American Express May Reap Rewards in Credit-Card Suit
American Express, in its ad campaign, tells consumers to "Make Life Rewarding." Now, after a slew of lawsuits targeting the credit-card industry, Wall Street has a question: Will litigation prove rewarding for American Express?
So far, the answer is a qualified yes.
American Express Co. has been targeted in a number of the suits that promise to reshape the way card companies do business. Plaintiff lawyers and antitrust crusaders have been suing card issuers on issues ranging from currency-conversion fees billed to cardholders to fraud costs stuck on merchants. But the New York-based credit-card issuer hopes to be a beneficiary of perhaps the most important suit.
That case, which the Justice Department brought against Visa USA Inc. and MasterCard International Inc., claims the two associations wrongly restrict their member banks from entering card-issuing agreements with Amex and other card brands. A federal court ruled in October 2001 in the Justice Department's favor, and the case is on appeal in New York. A decision is expected within a year.
Provided the judges uphold the original decision, and Visa and MasterCard fail to interest the Supreme Court in hearing the case, Amex will be free to court the thousands of banks that own Visa and MasterCard -- potentially ramping up the transaction volume it runs through its networks, and thus earning more in merchant fees.
"We feel pretty comfortable that the appeals process by Visa and MasterCard is probably not going to succeed," says Diane Jaffee, the fund manager of TCW Galileo Diversified Value. Amex has been the fund's largest holding since early spring, and Ms. Jaffee says she has no plans to reduce the position
The pitch by American Express: Amex would market the brand and run the processing network. The banks would manage the credit and monthly billing. And the two would share the profits. That's how Visa and MasterCard work with their thousands of member banks, though with one major difference: Visa and MasterCard, until recently, have technically been considered nonprofit joint ventures. The upshot: They take a relatively small cut on each transaction.
The trick for Amex, thus, would be to strike a bargain that makes enough money for both it and the banks to justify joining forces. Amex, having done this overseas with more than 70 banks, hopes it can repeat the strategy at home.
"Once the first bank goes through, you'll see others join up as well," says Paul Fusco, a senior research analyst at John Hancock Advisers, which has been expanding its position in Amex and currently owns roughly 2.4 million shares across a variety of funds.
Any victory for Amex, it must be said, would at best merely chip away at the dominance of Visa and MasterCard, the undisputed leaders of the card industry by several measures. By volume of transactions charged on common credit cards, for example, Visa has 45% of the market, MasterCard has 33%, while Amex has 15%.
"The numbers show that most consumers have found greater value in owning a Visa card," a Visa spokesman says. "Cardholders find greater utility in a Visa card because they can use it in more locations globally than American Express." A spokeswoman for MasterCard declined to comment.
One factor in Amex's favor: Fees paid by merchants to it are as much as half a percentage point higher than those paid to Visa and MasterCard. That makes it harder to sign up merchants, but easier to sign up banks. "Financial institutions will look into their portfolio of existing cardholders, identify some that aren't particularly profitable, and see if they can migrate them to an Amex product that generates higher fees from merchants," says David Robertson, the publisher of the Nilson Report, a trade publication following card-industry trends.
Amex is careful to say that its long-term target of 12% to 15% earnings growth doesn't factor in any potential victory for the Justice Department, noting that the case could drag on and that even a favorable ruling alone doesn't mean profits. The stock, meantime, is trading at 19 times this year's expected earnings as measured by a consensus forecast. That isn't considered cheap.
But Howard Mason, analyst with Sanford C. Bernstein & Co., writes in a recent report on the card industry that winning the right to market "bank-Amex" cards would fuel considerable growth in Amex's per-share earnings. By 2005, per-share earnings would grow 15% a year with the right to issue Amex cards with banks, compared with 13% without it, he says.
Amex's per-share earnings, which stood at $2.01 for 2002, would reach $5.29 by 2009, under Mr. Mason's scenario. Bernstein's share price target for Amex is $52 -- $5 of which the brokerage firm attributes to added revenue expected from deals with banks. American Express shares were down 22 cents to $42.27 at the early 1 p.m. New York Stock Exchange end of trading Thursday, ahead of Friday's holiday.
Mr. Mason's estimates don't include any potential windfall that American Express might earn in the form of a settlement. If the courts uphold the decision favoring Amex, that would open the door for civil action. Amex has said it may sue Visa and MasterCard for compensation for all those years in which it allegedly was barred from striking deals with the banks that are members of Visa and MasterCard.
Such a settlement could mean billions of dollars for Amex, if recent cases are any guide. Visa and MasterCard just paid a combined $3 billion to retailers in a dispute over debit cards, in which Wal-Mart Stores Inc., Sears, Roebuck & Co. and others claimed the two associations charged them excessive fees to accept debit cards. Amex had $23.8 billion in revenue last year.
"The profits lost as a result of being prevented from working with U.S. banks have been significant," said American Express Chairman and Chief Executive Officer Ken Chenault, at a recent conference. "Legal action is a viable option."
But the biggest prize for Amex would be the chance to grab market share, though it still faces hurdles. Because Amex is seen as a profit-driven rival whose demands on any potential partnership may make a deal more costly, some possible partners already have noted the difficulties of striking a pact.
For instance, when MBNA Corp. Chief Executive Charles Cawley was asked at a recent conference of the possibility of teaming up with American Express, he answered: "We are in the business of lending people money through credit cards. We don't care what kind of credit card it is." But he also noted that the Wilmington, Del., bank would be reluctant to replace existing cards with something less profitable.
American Express, according to people familiar with the company's thinking, plans to clear that hurdle in part by offering potential partners a cut of the lucrative fees earned from merchants. Among the banks mentioned in the Justice Department case as possible partners are such firms as Capital One Financial Corp. and Wells Fargo & Co. These banks declined to comment.
美国运通可能从信用卡诉讼中受益
美国运通公司(AMERICAN EXPRESS)的广告语，要使消费者"生活有价值"(Make Life Rewarding)。目前，在一些针对信用卡行业的诉讼之后，华尔街不禁要问：诉讼能否为美国运通带来价值。
到目前为止，这个问题的答案是有条件的肯定。
在一些希望能够改革信用卡公司业务方式的诉讼中，美国运通都是作为被告出现的。原告律师和反垄断改革者一直在从外汇兑换费到对商户征收的欺诈成本方面起诉信用卡发行机构。但是美国运通公司希望能够在或许是最重要的一场诉讼中成为受益人。
这场诉讼是由美国司法部(Justice Department)提起，指控威士美国(Visa USA Inc.)和万事达卡国际组织(MasterCard International Inc.)不当限制其成员银行与美国运通和其他信用卡品牌达成信用卡发行协议。2001年10月份，一个联邦法庭做出了对司法部有利的判决，该案目前在纽约进行上诉。预计判决将在1年内做出。
如果法官支持最判，威士和万事达卡也未能在案件审理中引起最高法院的关注，那么美国运通公司将可以自由地寻求与拥有威士和万事达卡的数千家银行签署协议。这将会大大提高其网络的交易量，并因此获得更高的商户费。
TCW Galileo Diversified Value基金经理Diane Jaffee说，他认为威士和万事达卡的上诉可能不会成功。美国运通是该基金春季初期以来的最大持股，Jaffee称她不计划减持美国运通的头寸。
美国运通的计划是：美国运通信用卡(Amex)将推销其品牌并经营交易处理网络，运通银行将管理信贷和月度账单。它们将分享利润。威士和万事达卡与数千家成员银行的做法也是这样，但有一个大的不同：直到最近，威士和万事达卡在技术上一直被看作是非盈利性的合作机构。结果是：它们在每一笔交易中分得的利润较少。
因此Amex需要签署既能为其赚钱又能被银行接受的协议。Amex在国外与超过70家银行签署这种协议，希望能够在本土复制这个策略。
John Hancock Advisers的资深研究分析师Paul Fusco说，一旦第一家银行签署协议，其他银行也会跟进。John Hancock Advisers一直扩大对美国运通的持股头寸，目前通过各个基金持有美国运通大约240万股股票。
必须说的是，美国运通所取得的任何胜利最多只能够削弱威士和万事达卡的垄断地位。从几个指标来看，威士和万事达卡毫无疑问都是信用卡行业的领袖。例如，从普通信用卡的交易数量来看，威士的市场占有率为45%，万事达卡的占有率为33%，美国运通的占有率为15%。
一位威士发言人说，数据显示，大多数消费者认为威士卡的价值较大。拥有威士卡，持卡人会感觉更加方便，因为与美国运通相比，威士卡可以在全球更多地方使用。万事达卡发言人拒绝置评。
对美国运通有利的一个因素是：商户向其支付的费用比向威士和万事达卡支付的费用要多出高达0.5%。这使美国运通与商户签署协议较为困难，但与银行签署协议则较为容易。跟踪信用卡行业趋势的贸易出版物尼尔森报告（NILSON REPORT）的出版人David Robertson说，金融机构将审查它们现有的持卡人组合，确定一些获利不高的持卡人，然后调查是否可以将这些持卡人改变使用美国运通的产品，从而可以获得较高的商户费。
美国运通谨慎的说，其12%至15%的长期收益增长目标并没有考虑司法部可能取得的任何胜利，称该诉讼可能延期，即使有利的判决本身也并不意味著能带来利润。同时，其股价是市场普遍预期的本年度预期收益的19倍，也不能算是股价偏低。
但是Sanford C. Bernstein & Co.分析师Howard Mason在近期关于信用卡行业的报告中写道，赢得推销美国运通卡的权利将大幅提高美国运通的收益增长率。他说，如果美国运通获得向银行发行美国运通卡的权利，那么到2005年其每股收益增长率每年将达到15%，而如果没有这个权力，那么其收益增长率将仅为13%。
根据Mason的预测，2009年前美国运通的每股收益将达到5.29美元。2002年美国运通的每股收益为2.01美元。Bernstein将美国运通的目标价位定位52美元，其中5美元归因于预期美国运通从与银行协议中获得的额外收入。美国运通当前股价为大约42美元。
Mason的预期尚不包括因为和解而使美国运通可能获得的意外好处。如果法庭维持对美国运通有利的判决，这将为民事诉讼打开大门。美国运通曾经表示，可能起诉威士和万事达卡，要求补偿所有这些年来因为不能与威士和万事达卡成员银行签署协议而导致的损失。
如果遵循近期的诉讼方向，这种和解可能为美国运通带来数十亿美元。在一个关于借记卡的诉讼中，威士和万事达卡仅向零售商共同赔偿了30亿美元，在这个诉讼中，沃尔玛连锁公司(Wal-Mart Stores Inc.)、西尔斯(Sears, Roebuck & Co.)和其他零售商指控这两个机构在接受借记卡付款时向它们收取了额外的费用。美国运通去年的收入为238亿美元。
美国运通董事长兼首席执行长Ken Chenault在近期的会议中说，因为不能与美国银行合作使美国运通产生的利润损失很大。诉诸法律是一个可行的选择。
但是对美国运通来说，更重要的将是提高市场占有率的机会，虽然仍然面临障碍。因为美国运通被看作是一个盈利性的竞争对手，其与合作者达成协议的成本较高，一些可能的合作者已经指出了与美国运通达成协议存在的困难。 例如，在近期一个会议上，MBNA Corp.首席执行长Charles Cawley被问及与美国运通合作的可能时回答说，其业务是通过信用卡向人们提供信贷，而不关心是什么样的信用卡。但是他还说MBNA不愿意以利润较低的产品来代替目前的信用卡。
知情人士说，美国运通计划通过与潜在合作者分享商户费等方法来消除这个障碍。在司法部诉讼中提及的银行中，可能成为美国运通合作者的银行有Capital One Financial Corp.和富国银行(Wells Fargo & Co., WFC)等。这些银行拒绝置评。
