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Capital Markets

Mastercard prepares $2.45 billion IPO

But owner banks should be cautious about the effects of a spin-off.

You can almost guarantee that if a bunch of banks were charged with looking after a harmless little mogwai it would end up getting wet, eating after midnight, and turning into a nasty gremlin.

Banks have a solid track record for turning collectively owned, cosy, profitable operations that are performing well into monsters that come back to bite them. The most conspicuous example of this is when banks voted to demutualize the friendly exchanges they collectively owned, turning them, quite foreseeably, into for-profit monopolies, a move that most privately regret.

Banks don't learn – they might be about to do something similarly foolish in the payments industry by allowing MasterCard, the world's second-largest payment card association, to become a public company.

MasterCard hopes to raise up to $2.45 billion in an IPO scheduled for the first quarter of 2006.

MasterCard, like its larger rival Visa, occupies a strategic position in the payments industry, which generates about $300 billion a year in revenues for banks, with tentacles reaching further than any bank.

The company, which has already expanded beyond credit cards with some success, has the potential, if not the declared ambition, to expand further.

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