Visa IPO Keeps Climbing

The electronic payment processor sees another day of big gains after Wednesday's initial public offering.
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Visa

(V) - Get Report

shares were chugging more than 11% higher after the newly public company announced that its IPO underwriters exercised their overallotment options -- adding an additional $1.8 billion in proceeds to one of the largest IPOs ever.

The underwriters, including

JPMorgan Chase

(JPM) - Get Report

,

Goldman Sachs

(GS) - Get Report

,

Bank of America

(BAC) - Get Report

,

Citigroup

(C) - Get Report

,

HSBC

(HBC)

,

Merrill Lynch

(MER)

,

UBS

(UBS) - Get Report

and

Wachovia

(WB) - Get Report

, have opted to purchase an additional 40.6 million shares of common stock at $44 a share, Visa said Thursday.

Visa now expects net proceeds from the

already record-breaking

offering, including the exercise of the over-allotment option and the deduction of fees and commissions to be $19.1 billion.

Shares of the San Francisco-based electronic payments processor debuted on the

New York Stock Exchange

on Wednesday in one of the most talked about and highly demanded initial public offerings in years. Visa was priced late Tuesday at $44 a share, above the expected range of $37 to $42 a share. Shares jumped 28% from its IPO price on its first day of trading.

Shares were most recently up $6.57 to $63.07.

Some of the most profitable investors of Visa's IPO are its so-called

member banks

. Prior to a restructuring completed last year, Visa was organized as multiple associations by country. So-called member banks owned shares in the various associations. It now operates under one holding company with the exception of Visa Europe.

The banks -- some of which are also the company's underwriters -- stand to cash in hefty sums from selling even just a portion of their stakes in Visa, particularly since the IPO priced higher than expected. Many banks are struggling to maintain capital levels as the credit crunch holds tight and losses from residential mortgage loans intensify. The added gain from the selling of Visa shares will be a welcome relief to earnings this quarter.

The gains will also offset the millions in provisions that the member banks have had to foot Visa for litigation issues.

National City

(NCC)

expects a pre-tax cash gain of approximately $530 million this quarter, it said on Thursday. The Cleveland-based bank, one of the hardest hit by rising residential mortgage losses, said the gain represents the redemption of approximately 39% of its Visa stake.

After taxes and litigation expenses, Nat City says the gain is equivalent to $500 million, or 79 cents a share. Its Tier 1 capital levels should benefit by roughly 35 basis points, it said.

Late last month JPMorgan Chase estimated a first-quarter gain from selling a portion of its Visa stake between $1.1 billion and $1.3 billion. The New York banking giant is likely to exceed that range since the shares priced above the expected range.

"

The potential positive impact to capital ratios is clearly greater than our original estimates due to pricing above the expected range and reversal of litigation accrual," writes Andrew Marquardt, an analyst at Fox-Pitt, Kelton, in a note on Nat City. "We now expect Tier 1 ratios to benefit by 7

basis points on average."

Marquardt estimates

Fifth Third

(FITB) - Get Report

and

U.S. Bancorp

(USB) - Get Report

"stand to benefit the most" after Nat City, with capital ratios increasing 23 basis points and 13 basis points respectively.