Visa loses $1.8 billion on legal costs

[July 26, 2012]  NEW YORK (AP) -- Visa posted a loss of $1.8 billion for the April-to-June period on an increase in litigation costs. Excluding that expense, Visa's results were much better than analysts expected.

Payments processors Visa and MasterCard, along with a number of major banks, recently settled a longstanding legal battle against stores over card fees. Visa, MasterCard and the banks agreed to pay the retailers $6 billion as part of the settlement.

Visa had increased its litigation provision by $4.1 billion, which led the company to post a loss of $1.8 billion, or $2.74 per share, for its fiscal third quarter.

Excluding the provision net income was $1.1 billion, or $1.56 per share, beating analysts' expectations of $1.45 per share according to FactSet.

The San Francisco-based company said its revenue grew 10 percent to $2.6 billion, compared to analysts' expectations of $2.5 billion

Visa shares rose $1.80, or 1.5 percent, to $124 in after-hours trading.

Visa makes money by processing card transactions. As the world's largest processor of debit and credit card payments, its results provide insight into how much consumers are spending.

In a sign that people aren't spending as freely as they used to, the total number of transactions Visa processed worldwide in the quarter rose just 1 percent from last year to 13.1 billion. The slowdown was particularly pronounced in the U.S.

The volume of transactions on Visa-branded cards fell 1 percent to $618 billion in the U.S.

However, it grew 8.7 percent in the Asia Pacific to $412 billion. It rose even more in Central Europe, the Middle East and Africa, 13.4 percent.

Visa has been focusing its sights on international expansion, especially in emerging market countries where the percentage of credit and debit card usage is very low.

Visa CEO Joseph Saunders said in a conference call with analysts that the company was expanding with new partnerships in the Mideast, Africa and in Asia.

Saunders pointed out that Visa is one of the main sponsors of the summer Olympic games in London, which will increase the brand's visibility around the world.

"Over the past 13 Olympic summer games and winter Olympic games, this sponsorship has provided Visa with a global platform to amplify our brand message among a passionate global fan base and drive tangible business results," said Saunders.

On the down side, the volume of transactions and payments on debit cards with the Visa logo dropped 7 percent to $362 billion in the quarter compared with the same period last year.

It was the first drop in debit card usage in at least two years for Visa. That represents a dramatic shift for a company which has dominated the market for debit cards.

Banks have eliminated some debit card rewards programs since October, when the government limited fees that banks can charge stores for card transactions.

There was also evidence that rival MasterCard may be swiping some market share in debit cards: Its U.S. debit card transactions grew by 21 percent to $152 million in the January through March period.

Visa said its board of directors has authorized it to repurchase $1 billion of shares through July 2013.

[Associated Press; By PALLAVI GOGOI]

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