AHEAD OF THE BELL: AMERICAN EXPRESS

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Associated Press
Ahead of the Bell: American Express
Associated Press, 03.12.09, 08:44 AM EST
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An analyst cut his price target and earnings estimate for American Express Co. amid concern that mounting credit losses will likely force the credit card lender to take sizable reserves in the coming quarters and potentially cut its dividend.

In a research note published Wednesday night, Citi (nyse: C - news - people ) Investment Research analyst Donald Fandetti said upcoming data about American Express (nyse: AXP - news - people )' credit quality and first-quarter results are likely to put pressure on the company's share price.
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Fandetti, who already rates American Express a "Sell," cut his price target to $9 from $14. Shares of American Express closed Wednesday at $11.93 and lost 23 cents in premarket trading.

Data from January showed rapid deterioration in credit quality at American Express, Fandetti said, as the lender faces rising delinquencies and defaults among its borrowers. Nearly all credit card lenders are facing rising losses as the recession worsens and unemployment rises, leading more customers to miss payments.

NOTE:nearly all creditcard lenders are facing rising losses as the recession worsens and unemplotment.

Fandetti said American Express has been especially hit hard because of its exposure to markets such as California and Florida, which have stung by the housing downturn, as well as a high proportion of loans in its portfolio from 2005 to 2007, which are among the worst-performing.

Continued deterioration could force American Express to ramp up loan-loss reserves in 2009, Fandetti wrote in the note.

Despite the credit-loss worries, Fandetti said American Express' capital ratio remains strong. But he cautioned that a dividend cut could still occur to help preserve additional cash. Many financial services firms have been slashing their dividends in recent weeks to help save cash as loan losses continue to mount.
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Fandetti cut his 2009 earnings estimate to 68 cents per share from $1.25 per share. He slashed his 2010 earnings estimate to $1.15 per share from $2.00 per share.

Analysts polled by Thomson Reuters, on average, forecast earnings of 94 cents per share for 2009 and $1.42 per share for 2010.

Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
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