Visa, Mastercard deal ‘unlikely to have material impact’ on revised antitrust settlement: Analyst – Mastercard (NYSE:MA), iShares US Financial Services ETF (ARCA:IYG)

Federal judge appeals to change settlement Visa Inc. V AND Mastercard Incorporated MOM The June 25 rejection of a $30 billion antitrust settlement is not expected to have a major impact on their similar business models, the analyst said.

US District Judge Margo Brodie in Brooklyn wrote Friday that banks could have settled for a “significantly” larger settlement, arguing that the deal would “disproportionately and unfairly” benefit small, local retailers at the expense of larger retailers like Walmart Inc. WMTBloomberg reported.

Despite Brodie’s opinion, JPMorgan remained overweight on both Visa and Mastercard, believing that “the diversity, complexity and scale of their business models give each significant opportunity to sustain overall pricing and earnings growth.”

“Taken in isolation (given the broad range of outcomes), we do not find the court’s comment unduly concerning, and based on the text of the note, we believe it is unlikely that the revised agreement will have a material impact on the V/MA economic model,” JPMorgan analyst Tientsin Huang wrote in a note Monday.

“In our view, the worse outcome would be if no agreement could be reached and the case goes to court, which widens the spectrum of potential outcomes.”

Also read: Visa, Mastercard’s $30 billion deal hits snag: Judge signals rejection

Brodie said the original agreement, which was intended to resolve two decades of legal battles over credit card fees, would have allowed large retailers to charge higher fees for Visa and Mastercard credit cards and allowed smaller merchants to use pricing tactics that would have encouraged customers to choose cheaper cards.

The judge noted that the “cost” of the settlement is an estimated $30 billion in savings for merchants over five years.

But Brodie went on to write in her opinion piece that the estimated $6 billion in annual savings for merchants is “paltry compared to the $100 billion merchants paid” in interchange fees for Visa and Mastercard transactions last year, according to Bloomberg. Both companies could “withstand a much larger assessment,” she said.

The judge’s opinion on the revised settlement is “negative for the stock,” but it doesn’t seem as bad as other recent bearish predictions, Huang said.

Reduction: Visa shares fell 0.06% to $262.32 on Monday afternoon, while Mastercard shares lost 0.65% to $438.30.

However, in the afternoon, two ETFs that give investors exposure to shares of Visa and Mastercard posted moderate gains. US Financial Services ETF Shares International Youth Tournament increased by 0.33%, while SPDR Select Sector Fund – Financial XLF gained 0.21%.

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