American Express Company (AXP)

Bloomberg reported that: American Express, Capital One Financial Corp. and Discover Financial Services shares have dropped more than 25 percent in the past year on concerns rising U.S. unemployment will hurt consumers’ ability to repay debts. The damage at American Express was cushioned by a 30 percent rise in overseas profit to $133 million as customers spent and borrowed more.

The biggest dislocation is still in the future outlook as compared to the stock price for many of the constituents within the banking sector. With all of the downgrades along with the fact that we are seeing a historic rise in defaults, don’t tell me that the worst has been priced already as that is not possible. There has got to be something else as there are reports, predictions and further “shoes” to drop from eco-space.

Write-offs in US card portfolio on owned portfolio is 7.1% in 2Q 08 - Amex is supposed to have consumers with good credit score. They also are not tracking their guidance anymore. This is a serious problem.

The earnings are awful, the business is in the dumps and now AMEX wants to withdraw any 2008 forecast. Bloomberg reported: Profit in the company’s U.S. card business dropped 96 percent to $21 million from $580 million a year earlier as provisions for losses more than doubled to $1.5 billion from $640 million. uncollectible debt in the unit rose to 5.3 percent of loans from 2.9 percent a year earlier.

The increase of cards issued by GNS' partner banks will cannibalize their core proprietary card business.

American Express will suffer from declining transactions per card, and hence average discount revenue, as it continues to increase the number of cards issued by partner banks.

Cell phones may take share away from card transactions in the near future, especially in key geographies in Asia and Europe.