Visa Says Debit-Card Rules May Slow Revenue Growth in 2012

Visa Inc. (V), the world’s largest payment network, said a Federal Reserve cap on debit-card fees may lead to slower growth in revenue and earnings in 2012 compared with the current year.

Revenue growth for the 2012 fiscal year will be in the “high single-digit to low double-digits range,” the San Francisco-based company said yesterday in a filing. That’s down from a projection of 11 percent to 15 percent for the 2011 fiscal year.

“We expect that fiscal 2012 will bear the weight of the regulations financially and in fiscal 2013 revenue growth will regain momentum,” Visa Chief Executive Officer Joseph Saunders said yesterday on a conference call. The 2012 forecasts are “based on the changing business landscape including the assumption that some portion of transactions may be routed away” to competitors, he said.

Investors have been concerned the cap on debit-card transaction fees, mandated by the Dodd-Frank Act, would crimp Visa’s profits. The central bank last week capped debit-card swipe fees, also called interchange, at 21 cents a transaction, increasing the limit from an earlier proposal of 12 cents. The system replaces a formula based on a percentage of the purchase price that averaged 44 cents.

Visa and its rival MasterCard Inc. (MA) set interchange fees that are paid by merchants and pass the money to card issuers like Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) Shares of the two card networks fell more than 10 percent on Dec. 16, when the Fed’s cap was first proposed. Visa climbed 15 percent on June 29 when the Fed increased the cap.

Visa rose $1.81, or 2.1 percent, to $90.01 at 9:53 a.m. in New York Stock Exchange composite trading. The shares advanced 25 percent this year through yesterday.

An Improvement

“On balance, the rules are an improvement from the initial draft proposed in December 2010,” Saunders said.

Diluted Class A common stock earnings-per-share growth in the next fiscal year may be in the middle-to-high teens, less than the 2011 per-share growth forecast of greater than 20 percent, the filing shows.

Visa projects client incentives, intended to generate transaction volume on its network, will be at the high end of the projected range of 16 percent to 16.5 percent of gross revenue this year, Saunders said on the call.

The company also completed a $1 billion stock buyback program, purchasing 13 million shares at an average price of $77, according to the filing.

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net