Long Live Swipe Fees and Interchange Fees (JPM, BAC, COF, C, V, MA, FAS)

Banks were already having a good day, but a new ruling has come out from the Federal Reserve on interchange fees.  Maybe the proper description would be “less bad” of news.   Banks were expected to have their debit-card interchange fees, often referred to as swipe fees, down from the current $0.44 fee today.  The prior regulation was going to take the swipe fees all the way down to $0.12 as a cap.  The new proposed regulation is calling for $0.21 as the new fee.  While bad, this is still far better than what had been expected.  The new plan brings new formulas and it is feasible that banks will still try to get more from this.  Arguably, it is a battle victory that is in a losing war.  The argument was that they lost money at the $0.12 fee and it was not going to leave any room for fraud prevention.

We consider this win a “less of a loss” for the likes of major institutions like J.P. Morgan Chase & Co. (NYSE: JPM), Bank of America Corporation (NYSE: BAC), Capital One Financial Corporation (NYSE: COF), and Citigroup Inc. (NYSE: C).  The large winners may in fact be none other than Visa Inc. (NYSE: V) and MasterCard Inc. (NYSE: MA) as they are only paid on a per transaction basis.

• J.P. Morgan Chase & Co. (NYSE: JPM) closed up unofficially by 2.3% at $40.45; shares are up 0.3% at $40.56 in the after-hours.
• Bank of America Corporation (NYSE: BAC) closed up unofficially by 2.95% at $11.14; shares are up 0.3% at $11.18 in the after-hours.
• Capital One Financial Corporation (NYSE: COF) closed up unofficially by 1.6% at $52.26; shares are actually down 0.3% at $52.26 in the after-hours.
• Citigroup Inc. (NYSE: C) closed up unofficially by 3.3% at $41.50; it was raised to Buy at Merrill Lynch today.
• Visa Inc. (NYSE: V) closed up unofficially by 15% at $86.57; shares are up 1% more at $86.57 in the after-hours.
• MasterCard Inc. (NYSE: MA) closed up unofficially by 11.3% at $309.70; shares are up 0.7% more at $311.85 in the after-hours.

Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is the real winner on the day due to its triple-leverage as it closed up by 6.9% at $25.43 on the day.

JON C. OGG