Tue, Jun. 9, 2:59 PM
- The sale of the Costco USA portfolio (to Citigroup) could result in a $2.2B gain for American Express (AXP +0.6%), says analyst David Ho, figuring a 15% premium on a roughly $15B portfolio.
- Investing $1B of that money into its rewards program could drive 5% or more EPS gains for AmEx, says Ho.
- And why should AmEx reap such a sizable premium for the credit card portfolio? "Citi is on the clock," says Ho, noting the bank's deal with Costco likely requires the bank to purchase the portfolio. Ho figures Citi is under pressure to announce a deal by Q3, giving AmEx the leverage to demand a large premium.
- Ho notes the portfolio is one of the best ever put up for sale - it generates 1.5x higher average spend per card vs. the average Visa card, and 3x more than the average Citi card. Balances are 30% higher than Citi cards and 10% higher than Visa.
- Source: Barron's
Thu, Jun. 4, 11:57 AM
- American Express (AXP -1.2%)has the lowest-value reward cards, says Nomrua's Bill Carcache, though it relies on its customer service and brand power to create the perception of just the opposite. In the Internet age, though, this can only last for so long, and at some point the company, says Carcache, is going to have to start spending more money on rewards.
- The Nomura team reviewed 23 credit cards from six different issuers for its analysis.
- "With credit benign and loan growth accelerating, we believe we're still in the early stages of the rewards war and expect competition to continue to intensify before it abates."
- Earlier this week, AmEx and Starwood Hotels announced new perks for their co-brand cards, and AmEx boosted rewards for its premier gold cards. Rewards spending in 2014 of $6.93B was up 7.3% from 2013.
- Source: Bloomberg
Fri, May 29, 3:36 PM| Fri, May 29, 3:36 PM | 7 Comments
Tue, May 12, 4:54 PM
Tue, May 12, 4:47 PM
Wed, May 6, 10:46 AM
Mon, May 4, 9:12 AM
- Moving forward after Costco, The Plenti Credit Card from AmEx (NYSE:AXP) - a no annual-fee credit card allowing members to earn 1 Plenti point for every dollar spent - is launched.
- Major participating partners at the open include AT&T, Exxon, Macys, Mobil, Nationwide, Rite Aid, Direct Energy, Enterprise Rent-A-Car, and Hulu. More brands and categories will be added over time.
- Source: Press Release
- Previously: Seeing the "silver lining" of losing Costco (March 26)
Sat, May 2, 4:24 PM
- "I make no apologies whatsoever for Clayton's lending practices," says Warren Buffett, responding to a Berkshire Hathaway (BRK.A, BRK.B) shareholder who says he's disgusted Berkshire would support Clayton Homes' allegedly predatory lending practices. "Clayton," says Buffett, "has behaved very well."
- Previously: Berkshire mobile homes unit accused of predatory tactics (April 6)
- Only about 3% of Clayton's $12B in mortgages on 300K homes fail, says Buffett, noting Clayton does not securitize the paper, but instead holds the notes on its books.
- The Oracle also defended his partnership with 3G - an outfit which has won a well-deserved reputation for ruthless cost-cutting, seemingly at odds with Buffett's distaste for layoffs and other expense reductions.
- See: Zero-Based Budgeting, 3G's secret sauce
- Buffett: “I don’t know of any company that says, as a policy, ‘we will have more people than we need,’ but a lot of companies ended up that way." Layoffs at 3G-run companies have spurred those companies to perform "exceedingly well."
- On American Express (NYSE:AXP): While the payments industry is subject to innovation, AmEx has an incredible history of adapting.
- On IBM: Asked if this is a "cigar butt" company - a great old company on the slide, but still a couple of puffs left (like Berkshire Hathaway when Buffett bought) - Charlie Munger says it isn't. He reminds that IBM was the dominant player in punch cards and has adapted over the years. It helps, says Munger, that Berkshire bought its stake at a reasonable price. "If people weren't often so wrong, we wouldn't be so rich."
- Live blog of the meeting at the WSJ
Fri, May 1, 2:42 AM
- Merchants displeased with the high fees American Express (NYSE:AXP) charges them are permitted to steer customers toward less expensive cards without fearing retaliation from the credit card company, a federal judge ruled on Thursday.
- Judge Nicholas Garaufis in Brooklyn federal court said American Express is not allowed to stop restaurants and stores from offering discounts, rebates or other incentives for using lower-fee cards - an activity known as steering.
Mon, Apr. 27, 12:56 PM
- At year's end, American Express (AXP -1.2%) had more employees than any of its publicly-traded card issuing and payment network peers, say Bill Carcache and Yuman Lui. This includes Capital one, which operates a larger physical bank infrastructure.
- The two note AmEx's CEO recently emphasizing how digitization of payments is transforming the industry and how he's got expense levers to pull. Adding those two comments together, the team looks for AmEx to "opportunistically shrink its employee base." Perhaps the intervention of an activist might speed up the process?
- Source: Barron's
- Previously: AmEx lower as another sell-sider bails (April 27)
Mon, Apr. 27, 10:12 AM
Fri, Apr. 17, 3:45 PM
- In the sort of things dreams are made of for retailers, Costco's (COST -1.7%) new deal with Visa (V -1.6%) and Citigroup (C -1.6%) will have the company paying next to nothing for transactions vs. the roughly 0.6% it pays current partner American Express (AXP -4.2%).
- "The numbers didn't add up," said AmEx CEO Ken Chenault last month when telling his shareholders why the company let the Costco relationship go. "We couldn't accept their financial terms."
- For Citigroup, it's plan is to make money by customers carrying loan balances, and for Visa it hopes to earn when customers use those cards at other retailers where fees are higher. Banks generally make about 80% of their credit card revenue from interest balances and other fees, with interchange making up the rest, according to Bernstein's Lisa Ellis.
- To put some numbers on it, Costco had about $100B in sales last year, with its customers accounting for 20% of AmEx's loans and 8% of spending.
Fri, Apr. 17, 11:02 AM
- "If any doubt remained, it is very clear that dollar strength is a major problem right now for large multinationals," says Topeka, after going over American Express' (AXP -4.5%) Q1 results, and noting the corporate card business slowdown wasn't isolated to any particular industry.
- AmEx, notes the team, has 31% of its volume outside of the U.S. and is highly dependent on cross-border and business-related travel. 'This reads negatively for Mastercard (MA -1.4%), and, less so, Visa (V -1.4%)."
- AmEx earnings call transcript and presentation slides.
- Previously: AmEx beats on bottom line, but outlook still dour (April 16)
Thu, Apr. 16, 4:12 PM
- Q1 net income of $1.525B or $1.48 per share vs. $1.432B and $1.33 one year ago. ROE of 29% up 70 basis points.
- Revenues of $7.95B fell 3%, but gained 1% when adjusting for forex swings.
- Provisions of $420M fell 13% Y/Y.
- Expenses of $5.2B fell 5%, or 1% after forex adjustment.
- Cardmember spending grew 3%, or 7% after forex adjustment.
- FY15 earnings are still expected to be flat to modestly lower thanks to headwinds and as investments ramp to fill the Costco void.
- U.S. card services net income of $934M up 7% Y/Y.
- International card services net income of $134M down 16% Y/Y thanks to the strong dollar.
- Global commercial services net income of $444M flat Y/Y. Corporate and other net loss of $167M vs. loss of $230M a year ago.
- Conference call at 5 ET
- Previously: American Express beats by $0.11, misses on revenue (April 16)
- AXP -0.75% after hours
Thu, Apr. 16, 4:06 PM
Wed, Apr. 15, 5:35 PM
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