Analysts Eye Amex Commercial Cards Ahead Of Earnings Report

Deutsche Bank Research and American Express offered an update on Amex’s card segments, and the successes of the credit card firm’s corporate segment are clear.

Reports by Seeking Alpha late last week offered a summary of the online meeting held by Amex and Deutsche Bank Research. Amex Vice Chairman Steve Squeri pointed to high expectations for its Global Commercial Services (GCS).

According to the company, competition in the consumer card space remains a challenge. Seeking Alpha said the highlight of the conversation was the strength of the corporate card unit, which accounts for about 30 percent of revenue for American Express. Last year, the GCS unit provided $3.2 billion in pre-tax earnings, reports added, and holds a return on investment at about 27 percent.

Commercial cards account for only 13 percent of cards by Amex but almost 40 percent of billings, the outlet said. Competition in the commercial services space is also less intense than that of the consumer card industry.

“For global accounts, AXP is essentially operating a duopoly with Citi as the only global competitor, while JPMorgan dropped out last year,” the outlet wrote.

Squeri reportedly noted American Express’ vast resources and access to data to maintain leadership in the commercial card space and argued that competitors without this data cannot adequately underwrite and manage the risk of commercial payments, which is handled differently than consumer credit.

American Express also predicts the small and commercial middle market is growing by up to 10 percent year over year.

The company is scheduled to hold its Q2 2016 earnings call on Wednesday, July 20.