AmEx Shares Up On Analyst Upgrade, Card Loans Performance

Investors pushed up the shares of American Express Co. (AXP) Wednesday, encouraged by the performance of its card loans and an upgrade from an analyst.

The shares ended Wednesday at $35.84, up $1.19 or 3.43%. The stock has traded in the range of $9.71 and $41.10 in the last 52 weeks.

Analyst Michael Taiano at Sandler O'Neill upgraded AmEx stock to a 'hold' from 'sell.' The move was fueled by "steady credit improvement," Tiano said in a note published Wednesday.

AmEx shares also got a boost from a monthly report card issued Tuesday by the company, outlining the performance of credit card loans, including those packaged into bonds.

In this report the company said that the number of U.S. borrowers at least a month behind their card payments decreased modestly to 4.1% in August from 4.2% in July. This decline in delinquencies, a key gauge of future losses, is important because higher delinquencies force issuers to squirrel away capital to reserve for potential losses; ultimately, companies must write off loans if customers can't pay up.

The slowing pace of delinquencies is also noteworthy because it comes at a time when seasonal factors - such as good behavior on the part of borrowers fueled by tax refund checks - are behind the card industry.

"AmEx was the strongest performer from its group," said Scott Valentin, an analyst at FBR Capital Markets. Issuers of plastic, including Capital One Financial Corp. (COF), JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C) and Discover Financial Services (DFS) also released reports Tuesday, outlining the monthly performance of their credit card debt securities.

AmEx wrote off in August 9% of its card loans, including those packaged into bonds. In July, the company wrote off 9.2% of its U.S. card loans.

The company said last month that better-than-expected bankruptcy trends contributed to the decline in write-offs.

Like other card issuers, AmEx has been hurt by cutbacks in spending and customers who are falling behind on their bills in the current economic slump. Unlike other card companies, AmEx both issues cards and processes transactions. Furthermore, it issues both charge cards requiring a monthly payoff and credit cards on which customers can carry a balance.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; [e-mail]