PURCHASE, N.Y. MasterCard shares swung wildly yesterday, first up after the company reported a 21% surge in second quarter earnings, then down after a federal court told the Federal Reserve to cut debit fees under the Durbin amendment even more.
The No. 2 card brand reported at the market opening net income of $848 million for its second quarter, up from $700 million for the same period last year. It said the increase was fueled by a 15% rise in revenue to $2.1 billion.
Two hours later a federal court in Washington struck down the Federal Reserve’s Durbin amendment cap on debit fees and ordered the Fed to do it over with a lower cap. A lower cap would cost credit unions and banks that get paid the fees from MasterCard and Visa billions of dollars in lower revenue.
After the ruling the markets battered shares in MasterCard and Visa, which control about 80% of the U.S. debit card market. The fortunes of the two card networks are critical for credit unions, which earn more than $5 billion per year in card fees from the two companies, and also own stock in MasterCard and Visa the only two stocks credit unions are allowed to own.
MasterCard shares opened at $624.49, then rose as high as $626.23 after announcement of the great second quarter, before plunging all the way to $567.02 after the court ruling. The share price later rallied to close at $610.61 up $9.19 (1.5%) from Tuesday’s close, but down $13.88 from Wednesday’s opening price.
Yesterday’s ruling comes as the European Union is proposing to cap debit fees for MasterCard and Visa and the card networks’ $7.2-billion antitrust settlement with American merchants appears to be fraying.
MasterCard said its second quarter spurt was due to continued growth in cards transactions worldwide. Worldwide purchase volume during the quarter grew 12% to $734 billion. As of June 30, banks and credit unions had issued 1.9 billion MasterCard and Maestro-branded cards.
For the first six months of the year MasterCard reported a 12% increase in revenue to $4 billion, and a 17% spurt in net income to $1.6 billion.
