Credit card stocks to outperform in 2012: Citigroup

MasterCard and VISA credit cards are seen in this illustrative photograph taken in Hong Kong December 8, 2010.

(Reuters) - Citigroup expects the U.S. card and payment sector to outperform in 2012, citing early signs of card loan growth, receding regulatory risks and an improvement in economic data points.

The brokerage raised its price targets on several major card companies and payment processors and added Capital One Financial Corp (COF.N) to its "top picks live" list as it sees the company benefiting from the closing of the ING deal.

Last June, Capital One said it plans to buy ING Groep NV's (ING.AS) U.S. online bank for $9 billion in cash and stock, but is facing tough scrutiny for its proposed merger that would create the seventh largest U.S. bank by assets.

The brokerage doesn't expect legislative moves on credit interchange and said the industry is not overly concerned about the legislations.

The U.S. financial industry, in June, had succeeded in blunting a government proposal to sharply cut the billions of dollars banks annually charge retailers to process debit card purchases.

On alternative payments, the brokerage does not see a material near-term threat to the networks.

"Many factors support our view that the mobile wallet is unlikely to supplant the 'traditional' card-based payments market in a hurry," Citigroup analysts, including Donald Fandetti, said in a note to clients.

Fandetti, according to Thomson Reuters' Starmine data, has a four-star rating for the accuracy of his earnings estimates on stocks he covers.

The brokerage increased its price target on MasterCard Inc (MA.N) to $375 from $360 citing healthy fundamentals. It raised its price target on Visa Inc (V.N) to $104 from $92.

Shares of MasterCard closed at $342.92 on the New York Stock Exchange on Friday, while those of Visa closed at $100.71. Shares of Capital One ended at $45.16.

(Reporting by Tanya Agrawal in Bangalore; Editing by Maju Samuel)