Though the Federal Reserve Board has yet to determine debit card interchange rates as mandated under the federal financial-reform bill Congress approved July 15, the decrease in annualized debit card revenue before mitigation at Bank of America Corp. could approach $2 billion starting in the third quarter of next year, Charles Noski, BofA Executive Vice President and Chief Financial Officer, told analysts this morning during a conference call to discuss second quarter earnings (see story).
All of the bank’s consumer and small-business card products, including the debit card business, are part of an integrated platform within the bank’s Global Card Services segment, he noted. BofA is the nation's largest debit card issuer.
Once President Obama signs the reform bill into law, “it will impact the future revenues generated by our debit card business,” Noski said, estimating BofA’s debit card business revenue for 2010 to be approximately $2.9 billion. “Although subject to final rulemaking over the next year, we estimate that the decrease in annualized revenue before mitigation could be as much as $1.8 billion to $2.3 billion, starting in the third quarter of 2011.”
The estimated revenue shortfall would affect the carrying value of the $22 billion of goodwill included in the Global Card Services segment,” Noski said. “Under these revenue estimates, we estimate that the impairment of goodwill to be reported in the third quarter of 2010 could potentially be in the range of $7 billion to $10 billion,” Noski said. “We will continue to explore mitigation initiatives, not all of which will be reflected in the Global Card Services segment.”