American Express (AXP) - Get American Express Company Report shares rose Tuesday after a report said the credit-card company was deep into talks to purchase Kabbage, an online lender to consumers and small businesses.
A source told Bloomberg the purchase price could reach $850 million, including retention payments, all in cash. An agreement could come as soon as this month or not at all, the source said.
Kabbage is backed by Softbank Group.
AmEx shares recently traded at $104.67, up 3%. They have declined 16% year to date.
AmEx already is the biggest credit card issuer for small business and consumers, Bloomberg noted. So the possible deal would expand its lead.
American Express talked up the potential of small businesses last month.
“Ninety days on now, we actually feel really good about the small-business portfolio,” said Chief Financial Officer Jeff Campbell. The percentage of those loan balances in forbearance has gone “way down,” he said.
Last month, AmEx posted an unexpected second-quarter profit, but saw revenue fall by nearly a third as consumer spending collapsed during the peak of the coronavirus pandemic.
American Express said earnings for the three months ended in June were 29 cents a share, down 86% from the same period last year but besting the Wall Street consensus forecast of a loss of 11 cents. Revenue fell 30% from last year to $7.675 billion and missed analysts' forecasts of $8.155 billion.
American Express also said it would set aside $628 million to cover what it expected to be a wave of consumer defaults in the months ahead, taking its overall loss provisions to around $1.6 billion.