB $86.91 -0.43%
GOOG $520.30 -0.59%

Markets

DOW 17,643.33 -40.25 -0.23%
S&P 500 2,068.76 -8.02 -0.39%
NASDAQ 4,991.94 -17.2740 -0.34%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs