American Express To Buoy Up On Growth Steps, Cost Control

American Express Co. (NYSE:AXP) is set to benefit from continued secular growth of electronic payments globally. Convenience, security, and enhanced services and rewards for consumers continue to fuel growth in electronic payments.

The company remains focused on several initiatives to strengthen its operations. These include renewed focus on its Platinum Card portfolios in the U.S. and Small Business Saturday to leverage on the ongoing expansion of its merchant network in the U.S. through the OptBlue program. Through OptBlue, the company has set an aggressive goal to achieve merchant coverage on a par with Visa Inc. (NYSE:V) and MasterCard Inc. (NYSE:MA) in the country by the end of 2019.

Apart from taking measures to improve its top line, the company has also launched cost initiatives designed to remove $1 billion from its overall cost base by the end of 2017. Adjusted operating expenses decreased in the first half of 2017, reflecting progress against cost-reduction initiatives. The company is on track to reduce $1 billion from cost based on a run-rate basis by the end of 2017.

The company’s vast international business, expansion in verticals such as consumer, small business, new lending products and growth of the loyalty business would further drive its long-term growth. Another player in the same space Euronet Worldwide, Inc. (NASDAQ:EEFT) also has significant international operations.

American Express enjoys a strong capital position and is committed to enhance shareholders’ value. The company’s 2017 capital plan received the Federal Reserve’s approval, following which it hiked its quarterly dividend by 9.4%. The capital plan also includes repurchase of up to $4.4 billion of common shares through the second quarter of 2018.

Nevertheless, the company continues to face an increase in provision for loan loss. Also, increased rewards and marketing costs in order to fold more business will hurt margins.

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