Here's how Amex's stock could stand out from its peers

By Emily Bary

RBC upgrades Amex's stock, while downgrading shares of Bread and Synchrony

American Express Co.'s stock looks relatively well positioned in what could be a tougher regulatory environment for card names, according to an analyst.

RBC Capital Markets' Jon Arfstrom boosted his rating on Amex shares (AXP) to outperform from sector perform Tuesday, noting that the company is less reliant on late fees than some of its peers are, while Amex also has a more affluent customer base.

Amex's lesser reliance on late fees is notable, in Arfstrom's view, because he thinks the Consumer Financial Protection Bureau could finalize its crackdown on late fees this fall and set it up for a 2024 implementation. The CFPB has said it wants to cap fees for late payments at $8 versus $30, for example.

Read: Helping consumers--or pure profit for banks? The latest in the credit card late-fee debate

Though Arfstrom thinks the consumer is still healthy, he noted that inflation has caused some spending pressures and flagged that delinquencies in the industry are riding. In that context, he wrote that Amex and Discover Financial Services (DFS) have "higher concentrations of super prime and prime customers," which "should drive better than peer losses over the cycle."

See also: Why American Express is feeling good about credit, even as it builds reserves

Arfstrom downgraded Synchrony Financial (SYF) and Bread Financial Holdings Inc. shares (BFH) to sector perform from outperform in his latest report, saying that while he likes the companies over the long run, the stocks could struggle to outperform through the balance of 2023.

Those companies are "potentially more exposed to the challenges of the late-fee proposal and will need to spend more time focusing on mitigating this earnings headwind," Arfstrom said, though he also deemed his downgrades "a thematic adjustment of our ratings preferences due to the evolving macro and regulatory environment rather than comments on the fundamental health of each specific company."

Amex shares were rising nearly 1% in Tuesday's premarket action, while Synchrony shares were down 1.6% and Bread shares were off 1.9%.

See also: Is there a subprime credit-card crisis on the horizon?

-Emily Bary

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09-05-23 0855ET

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