DOW JONES NEWSWIRES
Standard & Poor's Ratings Services lowered its credit ratings on American Express Co. (AXP) and its units amid concerns about the card company's long-term liquidity.
While the ratings agency views current levels as adequate, it said the fundamental credit environment in which American Express operates will continue to deteriorate into 2010.
The downgrade, which S&P warned it was considering last month, came a week after the company posted a 56% drop in first-quarter net income as write-offs climbed. Credit-card companies have been suffering as growing numbers of cash-strapped and jobless borrowers are unable to make their monthly payments. The outlook isn't getting any better, as unemployment numbers continue to tick higher amid the ongoing recession.
On Thursday, S&P cut its counterparty credit rating by two notches to BBB+, or three notches above junk territory, and lowered its preferred stock rating into junk territory, with a three-notch cut to BB. The ratings are no longer on watch for downgrade, where they were placed in November, but the outlook is negative, meaning further downgrades aren't out of the question.
S&P expects unemployment will continue to rise, further pressuring the company, and said its 2009 results could be pressured to the point that American Express posts a loss for the year amid ever-increasing loan-loss provisions. The $1.8 billion put away to cover soured loans in the first quarter was up 49% from a year earlier and 29% from the prior quarter.
In addition, the credit-card industry is facing government legislation that would restrict certain practices. The House is debating a bill which would prohibit so-called double-cycle billing, retroactive rate hikes and ban the issuance of credit cards to people under 18. The "Credit Card Holders' Bill of Rights" was expected to garner enough support for passage Thursday.
S&P went on to say American Express can offset the pressures by continuing its cost cutting and stable revenue persisting at its transaction-processing network.
Last week, Moody's Investors Service lowered its credit ratings on American Express, citing the company's weaker asset quality and revenue trends. Its lowered ratings were still comfortably in investment-grade territory, but the ratings outlook is negative.
Shares were up 0.5% to $25.07 in recent trading.
http://online.wsj.com/article/BT-CO-20090430-718290.html |
發表於 2009-4-30 15:29
| 
