Visa Inc. has made a significant move that could potentially create additional capital for banks, according to Jefferies analyst Ken Usdin. In a research note on Thursday, Usdin highlighted Visa’s plan to provide liquidity to bank owners of its Class B shares, which are currently valued at around $96 billion. This move comes at a time when financial firms are actively seeking ways to bolster their capital in order to meet the balance sheet requirements proposed by federal regulators.
The timing of this proposal seems to be particularly advantageous, as banks are in need of additional capital and support. However, the approval process and the timeline for its completion remain uncertain. It is yet to be determined whether all shareholder classes will agree to Visa’s proposal and how long it will take for the process to be finalized.
When Visa was publicly listed in 2008, JPMorgan Chase & Co. owned 23.1% of its Class B shares, while Bank of America Corp. owned 11.5%, and National City (now part of PNC Financial Services Group Inc.) owned 8%. Additionally, Citigroup Inc. held 5.5% of the shares, and Wells Fargo & Co. and U.S. Bancorp each held approximately 5%. However, over time, many banks have been gradually selling their Class B shares.
Currently, JPMorgan Chase owns about 37 million Class B shares and has sold 23 million of them. Bank of America confirmed in a 2015 interview with The Wall Street Journal that it had sold its stake over the course of several years. As for PNC, they reported that their Class B shares were worth approximately $1.3 billion in the second quarter.
In premarket trades, JPMorgan stock witnessed an increase of 0.4%, while Bank of America saw a rise of 0.5% and Wells Fargo experienced a slight 0.1% increase. Visa’s initiative could potentially provide a necessary boost to the capital and stability of banks, ultimately benefiting the entire finance industry.
