Visa to raise up to $19 billion in largest-ever IPO

Visa Inc. plans to raise up to $19 billion in the largest-ever U.S. initial public stock offering, giving a cash infusion to giant banks hurt by weak investment markets and bad home loans.

Two main beneficiaries are JPMorgan Chase & Co. and Bank of America Corp., whose credit card banks are based in Wilmington.

JPMorgan Chase expects to sell Visa stock worth up to $1.62 billion after San Francisco-based Visa goes public later this year, and Bank of America plans to sell Visa stock worth up to $600 million, Visa said in a filing with the Securities and Exchange Commission.

BofA is the largest and JPMorgan the second-largest U.S. credit card issuer, according to the Nilson Report, of Carpinteria, Calif. Wilmington became the nation's credit card capital in the 1980s, when Delaware eased limits on consumer-loan fees and reduced taxes on banks.

Visa hopes to imitate rival MasterCard Inc., whose stock is up more than 400 percent since it went public in May 2006. By comparison, the Standard & Poor's 500 index is up just 13 percent in that period, and the KBW Bank Index is down 14 percent.

Banks use card networks such as Visa and MasterCard to move money from consumers to merchants. Consumer bankruptcies and home foreclosures threaten bank earnings but do not directly hurt the card networks, which are reporting higher sales and bigger profits as more people in the United States and around the world switch to credit, debit and online payments from cash and checks.

Formerly, Visa and MasterCard were bank-owned nonprofit cooperatives.

"The culture shift will be dramatic," said William Keenan, chief executive officer of DeNovo Corp., a Wilmington credit-card-services firm. "When the banks all owned Visa, it was almost like a cooperative culture. They managed to the lowest common denominator. Now, they'll be basing decisions on return to investors."

Visa had planned the offering in 2006, before the securities-market slowdown that began last summer.

"Visa runs a good company. This'll show the public's confidence in the credit card industry," said Rocco Abessinio, founder and president of Applied Card Bank, a Chadds Ford-based credit card issuer.

Consumers spent $3.1 trillion on Visa cards in 2006, according to the Nilson Report. That is more than double the $1.4 trillion they spent on MasterCard. But Visa's public offering does not include its European arm, making the two more nearly equal in size. The companies charge merchants 1 to 2 cents for every dollar consumers put on their cards.

Among its other reasons for going public, Visa and MasterCard have cited the cost of defending against government antitrust actions and lawsuits by competitors such as American Express Co. and Discover Financial Services L.L.C., and by consumers and merchants dismayed by the fees that the card associations charge for using their networks.

Besides Bank of America and JPMorgan, National City Corp., Citigroup Inc., U.S. Bancorp and Wells Fargo & Co. also expect multimillion-dollar payouts, Visa said.

Even after they sell part of their holdings, the banks will remain major shareholders, according to Visa.