The shares tumbled $10.47 to close at $198.93 in New York, the worst performance in the Dow Jones Industrial Average. Visa is the biggest component of the 30-company (INDU) index, which slid 0.8 percent. The sanctions may trim “several pennies” per share from fiscal 2014 earnings, Chief Financial Officer Byron Pollitt said yesterday after the firm reported quarterly results.
The U.S. imposed sanctions on more than two dozen individuals and St. Petersburg-based OAO Bank Rossiya, prompting Visa and MasterCard Inc. (MA) to stop processing payments for some banks. Russian President Vladimir Putin responded to the sanctions by recommending that his country create its own payments system and change its laws. He said the two companies will lose market share.
“The geopolitical situation will create additional risk for Visa and MasterCard in coming months,” Christopher Donat, an analyst at Sandler O’Neill & Partners LP, said today in a note to clients. “Pending Russian law could be negative for earnings.”
MasterCard, the second-biggest U.S. network, also dropped 5 percent, the most since January. The Purchase, New York-based company is scheduled to report quarterly results May 1.
Members of Russia’s parliament voted today on proposed changes to the nation’s laws to create its own payments system.
“We are disappointed by the proposed amendments,” Seth Eisen, a MasterCard spokesman, said in an e-mailed statement. “We now need to meaningfully evaluate what actions we will be required to take as a result but will continue to work closely with partners and issuers in Russia to continue delivering leading payment solutions to the market.”
MasterCard issued separate comments earlier today in Russian. The adoption of the amendments “causes us deep concern, and at the moment we are working to evaluate the possible consequences of these amendments to our business and business of our partners,” Pavel Gafarov, a spokesman for MasterCard at Ketchum Inc. in Moscow, said in an e-mailed statement translated by Bloomberg News.
Visa Chief Executive Officer Charlie Scharf, 49, is among U.S. executives scheduled to attend an economic forum Putin is hosting next month. Citigroup Inc., which has more than 50 branches in Russia, said yesterday that CEO Michael Corbat, 53, is withdrawing from the St. Petersburg International Economic Forum. ConocoPhillips CEO Ryan Lance also bowed out of the forum, the Houston-based energy producer said yesterday.
Paul Cohen, a Visa spokesman, said the company doesn’t comment on the travel or schedules of its executives.
“We’re caught between the politics of the United States and the politics of Russia,” Scharf said yesterday during a conference call. “We have 100 million cards there and it’s not in anyone’s best interest, inclusive of the Russians, to make those cards not available to their own citizens.”
Visa said net income for the fiscal second quarter ended March 31 climbed 26 percent to $1.6 billion as consumer card spending increased amid a long-term global shift from cash and checks to electronic payments. Adjusted earnings per share were $2.20, two cents more than the average estimate of analysts surveyed by Bloomberg.
Revenue increased 6.9 percent to $3.16 billion, missing the $3.19 billion average estimate of analysts. Visa said it expects fiscal 2014 revenue to climb 10 percent to 11 percent, compared with a previous forecast of “low double-digits.”
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