Tue, Apr. 7, 10:29 AM
- "We think the financial crisis is the best demarcation line to think about how competition has gone from envying American Express' (AXP -1%) model to trying to full-on replicate it." say Oppenheimer's Ben Chittenden and Chris Kotowski, downgrading to Underperform with $68 price target.
- The duo notes competition has become more intense in previous AmEx strongholds like 1) spend-centric consumers; 2) corporate-card holders; 3) partnership/rewards; 4) business travel.
- Turning to valuation, the team says large-cap financials typically trade at around 60-80% of the S&P 500 P/E ratio, while AmEx has enjoyed a more premium ratio of 90-110%. While some premium may be deserved, that's probably too high, they say, modeling instead for 75-90%.
- More here
- Previously: AmEx lower on Oppenheimer downgrade (April 7)
Tue, Apr. 7, 7:21 AM
Wed, Apr. 1, 4:33 PM
- Looking for some kind of growth wherever they can find it, banks are about to get their wish as Fair Isaac is set to launch a new credit scoring metric which should expand by tens of millions the field of those eligible to get credit.
- The new score will pull payment histories for things like utilities to calculate credit scores for consumers who might otherwise not have one. Other things - like how often someone changes address - will be used to help calculate a score.
- FICO and 10 unnamed credit card issuers have been testing the new score since November, and Fair Isaac intends to roll things out nationwide by year-end. Right now, about 15M of the 53M previously unscorable Americans can be scored using the new system.
- Source: WSJ
- Among those of interest: WFC, C, BAC, JPM, COF, DFS, AXP
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, QABA, FINU, KRU, RWW, KBWR, RYF, FINZ, KRS
Tue, Mar. 31, 3:58 PM
- “We took our prestige so seriously that as a company we too became elitist and arrogant," says American Express (AXP +0.2%) CEO Ken Chenault, speaking in Boston, the site of the 1991 "Boston Fee Party" in which retailers stopped accepting AmEx cards to draw focus on their high fees.
- Prestigious, elitist, and expensive worked for AmEx once, says Chenault, but today no customers are taken for granted. There's OptBlue, which aims to win small businesses over with lower costs, and more inclusivity such as adding retailers like grocers where consumers buy everyday items.
- “We almost missed the boat,” said Chenault, speaking to a room full of execs from places like BJ's Wholesale Club and Legal Sea Foods. "But because of their historical relationship with our brand, our customers gave us time.”
- Source: Bloomberg
Fri, Mar. 27, 12:55 PM
- First, says analyst Richard Shane, the stock trades at 14.6x this year's estimated earnings, roughly inline with post-crisis levels. Second, American Express (AXP -0.8%) is facing limited earnings growth over the next one to two year, and finally - while the long-term EPS growth target of 12-15% is achievable - the long-term revenue growth target of 8% may not be realistic given the maturity of AmEx's core business and the limited impact of new products and initiatives.
- Previously: Seeing the "silver lining" of losing Costco (March 26)
Thu, Mar. 26, 11:09 AM
- Listening to American Express (AXP -1.7%) explain the details behind the Costco breakup at its investor day yesterday, Susquehanna's James Friedman and John Coffey see a "silver lining."
- Costco's demands, say the two, would have lowered returns and forestalled AmEx from pursuing better deals due to rigid non-competes. One of these deals could be the Plenti multi-partner program announced last week - CEO Ken Chenault says this could not have been done 60 days ago.
- Though management wouldn't comment on plans for selling the Costco loan book or their plans for retaining existing card holders, they did say efforts to retain spending from the Costco-Canada portfolio were "encouraging."
- Previously: AmEx seeks to reassure at investor day; Munger questions competitive edge (March 25)
- Previously: American Express to launch loyalty program (March 18)
Wed, Mar. 25, 3:12 PM
- In no surprise, American Express (AXP -1.3%) CEO Ken Chennault says the company is committed to its long-term 8%+ revenue growth target, and continues to see 12-15% EPS growth over time (though it's failed to hit that goal of late). Despite challenges, the company also doesn't back off of its ROE target of 25%.
- Webcast and presentation slides
- Helping EPS growth, of course, is a strong capital position allowing the continuation of buybacks, and AmEx repurchased 3.6% of the float in 2012, 4.6% in 2013, and 3.5% in 2014. After being flat-to-down in 2015, EPS growth should turn positive in 2016, says the company, and hit the 12-15% target in 2017.
- The stock turned higher as the presentations began at 1:30 ET, but has since returned to session lows. Not helping is Charlie Munger, speaking at the Daily Journal annual meeting, suggesting AmEx's "moat" is less than it once was.
Tue, Mar. 24, 10:59 AM
- While the company is likely to maintain its revenue and EPS targets at its investor day tomorrow, say Credit Suisse's Moshe Orenbuch and Lesley Robertshaw (noting it's been three years since the revenue target was hit and EPS targets are likely out of reach for the next two years), the key question at hand is whether the 25% ROE target will be cut.
- It could be time, says the team, for AmEx (AXP -0.5%) to recognize it's competing against companies with far lower current returns and lower required ROEs which will make hitting that lofty target difficult in the future.
- Among the issues are the co-branding deals - losing the Costco and JetBlue business, and being forced to renegotiate with Delta and Starwood at terms most likely less-advantageous to AmEx.
Mon, Mar. 23, 2:37 PM
Mon, Mar. 23, 12:29 PM
- The Regional Bank Coalition is urging D.C. to remove the $50B threshold at which, under current Dodd-Frank rules, lenders are subject to boosted regulatory standards.
- The fight thus far has centered on whether to raise that bar (something even the Fed appears to support) or scrap it altogether.
- "Regional banks do not create systemic exposure through market making or complex networks of interconnected transactions with other financial firms," says the group.
- Regional Bank Coalition website
- The group: SunTrust (NYSE:STI), Regions Financial (NYSE:RF), Huntington Bancshares (NASDAQ:HBAN), Fifth Third (NASDAQ:FITB), Capital One (NYSE:COF), BMO Financial (NYSE:BMO), Compass (NYSE:BBVA), BB&T (NYSE:BBT), Bank of the West, and AmEx (NYSE:AXP).
- ETFs: KRE, KBE, IAT, KBWB, QABA, KRU, KBWR, KRS
Thu, Mar. 19, 9:29 AM
- American Express (NYSE:AXP) agrees to a multi-year agreement with Charles Schwab for two new, premium co-branded cards expected to be available early next year.
- More details on the cards will come closer to their availability.
- Source: Press Release
- Previously: American Express to launch loyalty program (March 18)
Wed, Mar. 18, 3:12 AM
- American Express (NYSE:AXP) is teaming up with big-name companies such as Macy's, Exxon Mobil, AT&T and Rite Aid to launch a loyalty program, called Plenti, which will operate similar to drugstore-rewards programs.
- The announcement comes as AmEx prepares for the end of its 16-year relationship with Costco after the two couldn’t agree on terms.
- Previously: AmEx down 6% on scrapping of Costco exclusivity (Feb. 12 2015)
Mon, Mar. 16, 11:00 AM
- Still not bullish on the growth outlook for American Express (AXP +0.9%) this year or next, Nomura's Bill Carcache and Yuman Lui say the stock - selling for about three standard deviations below its historical average relative to the S&P - has overshot to the downside.
- Terminating the Costco relationship has investors questioning AmEx's business model in today's world, says the team, which decided to conduct a survey to test that hypothesis. What it found is that AmEx's core strengths remain "alive and well across important demographic segments."
- "American Express’s business model may be bruised post the loss of Costco, but it is not broken."
Thu, Mar. 12, 12:31 PM
- American Express (AXP +2%) "shined" in its stress test, says Susquehanna's James Friedman, noting the new buyback of $6.6B vs. last year's $4.4B (the dividend was boosted 11.5% as well).
- Share count should fall by 5.7% through the end of 2016 Q2 vs. a 3.6% decline last year, says Friedman, who thus boosts his 2016 EPS estimate to $5.96 from $5.85. 2015 EPS is now expected at $5.58 from $5.56 previously.
- Previously: American Express boosts payout by 11.5% after CCAR approval (March 11)
Wed, Mar. 11, 5:53 PM
Thu, Mar. 5, 8:28 PM
- The minimum Tier 1 common capital ratio for banks is 5%, according to the Fed, and here's how the 31 lenders stacked up under the central bank's severely adverse scenario vs. a year ago (h/t: WSJ):
- Deutshce Bank (NYSE:DB): 34.7%, not tested a year ago
- DIscover (NYSE:DFS): 13.9% vs. 13.2% a year ago
- Bank of New York Mellon (NYSE:BK): 12.6% vs. 13.1%
- American Express (NYSE:AXP): 12.5% vs. 12.1%
- Northern Trust (NASDAQ:NTRS): 12.3% vs. 11.7%
- State Street (NYSE:STT): 11.8% vs. 13.3%
- Citizens Financial (NYSE:CFG): 10.7% vs. 10.7%
- KeyCorp (NYSE:KEY): 9.9% vs. 9.2%
- Capital One (NYSE:COF): 9.5% vs. 7.8%
- PNC Financial (NYSE:PNC): 9.5% vs. 9%
- Santander Holdings USA (SAN's U.S. unit): 9.4% vs. 7.3%; shares +0.8% after hours
- BMO Financial (BMO's U.S. unit): 9% vs. 7.6%
- Comerica (NYSE:CMA): 9% vs. 8.6%
- Huntington Bancshares (NASDAQ:HBAN): 9% vs. 7.4%
- HSBC North America (NYSE:HSBC): 8.9% vs. 6.6%
- U.S. Bancorp (NYSE:USB): 8.5% vs. 8.2%
- Regions Financial (NYSE:RF): 8.3% vs. 8.9%
- Citigroup (NYSE:C): 8.2% vs. 7.2%
- SunTrust (NYSE:STI): 8.2% vs. 8.8%
- BB&T (NYSE:BBT): 8.1% vs. 8.4%
- MUFG Americas Holdings (NYSE:MTU): 8% vs. 8.1%
- Ally Financial (NYSE:ALLY): 7.9% vs. 6.3%
- Fifth Third Bancorp (NASDAQ:FITB): 7.9% vs. 8.4%
- Wells Fargo (NYSE:WFC): 7.5% vs. 8.2%
- M&T Bank (NYSE:MTB): 7.3% vs. 6.2%
- Bank of America (NYSE:BAC): 7.1% vs. 5.9%; shares +2.1% after hours
- JPMorgan (NYSE:JPM): 6.5% vs. 6.3%
- BBVA Compass (NYSE:BBVA): 6.3% vs. 8.5%
- Goldman Sachs (NYSE:GS): 6.3% vs. 6.9%
- Morgan Stanley (NYSE:MS): 6.2% vs. 6.1%
- Zions Bancorp (NASDAQ:ZION): 5.1% vs. 3.6%; shares -1.7% after hours
- The lenders were also informed today whether their capital return plans would put them below the Fed's 5% threshold, giving them a 6-day window with which to change those requests, if need be. Last year, both BofA and Goldman scaled back their dividend/buyback requests, allowing them to pass the CCAR. This year's CCAR results will be announced on Wednesday.
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