Visa windfall gives European banks Q2 boost

By Steve Slater

LONDON, June 22 (IFR) - Dozens of European banks will book hefty windfalls in the second quarter from the sale of their stakes in Visa Europe, after Visa Inc (Xetra: A0NC7B - news) this week completed the purchase of its sister card payments firm.

Barclays (LSE: BARC.L - news) is set to be the biggest beneficiary due to the amount of trading on its Visa cards, booking a gain of about £396m now the sale has completed. The British bank will also receive shares in Visa and another cash payment in 2019 that could see it reap about 1.2bn from the sale, people familiar with the matter have previously said.

Most other major European banks - including Lloyds, HSBC, Intesa Sanpaolo (Amsterdam: IO6.AS - news) , Santander and Caixabank (Amsterdam: CB6.AS - news) - will also get a second-quarter windfall of varying size depending on how active they are on the Visa network. That income will be timely, as bank profits are under pressure from sluggish economies and weak trading income.

US card giant Visa agreed to buy Visa Europe for up to US$23.3bn in November, in a deal that unites the two arms of the world's largest payments network.

The proceeds will be shared by more than 3,000 banks and payment firms that own the European network.

Visa and Visa Europe were part of a global bank-owned network until 2007, when Visa Europe became a separate entity. It (Other OTC: ITGL - news) has more than 500m cards in issue and had a 52% share of the European card market in 2013.

Under November's deal, Visa said it will pay 16.5bn up front in cash and convertible preferred stock, with potential for an additional payment of up to 4.7bn.

Visa Europe's members have this week received shares in Visa as well as the cash payment, and will get another cash payment on the third anniversary of closing, the size of which will depend on future net revenue for the business.

UK banks could receive about 40% of the proceeds, because of the popularity of the Visa network in Britain, people have previously estimated. Much of the remaining activity is in France, Spain and Italy.

Some banks have this week disclosed the second-quarter profit boost they will get, although some said most of the capital benefit was booked in 2015 results when the deal was struck.

Italy's Intesa Sanpaolo said the deal will result in a second-quarter net capital gain of around 150m and Spain's Caixabank said it expected a gain of 115m.

Austria's Raiffeisen Bank International (LSE: 0NXR.L - news) said it will get 97m from the initial cash payment and Britain's Co-operative Bank said it will recognise a gain of £62m in its half-year results.

Lloyds has previously said it expected a pretax gain of about £300m from the upfront cash payment when the deal closed.

Payment services provider Worldpay Group (Other OTC: WDDYF - news) said the sale of its 5.9% interest in Visa Europe will bring in 1.25bn. That consists of an upfront cash payment of 592m, 374m in Visa shares and a future payment of up to 283m. (Reporting by Steve Slater)