Rob Black's Financial Stock Report (AXP, FNM, ICE)

Includes: AXP, FNMA, ICE
by: Rob Black

American Express (NYSE:AXP) is focusing on increasing spending per card with an emphasis on rewards is driving business growth worldwide. Lower card and rewards penetration outside the US suggests even greater growth opportunities outside the US, however. Regulators' focus on bankcard interchange rates around the world (except US) could eventually put some additional pressure on Amex's discount rates as in Australia, but Amex still seems well positioned to deal with that pressure and to be a net beneficiary.

Bank of America initiated Intercontinental Exchange (NYSE:ICE) with a Neutral and $65 target. They believe the company has solid organic growth prospects over the next few years, they face a meaningful competitive threat from the NYMEX-CME trading relationship which could pressure pricing, market share, and limit growth in WTI.

Fannie Mae (FNM) held a conference call Tuesday to discuss the release of OFHEO's report on its examination and the company's settlement agreement also announced. While the settlement agreement requires the company to review all employees mentioned in the report, Chairman Ashley indicated that board and regulator had thoroughly reviewed Dan Mudd prior to his appointment as CEO.

The company will pay $50 million to the Treasury and $350 million to the SEC to be paid into a fund for the benefit of shareholders. Mr. Mudd expected the funds to be released. Fannie Mae's retained portfolio will be limited to December 31 levels until OFHEO approves a plan that can permit modest growth. The portfolio declined during the first quarter, but growth in April has returned the portfolio balance back to the year end 2005 level . Portfolio limits can be removed once the company meets required levels of capital and liquidity, improves its processes and independent assessments of internal controls and financial statements.

The company expects to submit its portfolio growth plan within the 60 days required and committed to hold portfolio balances steady until the plan is approved by OFHEO. The company expects its total return strategy to enable it generate attractive returns for shareholders without portfolio growth. It expects to be selective in the assets it acquires. While the $400 million settlement will reduce capital, the company's surplus has apparently continued to build.