Visa Inc, the newly formed entity that arose out
of the restructuring of Visa’s US, international and Canadian
units, says there is a 95 percent chance it will complete its
initial public offering (IPO) by 10 October 2008, according to its
latest quarterly filing with the US Securities and Exchange
Commission (SEC). The probability estimation was part of a
calculation used to value a class of Visa shares.

In November 2007, Visa filed to raise up to $10
billion with the offering, potentially making it the second-largest
US IPO after the $10.6 billion offering by telecommunications giant
AT&T Wireless in 2000. Visa Inc has not disclosed the number of
shares it will offer or a price range for the share sale. It plans
to list its shares on the New York Stock Exchange under the symbol
Visa’s IPO is expected to attract huge interest
from potential investors given the successful transition of
MasterCard to a publicly traded company in 2006. Since its stock
market debut, MasterCard’s share price has risen significantly.
However, Visa’s IPO plans could still be snagged due to the falling
US stock market, which has put a dampener on the prospects of many
planned IPO offerings. But given the strength of MasterCard’s
recently announced financial results, industry analysts expect that
once Visa shares go on sale, they will prove to be just as popular
as MasterCard’s.

UBS downgrades issuers

The economic downturn has already affected card issuers in the US.
Just a few weeks after announcing a mixed set of fourth-quarter
financial results, Swiss financial giant UBS downgraded American
Express, Capital One and Discover Financial Services to “sell”
ratings amid fears of a consumer-led recession in the US. UBS said
that unemployment levels will rise during 2008 and 2009, driving
losses in the consumer credit sector.

While Capital One Financial and Discover
Financial Services were cut from “neutral”, American Express was
cut from “buy”. UBS said it was also was reducing its earnings
estimates on the three companies to reflect higher losses and lower
transaction volumes, leading to price target cuts on American
Express and Discover Financial.
“We also expect industry receivables growth to
remain low given high levels of consumer leverage and the potential
impact from additional government rebates,” UBS said. “Hence, we
expect higher losses, limited balance sheet growth and lower
margins to result in lower earnings through 2008 to 2009 relative
to our prior forecasts, which also supports our current outlook for
lower valuations.”

US recession fears

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There are mounting concerns over a recession in the US following
the release of data from the Institute for Supply Management’s
(ISM) non-manufacturing index on 4 February, which showed that US
service industries unexpectedly shrank in January at the fastest
pace since the last recession of 2001 amid a falling housing market
and cooling consumer spending. The ISM index, which reflects around
90 percent of the US economy, fell to 41.9 from 54.4 the prior
month. A reading of 50 is the dividing line between growth and

Adding to the bad news was data showing that US
employers in January reduced payrolls for the first time in more
than four years. Service providers added 34,000 workers to payrolls
after an increase of 143,000 in December. US economic growth slowed
to an annual rate of 0.6 percent between October and December 2007,
down from 4.9 percent in the third quarter, according to government
figures in late January.
However, Visa and MasterCard are likely to fare
much better than card issuers during an economic downturn, given
that they do not keep consumer debt on their balance sheets and
have a well-diversified international presence. On 4 February, Visa
Inc announced that its first-quarter net income had more than
doubled from $205 million in the year-ago period to $424 million.
Total operating revenue amounted to $1.49 billion for the first
quarter ended 31 December, up from $845 million a year
Visa warned that a slowing economy and consumer
spending could “moderate” its growth rate for the remainder of its
fiscal year, due to a falling housing market, declining mortgage
credit quality, and recent economic trends in the US that could
affect its growth over the next nine months. Growth in operating
revenue outside of the US was the biggest driver of Visa’s
increase, which the company attributed to cross-border business and
leisure travel. Transactions processed rose 13 percent to 9.1