Bank of America, Big Banks Face Massive Credit Card Case

Private antitrust litigation pitting some five million retailers against Visa (V), MasterCard (MA), and 13 large banks, including Bank of America (BAC), Citigroup, Capital One Financial (COF), JPMorgan Chase (JPM), U.S. Bancorp (USB), Wells Fargo (WFC), PNC Financial (PNC), Fifth Third Bancorp (FITB), SunTrust Banks (STI), HSBC (HBC) and Barclays Plc (BCS) has slipped under the radar of many analysts and investors who follow those companies, but the case may deliver a multi-billion dollar shock to bank bulls in the coming months.

Estimates of the potential cost of a settlement of the antitrust case vary dramatically--from a few billion dollars into the hundreds of billions. At least as worrisome to the financial companies, according to Deutsche Bank research, is the risk that a settlement or judge's ruling could take the 2% "interchange" fees banks and card companies charge retailers on credit card transactions to as low as .5%, That would equal the rate in Australia, but still be higher than the .3% charged in the European Union, according to a report by Sanford Bernstein analyst Rod Bourgeois.