Yesterday, American Express Co. (AXP) (AmEx) reported that it witnessed a significant decline in its third quarter lobbying charges, apparently emerging more relaxed with respect to the regulatory issues. As the data filed, the company spent $0.34 million, plummeting 26% from $0.46 million in the year-ago quarter and 44% from $0.61 million reported in the sequential quarter.
In the July-September period of 2011, AmEx undertook the federal government into its confidence regarding the regulation of consumer financial products, patent reform online payments and advertisement, data security, mobile messages alerts and internet gambling among other issues.
However, lobbying costs for another card processing player, Discover Financial Services (DFS), escalated during the third quarter as it lobbied the federal government on legislation involving a patent reform. As a result, Discover spent $0.4 million, reflecting 74% jump year over year from $0.23 million and doubling sequentially from $0.2 million.
Overall, the companies lobbied both houses of the Congress, the White House, the Treasury Department, the Internal Revenue Service and the US Postal Service.
Earlier, last week, card giants – Visa Inc. (V) and MasterCard Inc. (MA) – also reported their lobby spending during the third quarter of 2011. The lobby costs of $1.69 million increased for Visa, both year-over-year and sequentially, as it tried out all means to delay the implementation of the debit-fee ruling finalized in June this year. However, the same for MasterCard came in at $0.58 million, declining both year-over-year and sequentially, thereby reflecting the company’s eased motion over the recent reforms.
Although the financial overhaul reforms attempts to nibble into the card players’ revenue and earnings, we believe that the card industry contains fundamentally strong stocks and, are expected to deliver well with the market stability.
Besides, the companies are also seeking greener pastures through newer initiatives, including the expansion into prepaid cards, mobile banking and eCommerce. Through these initiatives, the companies are also targeting to reach out to the banked and unbanked consumers in developing nations as well, which was laid unexplored until now and hence, showers ample growth opportunities.
Hence, we maintain a long-term Neutral recommendation on all the four card stocks. While AmEx and Discover carry a Zacks #3 Rank, reflecting a short-term Hold rating, both Visa and MasterCard have a Zacks #2 Rank, which implies a Buy rating in the near term.
AMER EXPRESS CO (AXP): Free Stock Analysis Report
DISCOVER FIN SV (DFS): Free Stock Analysis Report
MASTERCARD INC (MA): Free Stock Analysis Report
VISA INC-A (V): Free Stock Analysis Report
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