Meredith Whitney Downgrades Visa, MasterCard to ‘Outperform’

Meredith Whitney, the bank analyst who predicted “hundreds of billions of dollars” of municipal defaults, downgraded Visa Inc. (V) and MasterCard Inc. (MA) to “outperform” from “buy,” an employee of her firm said.

Meredith Whitney Advisory Group cut the two companies today, Marc Lombardo, a research analyst, said in a phone interview. The research firm has a five-tier rating system, with “buy” at the top, followed by “outperform.”

Whitney had “buy” ratings on Visa and MasterCard since she started coverage in March 2010, according to data compiled by Bloomberg. She called Visa her “single best buy” during an interview with Bloomberg Radio on May 4, 2010. The stock had climbed 3.5 percent since then through yesterday, compared with a 5.5 percent gain for the Standard & Poor’s 500 Index.

Visa and MasterCard, the world’s biggest payments networks, plunged last year after U.S. lawmakers approved caps on debit- card transaction fees as part of the Dodd-Frank Act. The shares rebounded this year as consumers worldwide continued to shift to plastic from cash and checks.

MasterCard advanced 1.7 percent to $363.75 at 1:37 p.m. in New York after surging 60 percent in 2011 through yesterday, the top performance in the 75-company S&P 500 Information Technology Index. Visa, the index’s fifth-biggest gainer, climbed 1.9 percent to $93.19 after advancing 30 percent this year.

James Issokson, a spokesman for Purchase, New York-based MasterCard, and Erica Harvill of San Francisco-based Visa, declined to comment.

Whitney became a celebrity during the financial crisis after she correctly predicted that Citigroup Inc. would cut its dividend. Her call last year that there would be a wave of state and local government bond defaults has so far proved unfounded. Defaults totaled $1.13 billion in 2011, compared with $4.25 billion for all of 2010, Bank of America Corp. said in a Sept. 23 research note.

To contact the reporters on this story: Donal Griffin in New York at dgriffin10@bloomberg.net; Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

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

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