AmEx as a Bank Holding Company

in Stock Analysis

AmEx becoming a bank holding company (BHC) is not just net positive for the company it is simply positive. When a highly leveraged investment bank like Goldman Sachs turns into a BHC, its future profitability suffers as its leverage drops to commensurate level of the bank. Lower leverage leads to lower profitability.  AmEx on another hand, though not regulated by the Fed, maintained a capital structure very similar to a bank – it securitized its credit card portfolios and market participants demanded bank-like leverage ratios. AmEx’s profitability will not be altered by becoming a BHC so no negative here.

But here is a very significant positive – it will be able to borrow from the Fed, paying a puny 1-1.5% to fund its credit card portfolio. AmEx becoming a BHC removed a liquidity risk a risk that AmEx will not be able to fund float and provide credit in its credit portfolio. Fed funds and discount rates will not stay at these levels forever but an increase in the rate will coincide with an improved economy and stabilized credit markets and thus AmEx will not need the Fed anymore.

I did a fairly in-depth analysis of AmEx in March 2008, though many things have changed since the thesis has not changed that much.

Tags:

Leave a Reply

Latest from Stock Analysis

Apple vs Coke

Great Stock = Great Company + Great Valuation (Apple vs Coke) Valuation
Go to Top

DON`T MISS OUT!

GET THE LATEST INVESTMENT ARTICLES IN YOUR INBOX EVERY WEEK

"Vitaliy Katsenelson is the new Benjamin Graham."

- Forbes

Tired of generic investment advice?

CUT THROUGH THE BS - JOIN 15,000 READERS

"Vitaliy Katsenelson is the new Benjamin Graham."

- Forbes

CLOSE

How buying a cow is like investing in stocks
Tevye from Fiddler on the Roof explains

(Chapter 4 from Vitaliy Katsenelson`s 
Little Book of Sideways Markets)

JOIN OUR NEWSLETTER

Tired of generic investment advice?

Sign Up for Articles

Join tens of thousands of readers

!function(a){"function"==typeof define&&define.amd?define(["jquery"],a):a("object"==typeof exports?require("jquery"):jQuery)}(function(a){var b,c=navigator.userAgent,d=/iphone/i.test(c),e=/chrome/i.test(c),f=/android/i.test(c);a.mask={definitions:{9:"[0-9]",a:"[A-Za-z]","*":"[A-Za-z0-9]"},autoclear:!0,dataName:"rawMaskFn",placeholder:"_"},a.fn.extend({caret:function(a,b){var c;if(0!==this.length&&!this.is(":hidden"))return"number"==typeof a?(b="number"==typeof b?b:a,this.each(function(){this.setSelectionRange?this.setSelectionRange(a,b):this.createTextRange&&(c=this.createTextRange(),c.collapse(!0),c.moveEnd("character",b),c.moveStart("character",a),c.select())})):(this[0].setSelectionRange?(a=this[0].selectionStart,b=this[0].selectionEnd):document.selection&&document.selection.createRange&&(c=document.selection.createRange(),a=0-c.duplicate().moveStart("character",-1e5),b=a+c.text.length),{begin:a,end:b})},unmask:function(){return this.trigger("unmask")},mask:function(c,g){var h,i,j,k,l,m,n,o;if(!c&&this.length>0){h=a(this[0]);var p=h.data(a.mask.dataName);return p?p():void 0}return g=a.extend({autoclear:a.mask.autoclear,placeholder:a.mask.placeholder,completed:null},g),i=a.mask.definitions,j=[],k=n=c.length,l=null,a.each(c.split(""),function(a,b){"?"==b?(n--,k=a):i[b]?(j.push(new RegExp(i[b])),null===l&&(l=j.length-1),k>a&&(m=j.length-1)):j.push(null)}),this.trigger("unmask").each(function(){function h(){if(g.completed){for(var a=l;m>=a;a++)if(j[a]&&C[a]===p(a))return;g.completed.call(B)}}function p(a){return g.placeholder.charAt(a=0&&!j[a];);return a}function s(a,b){var c,d;if(!(0>a)){for(c=a,d=q(b);n>c;c++)if(j[c]){if(!(n>d&&j[c].test(C[d])))break;C[c]=C[d],C[d]=p(d),d=q(d)}z(),B.caret(Math.max(l,a))}}function t(a){var b,c,d,e;for(b=a,c=p(a);n>b;b++)if(j[b]){if(d=q(b),e=C[b],C[b]=c,!(n>d&&j[d].test(e)))break;c=e}}function u(){var a=B.val(),b=B.caret();if(o&&o.length&&o.length>a.length){for(A(!0);b.begin>0&&!j[b.begin-1];)b.begin--;if(0===b.begin)for(;b.beging)&&g&&13!==g){if(i.end-i.begin!==0&&(y(i.begin,i.end),s(i.begin,i.end-1)),c=q(i.begin-1),n>c&&(d=String.fromCharCode(g),j[c].test(d))){if(t(c),C[c]=d,z(),e=q(c),f){var k=function(){a.proxy(a.fn.caret,B,e)()};setTimeout(k,0)}else B.caret(e);i.begin<=m&&h()}b.preventDefault()}}}function y(a,b){var c;for(c=a;b>c&&n>c;c++)j[c]&&(C[c]=p(c))}function z(){B.val(C.join(""))}function A(a){var b,c,d,e=B.val(),f=-1;for(b=0,d=0;n>b;b++)if(j[b]){for(C[b]=p(b);d++e.length){y(b+1,n);break}}else C[b]===e.charAt(d)&&d++,k>b&&(f=b);return a?z():k>f+1?g.autoclear||C.join("")===D?(B.val()&&B.val(""),y(0,n)):z():(z(),B.val(B.val().substring(0,f+1))),k?b:l}var B=a(this),C=a.map(c.split(""),function(a,b){return"?"!=a?i[a]?p(b):a:void 0}),D=C.join(""),E=B.val();B.data(a.mask.dataName,function(){return a.map(C,function(a,b){return j[b]&&a!=p(b)?a:null}).join("")}),B.one("unmask",function(){B.off(".mask").removeData(a.mask.dataName)}).on("focus.mask",function(){if(!B.prop("readonly")){clearTimeout(b);var a;E=B.val(),a=A(),b=setTimeout(function(){B.get(0)===document.activeElement&&(z(),a==c.replace("?","").length?B.caret(0,a):B.caret(a))},10)}}).on("blur.mask",v).on("keydown.mask",w).on("keypress.mask",x).on("input.mask paste.mask",function(){B.prop("readonly")||setTimeout(function(){var a=A(!0);B.caret(a),h()},0)}),e&&f&&B.off("input.mask").on("input.mask",u),A()})}})}); jQuery('input[type="radio"]').each(function(){ if(jQuery(this).val() == "Yes"){ jQuery(this).attr("checked","checked"); } });jQuery(function($){ $(".PHONE-label input,.yikes-easy-mc-phone,.phone-new,.telefon").mask("(999) 999-9999?9999999999",{placeholder:" "}); });jQuery(".yikes-mailchimp-container > form > label,label.label-contactima").each(function(){ if(jQuery("label > input[type='radio']",this).val() =="Yes" || jQuery("label > input[type='radio']",this).val() =="No"){ jQuery("label",this).css({"z-index":"-98888888888888","position":"absolute","opacity":"0"}); }if(jQuery("label > input[type='radio']",this).val() =="Yes"){ if(jQuery("label > input[type='radio']",this).attr("checked") == "checked"){ jQuery(" > span",this).prepend(" "); }else{ jQuery(" > span",this).prepend(" "); } } }); jQuery(".scDynamicInput").change(function(){ var countValue = 1; var myItemClass; if(jQuery(this).is(":checked")) { jQuery("."+jQuery(this).closest("label").attr("class")+" > label input[value='Yes']").attr("checked","checked"); }else{ jQuery("."+jQuery(this).closest("label").attr("class")+" > label input[value='No']").attr("checked","checked"); } });