American Express May Be Downgraded by S&P on Prospect of Borrower Defaults

[Purveyor]

By Erik Holm

March 19 (Bloomberg) -- American Express Co., the largest credit-card company by purchases, may be cut by Standard & Poor’s on the prospect more borrowers will default.

The company was put on “CreditWatch” for a downgrade based on “escalating credit quality deterioration,” the ratings firm said today in a statement on New York-based American Express.

Chief Executive Officer Kenneth Chenault is shedding customers after efforts to expand backfired, and the company’s stock declined by more than two-thirds in 12 months. The firm is paying some cardholders $300 each to close accounts so the lender can reduce the risk of default as the recession deepens.

After “an aggressive growth strategy related to its credit-card loan portfolio during 2004- 2007, American Express has seen its asset quality deteriorate at a pace that exceeds median levels for the industry,” the ratings firm said.

Credit-card companies are facing higher charge-offs as the worst unemployment in a quarter century leaves more consumers unable to pay their bills.

BLOOMBERG: http://www.bloomberg.com/apps/news?pid=20601087&sid=aOHWmsgvkeRI&refer=home

[SidDithers]

1. I got the letter from AMEX last week...

telling me my credit limit has been lowered (to 1/3 of my previous limit). Doesn't really matter too much, as I don't use card except for some pre-authorized utility bills.

I wonder how long it'll be before I get notice about how happy AMEX is to be offering me a higher credit limit :)

Sid

[EFerrari]

2. You gotta love it. As more and more of our money is funneled up

to these guys, they lower and lower our ability to use it.