AmEx Shares Slide On Downgrade
NEW YORK (
) -- Shares of
American Express
(AXP) - Get Report
slumped nearly 6% on Monday after Stifel Nicolaus slapped a downgrade on the card services company following concerns that credit card interchange fees may be next to be restricted by the
Federal Reserve
.
Stifel analyst Chris Brendler lowered his rating on American Express to hold from buy, as reported by
Bloomberg
.
"We are increasingly convinced that credit interchange will inevitably be the next target," Brendler writes in a note to clients. "The now- significant disparity in payments' costs greatly increase the risk."
American Express shares were falling 5.8% to $41.44 at last check on fairly strong trading volume of 15 million shares.
Brendler's downgrade comes as the Fed issued two proposals last week on curbing debit interchange fees. The proposals are mandated as part of the controversial Durbin Amendment included in this summer's financial reform package.
Wall Street was surprised by the harsher than expected proposals, each of which call for slashing debit interchange fees as much as 70%. While debit interchange fees only make up a small portion of large banks' revenue streams, regional banks like
TCF Financial
(TCB)
and
Huntington Bancshares
(HBAN) - Get Report
garner a larger portion of total revenue from the fees.
The regulation is another challenge to banks' business models in an environment where the sector is already struggling for revenue growth.
Last week
MasterCard
(MA) - Get Report
and
Visa
(V) - Get Report
shares fell 13% and 16%, respectively, following news of the proposals, even though neither firm garners interchange fees directly. Rather, investors were concerned about the lack of clarity in the proposals surrounding network exclusivity arrangements.
American Express does not offer debit cards.
While the Durbin amendment doesn't address credit card interchange fees - intechange through charge cards and revolving credit cards are much higher than that of debit cards.
With that in mind, if legislators look to curb credit card interchange fees, there is sure to be greater pushback from the industry.
MasterCard shares were rising 0.8% to $223.10. Visa shares were rising 1% to $67.54. Discover Financial shares were also up 1% to $18.19.
-- Written by Laurie Kulikowski in New York.
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