The shares of Visa, the largest card company in the world, have been floated on the New York Stock Exchange and, as a result, banks that have issued Visa cards will receive shares worth millions of dollars. For Australian institutions, this injection of funds, although one-off in nature, will be warmly received at a time when banks are facing a liquidity squeeze. Visa’s decision to follow in the footsteps of smaller competitor MasterCard, which was listed in 2006, has resulted in the largest IPO ever recorded, raising $17.9 billion (A$19.4 billion).

As Visa is owned by a consortium of the banks that issue Visa cards, the public listing of Visa means that shares will be disbursed to the constituent banks in proportion to the number of cards issued. The banks can then keep the Visa shares or sell them on the market as they see fit. While the benefits of this listing will be felt by banks around the globe, not least those in the US, Australian banks are also set to reap substantial bonuses.

ANZ is the largest Visa card issuer in Australia, and the financial institution in the country that stands to receive the most shares. Indeed, the bank is expected to reap a pre-tax gain of A$350 million from Visa’s stock market launch, and has indicated that it will sell around half of these shares. Meanwhile, it has been reported that Westpac, as Australia’s second largest issuer of Visa cards, has received a pre-tax profit of A$270 million as a result of the float. In addition, NAB is expected to receive shares worth around A$100 million. St George and CBA are not expected to receive such a large amount, with analysts pegging their windfall at an estimated A$50 million each.

The injection of cash that the float of Visa provides to some Australian banks comes at an opportune time. An all time low in liquidity in the global credit markets has led to concerns about Australian institutions being forced into credit rationing. However, it should be noted that the receipt of Visa shares is a one-off capital gain. The fundamentals of the Australian banks have not changed, only the ability to recognize and liquidate the inherent value of Visa ownership. Nevertheless, the funds will certainly be welcomed by the Australian banks.

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