MasterCard shares gained a whopping 70.78% in 2011 while Visa gained 47.71% compared to a loss of 18.07% for Financial Select Sector SPDR (XLF),
Analysts at Janney Capital Markets downgraded both stocks at the start of 2012 to "neutral" from "buy" arguing that the shift to credit and debit cards from cash has slowed.
"During the 1990s, spending on cards exceeded overall consumer spending by about 9%. During the most recent decade, this slowed to about 6%," the report states. It also argues the Durbin amendment, which caps fees on debit cards, will drive banks to push customers toward using credit cards instead.
Investors also appear increasingly focused on an antitrust lawsuit that could result in billions worth of penalties for Visa and MasterCard. While it appears much of those costs would be borne by banks including Citigroup (C)
There is also the possibility that so-called credit card "interchange fees," which retailers pay to banks and credit card companies, will be reduced as a result of the lawsuit.
A Citigroup report last week stated in regard to the suit that "views and scenarios are all over the map, with most expecting a settlement this summer, including some type of temporary interchange reduction as the base case, though some believe a settlement is not a sure thing."
The same report contended that "concerns... seem to be building among management teams and investors," over the Consumer Financial Protection Bureau, the controversial new regulatory agency mandated by the 2010 Dodd Frank financial services reform bill.
The Citigroup report followed a financial services industry conference hosted by the bank last week. Visa and MasterCard did not present at the conference, though the report noted that American Express