American Express Looks Toward Fed

Credit-card giant American Express Company (AXP) has gained acceptance from the Federal Reserve to operate as a bank holding company.  This follows earlier moves by the Fed to allow Goldman Sachs (GS) and Morgan Stanley (MS) into the commercial banking market, as well.

Before one leaps to the idea that AmEx is aggressively filling the void left by the failure of banks such as WaMu, notice that the main reason American Express cited for turning toward accepting deposits is to access federal financing on a permanent basis.  From the Fed’s perspective, it made this decision based on “emergency conditions.”  AXP shares are down over 5% ($1.25 per share) in early trading Tuesday.

Scratching the surface, one can see that American Express Company is far from moving with strength into its new configuration.  In the past month, 6 analysts have downwardly revised estimates for the December quarter, 4 have lowered expectations for fiscal year 2008 and 7 have ratched down numbers for fiscal 2009.  The Zacks consensus for next fiscal year is $2.50 per share.  A quarter ago, that number was $3.23.

Finally, late last month AmEx announced it was cutting 10% of its global workforce.  Profits fell 24% in the company’s 3rd quarter, and its year-over-year growth estimate is currently 32.4%.

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