UPDATE 2-Visa takes WaMu debit cards from MasterCard-sources

* MasterCard to lose most WaMu debit card users to Visa

* WaMu debit portfolio shift to occur in phases

* MasterCard shares close down 1.94 pct; Visa down 0.8 pct (Adds analyst comments, background, byline)

By Tenzin Pema

NEW YORK, May 22 (Reuters) - JPMorgan Chase & Co (JPM.N) is shifting a "substantial" portion of its Washington Mutual debit card portfolio to Visa Inc's (V.N) network from MasterCard Inc (MA.N), two people familiar with the matter said.

JPMorgan, which bought Washington Mutual's (WAMUQ.PK) banking units in September when the thrift failed, will shift parts of the debit card business in phases but has no plans to shift it all, one of the people said.

The people requested anonymity because the change has not been publicly announced.

"Losing the WaMu portfolio is a bigger deal for MasterCard than winning it is for Visa," said John Williams, who covers card companies at Macquarie Capital.

WaMu represents MasterCard's largest debit portfolio, with about $35 billion in fiscal 2007 spending, he said, citing the Nilson Report.

MasterCard, the world's second largest card network, will lose more than half of a $59 billion U.S. debit card portfolio as a result of the shift, Bloomberg News said, citing two people familiar with the matter.

MasterCard declined to confirm details of JPMorgan's decision, but said in a statement that it was not expected to materially affect revenue, and that it "has the opportunity" to retain part of the WaMu portfolio.

"We recognize that given the highly competitive nature of our industry and the challenging environment facing our financial institution customers today, decisions such as these can occur," MasterCard's statement said.

JPMorgan declined to comment. Visa did not immediately return a call seeking comment.

UBS analyst Jason Kupferberg said the move was widely expected because Visa handled most of JPMorgan's debit card portfolio before the WaMu acquisition.

Williams said that, nevertheless, the change was a "fairly substantial blow" to MasterCard's debit card platform.

Last week, Chris McWilton, president of U.S. markets at MasterCard, said debit cards were a "high-growth" opportunity in the U.S. market where Visa commands a strong lead.

Shares of MasterCard closed down $3.33, or 1.9 percent, at $168.36. Visa shares fell 53 cents, or 0.8 percent, to $65.75. (Additional reporting by Dan Wilchins and Jonathan Stempel; Editing by Leslie Gevirtz, Phil Berlowitz)