Chenault Goes On The Defense At Amex’s Investor Day

“Is the American Express business model fundamentally broken? I can tell you with complete confidence: That answer here is no.” So said company Chief Executive Officer Ken Chenault during the firm’s investor day on Thursday (March 10).

But in an acknowledgement of the competitive landscape the company faces on a global scale, the payments giant is looking for ways to streamline and revamp operations. Management presented a “reset” of at least part of the cost structure, with a goal of bringing the current $14.4 billion in operating expenses down to $13.4 billion through the next year, though, as Seeking Alpha noted, there was not especial detail on how to get to that number.

One important metric has come down a bit, though. Whereas previously the company had targeted 12 percent to 15 percent growth in the bottom line, that range has been taken in a bit and now is 10 percent to 12 percent (on 6 percent revenue growth), with a nod to a more difficult operating environment (though he also said these figures are not new targets). The 2016 earnings per share could be between $5.40 and $5.70 this year, with at least some growth off the 2015 level of $5.38.

Turning to battlegrounds in the United States, as Bloomberg noted, Amex will boost its lending activity in the United States with an eye on competition that has cut acceptance costs in a bid to get credit card deals in place. The CEO said lending would help the top line at the firm, even as bidding becomes ever fiercer on card business.

In an interview with the newswire, sell-side analyst Jason Arnold of RBC Capital Markets said: “The company is challenged to grow revenue via spending at present,” but adding loans may indeed have an impact on profitability. “The only way to attain growth like that is to offer better interest rates or rewards, which means lower return on equity on that growth.”

Perhaps referring, at least obliquely, to reports that his relationship with the board is tenuous, Chenault told the gathering that the new initiatives have the support of the board. In other strategic moves, the firm has been forging ahead in the wake of losing its Costco partnership by shaking up divisions and cutting costs (as mentioned above), amid headwinds that include the persistently strong U.S. dollar, lower gas prices and, of course, competition.