Brazilian card processor Cielo may be losing market share to rival Redecard and is still showing anemic growth from its prepayment receivables business, according to a report on its 4Q09 earnings from Raymond James (NYSE: RJF).

 Cielo had recurring net income of 442mn reais (US$235mn) in 4Q09 for a 77.5% increase from 4Q08, while Redecard, the card processor and acquirer controlled by Itaú Unibanco (NYSE: ITUB), posted net income of 401mn reais, up 5.7% in the same comparison.

Despite the strong growth in profits and cost controls at Cielo, Raymond James said it preferred Redecard based on the possibilities that it will be taking market share from Cielo in coming quarters and “has a more balanced revenues mix with a stronger participation in the prepayment business.”

Cielo showed faster transaction volume growth in 4Q09 over 4Q08 than Redecard, but Redecard grew faster compared to 3Q09, the report said, indicating a possible sea change in favor of the more efficient Redecard.

Raymond James was also negative on Cielo’s speed in developing its prepayment business, which accounted for 5.3% of transaction volumes in 4Q09, saying that it made “no material progress when compared with 3Q09.”"We were expecting prepayment volumes to represent as much as 8.5% in 4Q09,” analyst Federico Rey-Marino wrote. “The company seems to be pushing this business at a very low pace.”