AmEx Is a Bank, But Won't Act Like One

Updated from Tuesday, Nov. 11

American Express (AXP Quote) has now joined Capital One Financial (COF Quote) as a bank holding company, but don't expect the iconic charge-card issuer to mimic the same strategies pursued by its newer rival.

The change, approved by the Federal Reserve late Monday, provides American Express and a related company, American Express Travel Related Services Co., increased access to capital, while decreasing their reliance on the frozen credit markets.

But unlike Capital One, which has used the bank holding company status it gained four years ago and a series of acquisitions to build up a formidable branch network, American Express is not really interested in the business of banking, analysts say.

"I don't think American Express wants to be a full-service bank. There are parts of being a full-service bank that they just have no interest in," says Craig Maurer, an analyst at Calyon Securities, a unit of Credit Agricole, citing mortgage lending as one such area.

As a bank holding company, American Express will be regulated by the Fed and will have access to the Treasury's Troubled Asset Relief Program, or TARP, along with liquidity measures and the ability to "roll over corporate debt at lower rates than otherwise would have been possible," according to Friedman Billings Ramsey analyst Scott Valentin.

The company is considering a capital investment from the Treasury, according to analysts. American Express can also potentially borrow from other banks and other federal agencies if needed, Valentin adds.

American Express is seeking roughly $3.5 billion in taxpayer-funded capital from the federal government, the Wall Street Journal reports Wednesday, citing people familiar with the situation. It isn't clear if the application under the TARP came before or after American Express got approval to become a bank-holding company.

Even though it has some branches through its travel offices, American Express does not have a large physical branch infrastructure either, nor does it have interest in investing in one right now, Maurer says.