Business Blog Posts

The San Francisco based-company said on Wednesday it now expects annual net revenue growth "in the high single-digit to low double-digits range" for the next fiscal year ending September 30, 2012.

Visa still expects annual net revenue growth of 11 percent to 15 percent for fiscal 2011.

The Federal Reserve finalized last week rules slashing the "swipe" fees merchants pay banks and networks such as Visa and MasterCard Inc (MA.N) every time a customer buys something with a debit card.

"The impact is manageable," Chief Executive Joseph Saunders told analysts during a conference call on Wednesday.

He added that the rules "affect, but far from eliminate," a portion of the U.S. debit revenues that make up about 20 percent of Visa's global net revenue.

Banks pay card networks such as Visa and MasterCard for processing debit transactions and investors had worried that a cut in the fees that banks earn from retailers would translate into a cut in the fees they were willing to pay the networks.

Visa said in a conference call with analysts on Wednesday that its new guidance "contemplates" some pricing concessions to banks, but executives would not be more specific.

Saunders said during the call he expects the 2012 fiscal year to "bear the weight" of the debit fee crackdown, and that revenue growth would "regain momentum" in fiscal 2013.

The company also expects lower profits next year. It sees earnings per share growth "in the middle to high teens" in fiscal 2012, compared with the "greater than 20 percent" earnings-per-share growth it expects for the current year.

Last week, the Fed softened its initial restrictions, which were required by the 2010 Dodd-Frank financial reform law. But the final rules are still expected to cost the banking industry some $9.4 billion out of an estimated $23 billion in annual debit card processing fee revenue, according to the website, CardHub.com.

The softened rule was a victory for banks such as Bank of America Corp (BAC.N) and JPMorgan Chase & Co (JPM.N), as well as for Visa and MasterCard. The industry lobbied fiercely to weaken or delay the strict cap initially proposed by the Fed in December.

Visa also said on Wednesday it completed a $1 billion share repurchase program it authorized in April. Its shares closed down slightly at $88.20 on Wednesday.

(Reporting by Maria Aspan; editing by Andre Grenon)

The 25-basis-point increase in lending and deposit rates underscores China's quiet confidence that the world's second-biggest economy is resilient enough to take tighter monetary policy in its stride, and is not threatened by a hard landing that some investors fear.

"China's inflation battle is almost at an end. Already, there are signs that price pressures are coming off. Today's rate hike may therefore have been the last in the cycle," said Frederic Neumann, an economist at HSBC in Hong Kong.

The latest move increases China's benchmark one-year lending rate to 6.56 percent, and lifts its benchmark one-year deposit rate to 3.5 percent, the central bank said.

The increases will take effect from Thursday, the central bank said in a short statement on its website.

But with growing evidence that China's vast manufacturing sector is easing on the back of tight policy at home and softening demand abroad, some economists think Beijing may be near the end of its nine-month-long policy tightening cycle.

With U.S. interest rates near zero, Beijing also worries it would attract more speculative funds into China if it raises rates too far. That would exacerbate the problem of excess liquidity and further fuel inflation.

China's inflation quickened to a 34-month high of 5.5 percent in May as elevated food prices and a red-hot property market kept price pressures alive.

Beijing is especially sensitive to rising prices as it worries that could stir social unrest and threaten its leadership.

Wang Jun, an economist at CCIEE, a government think tank, said Beijing may feel compelled to raise rates again if inflation proves more stubborn than expected.

"If inflation comes down, there will be no need to raise rates. But if prices rebound, there could be further rate rises," he said.

(Reporting by Aileen Wang, Kevin Yao and Koh Gui Qing; Editing by Don Durfee)

* Caution over the euro zone debt crisis resurfaced after Moody's became the first ratings agency to cut the credit rating for Portugal by four notches to non-investment grade, known as "junk," warning the country may need a second round of rescue funds before it can return to capital markets.

* The euro lost ground against the dollar and the Swiss franc on euro zone debt worries and peripheral euro zone banking stocks fell across the board.

* U.S. stocks ended mainly flat in thin trade on Tuesday, as investors paused after last week's rally.

* The ISM non-manufacturing index, due at 1400 GMT, is expected to show a slight dip to 54.0 in June from 54.6, according to a Reuters poll, the second-lowest reading since last August.

* Other data scheduled for release include the Challenger planned layoffs for June at 1130 GMT and weekly mortgage index numbers at 1100 GMT.

* In company news, Berkshire Hathaway Inc (BRKa.N) has joined the group bidding for Citigroup's (C.N) consumer lending unit OneMain, formerly known as CitiFinancial, the Wall Street Journal said, citing people familiar with the matter.

* U.S. pipeline safety regulators on Tuesday said Exxon Mobil (XOM.N) must make fixes to its ruptured Montana oil pipeline and submit a restart plan before oil can flow again.

* Global passenger airplane market over the next 20 years is seen at $4 trillion, Boeing Co (BA.N) said on Wednesday, adding it expects a market for 33,500 new planes and freighters by 2030.

* In Europe, the FTSEurofirst 300 index .FTEU3 of top shares was lower in early trade, ending a seven-day winning steak on concerns about the euro zone debt crisis and the possibility of contagion after Moody's cut Portugal's credit rating.

(Reporting by Harpreet Bhal, editing by Jane Merriman)

The cost of insuring all weaker euro zone countries' debt against default rose and Portuguese two-term bond yields spiked by a whole percentage point on Moody's decision, announced late on Tuesday, to cut Portugal by four notches.

The euro and European shares fell on the news, ending a seven-day stocks rally, and Portugal had to pay more to sell 3-month T-bills on Wednesday.

The thumbs-down, coming so soon after a new center-right Lisbon government announced austerity plans going beyond those demanded by international lenders, again called into question the EU strategy for dealing with the euro zone sovereign debt crisis.

Moody's said Portugal may need a second round of rescue funds before it can return to capital markets, just as European governments and banks are haggling over a second 120 billion euro bailout for Greece, which has a much higher debt ratio.

"The key worry of the market is that the events that we've been seeing with Greece are being repeated with Portugal," said WestLB rate strategist Michael Leister.

IRELAND TOO?

Ireland, the other euro zone country to have received a bailout, said on Tuesday it may have to make additional spending cuts next year to meet deficit reduction targets in its 85 billion euro bailout plan due to an economic slowdown.

A Reuters analysis last week found that Dublin may also need a second bailout because it is unlikely to grow fast enough to make the envisaged full return to market funding in 2013.

Moody's cited the European Union's management of the crisis, and specifically the attempt to make private creditors share the burden of all future rescues as one reason for its steep downgrade.

The demand that banks and insurers share the risk is driven by growing public hostility in north European creditor nations to any further bailouts for south European states seen as having lived beyond their means.

But Moody's said insisting on private sector involvement not only increased the economic risk facing current investors, but also "may discourage new private sector lending going forward and reduce the likelihood that Portugal will soon be able to regain market access on sustainable terms.

BANKERS FACE OBSTACLE COURSE

Representatives of Greece's major creditor banks were meeting in Paris under the aegis of the International Institute of Finance (IIF), a banking lobby, to discuss the terms of a proposed rollover of privately held Greek debt.

Banking sources said numerous issues involving credit ratings, interest rates, maturities and accounting consequences remained to be ironed out among multiple stakeholders and an agreement was only likely in September.

Credit ratings agencies have warned they would be likely to treat any "voluntary" rollover of Greek bonds as a distressed debt exchange and declare it, at least temporarily, to be a selective default.

European leaders' response has been to criticize the ratings agencies rather than reconsider their policy of seeking at all costs to avoid a debt restructuring.

German Chancellor Angela Merkel brushed aside on Tuesday a warning by the world's biggest ratings agency, Standard & Poor's, that it would view the current French plan for a partial rollover by banks of maturing Greek debt as a default.

"It is important that the troika (EU, IMF and European Central Bank) do not allow their ability to make judgments to be taken away," she said. "I trust above all the judgment of these three institutions."

Germany's deputy finance minister told Reuters it was "absolutely premature" to discuss a second rescue package for Portugal and Berlin was confident the country could implement its reforms and get back on track.

"There is a new government in place so I would really suggest giving the government the time to do what the new government has promised," Joerg Asmussen told Reuters Insider TV.

"We are confident they are willing and able to implement the first package and get back on track," he said.

New French Finance Minister Francois Baroin was just as dismissive of Moody's action on Portugal.

"A ratings agency's view is not going to solve the matter of tension on sovereign debt markets and the budgetary crisis," he said, adding he trusted Portugal's new government to meet its deficit reduction target by 2013.

SELF-FULFILLING?

EU officials complain that the ratings agencies' downgrades are a self-fulfilling prophecy, making it harder for countries under assistance programs to return to capital markets.

Underlying the debate is an increasingly prevalent view in financial markets -- disputed publicly by EU governments -- that Greece, and possibly also Portugal and Ireland, will have to restructure debt sooner or later and force significant losses on bondholders.

The more widespread that assumption becomes, the harder it will be to negotiate further official funding for Greece.

The International Monetary Fund board is expected to approve on Wednesday the release of a vitally needed fresh tranche of loans for Greece after euro zone finance ministers agreed on Saturday to pay their share.

But IMF sources say disquiet is growing among non-Europeans at the global lender over the risks of pouring more money into Europe's debt crisis with no resolution in sight.

"It goes to show that this whole crisis isn't over just yet. Even if they cough up some more money for Greece, and that looks like it's a done deal, it's not over," said Jay Bryson, global economist at Wells Fargo Securities.

"I would think it's bad news for Spain and Italy as well."

(additional reporting by Ana Nicolai da Costa, Naomi Tajitsu and Alex Chambers in London, Walter Brandimarte in New York, Eva Kuehnen, Annika Breidthardt and Gernot Heller in Berlin and Leigh Thomas in Paris; writing by Paul Taylor, editing by Janet McBride)

The downgrade on Tuesday was not entirely unexpected and served as a reminder that Europe's debt troubles extend beyond Greece, which has dominated news headlines over its second financial bailout.

Some economists think Ireland may also need additional support, and investors worry Spain and Italy could be next in line for aid.

"It goes to show that this whole crisis isn't over just yet," said Jay Bryson, global economist for Wells Fargo Securities in Cape Hatteras, North Carolina. "Even if they cough up some more money for Greece, and that looks like it's a done deal, it's not over."

The protracted sovereign debt struggle has darkened the global economic outlook, cooling demand for Asia's exports and leaving financial markets on edge.

Mohamed El-Erian, co-chief investment officer for bond fund PIMCO, said it was unlikely that Europe's troubles would constitute a "Lehman moment" that paralyses the U.S. economy, but it was a drag on an already disappointing recovery.

The debt troubles add another wrinkle to the European Central Bank's interest rate decision on Thursday. Economists widely expect the ECB to raise its benchmark rate, which would be the second hike this year, to try to cool inflation.

But the move could raise already high borrowing costs for Portugal and other so-called "peripheral" European countries. Yields on long-term Portuguese government bonds are well above 10 percent, more than three times higher than those of Germany.

MISSING TARGETS

Moody's Investors Service slashed Portugal's credit rating by four levels, to Ba2, causing the debt-laden Iberian country to follow Greece into junk territory below investment grade. Greece is rated much lower, at Caa1.

Portugal in April became the third euro zone country to request a bailout, after Greece and Ireland.

Moody's cited heightened concerns that Portugal will not be able to fully meet deficit reduction and debt stabilization targets set out in its loan agreement with the European Union and International Monetary Fund.

Portugal is receiving funds from a three-year, 78-billion-euro EU/IMF bailout program and does not need to issue long-term debt in the market until 2013.

But Moody's said there is an increasing probability Portugal will not be able to borrow at sustainable rates in capital markets in the second half of 2013 and for some time thereafter.

There was a "growing risk that Portugal will require a second round of official financing before it can return to the private market, and the increasing possibility that private sector creditor participation will be required as a pre-condition," Moody's said.

Of the three major ratings agencies, Standard & Poor's and Fitch Ratings both have Portugal at BBB-minus, the bottom of the investment grade range.

The first repercussions of the downgrade could come as early as Wednesday, when Portugal is due to place up to 1 billion euros in a 3-month Treasury bills auction. It may have to pay a higher premium to entice buyers.

Portugal's new center-right government said in a statement that Moody's did not take into account strong political backing for austerity after a June 5 election, and an extraordinary tax announced last week.

"BIT EXTREME"

Unlike the previous minority Socialist government, the new ruling coalition has a comfortable majority in parliament to pass austerity measures and reforms. It did acknowledge, though, that the rating cut "shows the vulnerability of the country's economy amid a debt crisis."

It also reaffirmed commitment to deepening and speeding up austerity measures that the country vowed to implement under its bailout pact, saying a strong macroeconomic adjustment was "the only way to reverse the course and restore confidence."

The country has to slash its budget deficit to 5.9 percent of gross domestic product this year after overshooting its target last year, when the gap was 9.2 percent, and then reduce it to 3 percent by the end of 2013.

Anthony Thomas, Moody's analyst for Portugal, told Reuters "evidence that Portugal is meeting or indeed exceeding its deficit reduction targets" could be a positive that may lead the agency to change its outlook on the country's credit rating to stable from negative.

But he also said the outlook depends a great deal on whether euro zone officials will require private-sector participation when extending new financing to the region's troubled countries. Right now, such participation is planned to be only voluntary so as not to cause ratings agencies declaring it a "credit event."

Filipe Garcia, head of Informacao de Mercados Financeiros consultants in Porto, said Moody's move was "a bit extreme" and was likely to exacerbate concerns over Portugal's debt.

"The capacity to return to the markets after a while depends on a more global, structural solution by Europe rather than on what each troubled country does. I think it's too early to think of a second bailout for Portugal right now, not this year at least," he said.

Garcia said the ratings agencies were not taking into account the European Union's political determination to avoid a euro zone member's default, despite the union's strong support for Greece, which is in a far worse shape than Portugal.

"Either they don't believe in the power of the political will by the European Union to avoid default, or they are underestimating this political union," he said. (Additional reporting by Daniel Bases in New York, Sergio Goncalves in Lisbon and Emily Kaiser in Singapore; Editing by Dan Grebler and Neil Fullick)