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The Zacks Analyst Blog Highlights: Bank of America, MasterCard, Visa, Wells Fargo and JPMorgan Chase

BAC MA V WFC JPM

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For Immediate Release

Chicago, IL – August 7, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Bank of America Corporation (BAC - Analyst Report), MasterCard Inc. (MA - Analyst Report), Visa Inc. (V - Analyst Report), Wells Fargo & Co. (WFC - Analyst Report) and JPMorgan Chase & Co. (JPM - Analyst Report).

 

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Here are highlights from Monday’s Analyst Blog:

 

BofA Pays $738M in Merchant Lawsuit

 

According to Bloomberg, Bank of America Corporation (BAC - Analyst Report) will shell out $738 million as compensation to retailers for a lawsuit alleging the company, along with other card companies, of charging excess debit and credit card fees. This forms a part of the largest antitrust litigation settlement in the U.S. history.

Back in 2005, about 7 million merchants had charged card companies and several big banks with fixing prices and unduly increasing processing or interchange fees on transactions made through debit and credit cards. The settlement is aimed to resolve this multi-state U.S. merchant lawsuit.

Moreover, the settlement would permit retail stores to charge the customers extra amounts for card usage. This step is taken to divert consumers’ interest towards other forms of payments.

Earlier in July, credit card giants MasterCard Inc. (MA - Analyst Report) and Visa Inc. (V - Analyst Report) entered into a formal agreement with the federal court of Brooklyn to settle this lawsuit. Accordingly, both these companies agreed to pay about $6.0 billion to the retailers. While Visa is expected to incur a cash settlement charge of $4.1 billion, MasterCard projects to record $790 million (pre-tax) as lawsuit penalty in the remaining half of 2012.

BofA has announced that nearly $539 million of the settlement amount would be carried out through the litigation escrow account maintained by Visa. The account would be funded by Visa’s class B shares, owned by BofA and other major banks.

Thirteen more banks, including Wells Fargo & Co. (WFC - Analyst Report) and JPMorgan Chase & Co. (JPM - Analyst Report) are involved in this antitrust litigation. The overall settlement is estimated to be worth $7.25 billion, by far the largest in the history of antitrust settlements.

However, the plaintiffs have not received this settlement very well. They are dissatisfied with the fact that the settlement does not minimize their difficulty of understanding the ways through which the interchange fees are fixed. Moreover, they are concerned that this would strip them of their rights to sue payment networks in the future.

Conclusion

The settlement concludes a long-drawn legal hassle and is expected to be a relief for BofA. Such payouts do affect the financials of a company; however, at the same time these are effective tools for enhancing goodwill.

Currently, BofA retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.

 

 

 

 

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