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Brazilian financial institutions struggle in the face of possible credit card regulations

September 26, 2012

In countries around the world, financial institutions have struggled in the face of economic uncertainty.

In countries around the world, financial institutions have struggled in the face of economic uncertainty. Several large banks in Brazil, which provide merchant services to many businesses, have been seeing prices of shares plummet.

MarketWatch reports that stock prices of many of the biggest banks had fallen based on new pressures by the government to regulate the interest rates on credit card fees. The source reports that Banco Bradesco saw shares fall by 3.76 percent, while Itau Unibanco Holdings fell 3.7 percent and Banco do Brasil, a state-owned bank, saw its stock price fall 2.73 percent.

“We estimate the new rates should have a negative impact of 4.4 percent on NII [net interest margin] and 10 percent on earnings for 2013, assuming no additional volumes,” Credit Suisse stated in a report, according to the source. “Financing volumes would have to go up at least 40 percent to compensate for the lower rates.”

Not all credit card stocks are suffering. As Seeking Alpha pointed out, since 2008, Visa and MasterCard have seen the prices of their shares increase 10 percent and revenue skyrocket by approximately 20 percent.

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