Rapid-Growth Pangs Hit AmEx

Risks of Rapid Growth

Over the past two years, American Express grew its U.S. card portfolio 17% and 23% respectively, which was 11 and 14 percentage points faster than its industry peers, according to a research note from Credit Suisse analyst Moshe Orenbuch.

A good piece of this growth came from the American Express Blue and Stargazer cards, which allow borrowers to roll over their balances each month. American Express also has extended similar rollover plans to its classic gold-card members.

American Express made the moves to become more competitive, since most credit card companies -- like Capital One (COF Quote) and Discover Financial (DFS Quote) -- already allowed their members to roll over balances each month.

The evidence that portfolio growth is coming back to haunt American Express can be found in the American Express Credit Account Master Trust filings with the Securities and Exchange Commission. The trust manages the $38 billion of credit card receivables that American Express has securitized in off-balance-sheet financing.

According to last week's trust filing, delinquent accounts -- those where borrowers have missed a payment -- totaled 0.59% of all accounts in the trust for the first six months of this year. That's down from 0.61% at year-end 2007 and 0.74% at year-end 2006.

The latest number shows that a smaller percentage of the accounts are becoming delinquent. If the economy's so weak, shouldn't that number be rising?

Meanwhile, according to the trust data, so far there has only been a minor uptick in the major problem category: those who are delinquent for 151 days or more.