American Express May Be for Sale. Will Wells Fargo Buy?

American Express hasn’t even lost Costco charges yet, and it’s reeling. Here’s the inside story on how Amex lost the Costco deal. Delta is their second largest co-brand, but with Marriott buying Starwood they presumably lose the ability to issue Starwood co-brands at some point when the programs are expected to merge. Although American Express wants to find a way to keep the Starwood card post-merger.

American Express lost the JetBlue co-brand to Barclays though it’s small. Their network is no longer used for Fidelity card transactions.

Prepaid products aren’t driving the hoped-for growth. And American Express Plenti, a coalition rewards program that lets you earn points for doing business with a variety of merchants, hasn’t picked up many new participants since it launched.

Long term credit card interchange fees will be competed down by new technologies. Businesses which make their money on high margins processing credit transactions need to innovate, because those income streams will come under pressure.

American Express revenue is down and earnings are down. Instead of driving forward as a high growth company, they’ve talked about cutting costs.

All of this adds up to trouble. Now the company’s CEO may be walking a tight rope and the board may decide to sell.

Chenault’s increasingly tense relations with the company’s board –and possible departure–is now fueling speculation among bankers that the company may seek a deal with an outside suitor that would settle the succession issue and give a boost to the company’s sagging stock, which has lost 27% over the past year.

Speculation is that Wells Fargo could be a bidder, though American Express says the business “is not for sale.”

Coincidentally Warren Buffett’s Bershire Hathaway is the largest shareholder in American Express and Wells Fargo is their single biggest position.

Any deal first has to be made. Then it has to clear regulators and be approved by shareholders. Then the task of merging begins. Any company buying American Express would do so for the credit card business, and affluent clients. It could be worth more to a bank looking to leverage that customer base to build their wealth management business. And in the case of Wells Fargo, an opportunity to a strong portfolio of new financial products to their already robust customer base.

In all likelihood in the near term the status quo prevails. Although in any deal your favorite features and benefits become open to question. My own sacred cows would be Membership Rewards points transfers to miles and the Centurion Lounge program.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. I have a feeling, once we see 1 million point Delta awards, there will be a mass population of co-branded Delta card cancellations as well. Everything Delta is doing is hurting AMEX on top of all this!

  2. That could actually be awesome, at least for a few years. Just like when Chase, then later Citi ramped up their CC businesses, we could see a wave of new cards with nice sign up bonuses, and probably the end of the once in a lifetime bonus rule that is unique to Amex. It wouldn’t really result in consolidation of the industry b/c WF is such a small player in CCs right now.

  3. +1 for the “awesome for a few years” theory. If Chenault really is looking to sell, he’s going to want to pump up his cardholder numbers. And what better way to do that then dropping the “once in a lifetime” rule and lots of signup bonuses?
    Profitability? Nah. See recent insane Discover Double Cashback + Apple Pay promotion.

    My crystal ball sees that with Chase jumping on the 5/24 rule for all of it’s cards, AMEX will become our new “points” cow.
    When one door closes, another one opens. 😉

  4. As others have said, there is no reason to earn DELTA Points. I plan to eliminate the Delta card. I also have no interest in Marriott.

    The boy thing we can count on is change.

  5. Having gone from Green all the way to Black – and now back to Platinum, I have seen nothing but staggering decrease in the value of their cards. Add to that their customer service – my last call to the concierge resulted in a 30 minute wait time – and then compare to Chase Sapphire where a human answers the friggin phone! To me, AMEX is toast and overpriced toast at that! The ONLY card I use is the Starwood AMEX. When that goes, why stay?

  6. Maybe Chenault could get a job at Blackberry. Arrogance about your current position and failure to see where the market was headed worked well for them, right? I see the same traits at AMEX.

  7. Amex has already replaced 90% of American employees in its technology department to India onshore and offshore.
    Amex has been cutting any place they can especially in operating expense, there is not much left to cut and revenue is down.
    Seems like a candidate for sale.

  8. Customer service is my “sacred cow.” There’s a lot that AmEx does differently, though they have been undermining their own products for several years now. I always loved the customer service. They’re also, BY FAR, the best to deal with when it comes to fraud. Chase is alright, but they, like most banks, follow kind of “the letter of the law” and don’t do much beyond what’s on the script. The AmEx team has proactively reached out with a phone call, text, and app alert simultaneously when they saw suspicious transactions. They’ve also very clearly eaten fees in disputed transactions with AA in the past (AA unilaterally cancelled transactions originating in Brazil and… well, it was a mess, and AmEx ate a few of those according to FT).

    Points transfers are valuable and all, but if something’s going to have to go away, I’d rather keep my combined bank/transaction network with the kick butt customer service and risk management team. WF is not up to the same standards.

  9. Amex customer service has gone from best in class to well below average.

    When a 25 year Platinum customer has a problem, they are less responsive than Chase for a base cardholder.

    Their algorithms are out of date and their wait times interminable.

  10. Might be some signs already. I noticed that Amex added an Chip & Pin related question option in their online chatting survey more than a month ago (Chuck from DOC asked for comment from Amex but seems had no luck). Wells Fargo is one of the only 2 major card issuers in US that offer Chip & Pin enabled cards, and they just added 3 Amex cards 2 years ago which I’d think are their flagship cards now. So I’d boldly believe that WF buying Amex is around 50% chance now.

  11. Why would Wells Fargo buy Amex? Wells is a class operation, great customer service in branches (lots of helpful staff) and very conservative lending philosophy – no subprime loans, no 110% HELOCs, and worst of all no great rewards cards. Amex is run by a bunch of thugs who pretend to have a premium product but in fact will sign up anybody who makes $10k/yr for a green card. Amex has been successfully sued in multiple class actions over their investment products, credit card terms, etc. Merchants hate paying Amex fees and they will soon be losing cardholders in droves as those affinity contracts expire.
    As for Buffet, it would be a major conflict of interest for him to pressure WF to bail out his Amex investment. The ink would not even be dry before the class action vultures were swooping down. Nope, not gonna happen.
    It’s going to be a pleasure watching Amex circle the drain, and maybe they get picked up for pennies by CapOne. Now there’s a match made in heaven!

  12. Wow, Amex is my favorite company ever. They’ve save me thousands and thousands on insurance, fraud, merchant disputes, pretty much every corner of purchasing. They care about the customer and have the best interfaces in apps, website, phone, video. Plus, they had this thing called Blue Cash once upon a time, that was a boon. I cannot say how disappointed I am if they are in trouble. It’s literally impossible to give them any more of my business, and I know loads of people that do all their business with Amex. I’m not a Costco member, but I was thinking about it until their relationship went awry. I’m shocked commentators above think any of these outfits hold a candle to Amex. The premium merchant fee has always meant greater trust, and easily worth the extra 1% over Visa. WIthout that brand philosophy, I’d rather go with bitcoin.

  13. The black card is a JOKE. I paid for it for years until I found out that the “concierges” are just a call center in Canada that uses Open Table for dinner reservations. In my opinion Amex is a very arrogant company. We charged almost $1 Million per year on the card and they put ZERO effort into providing a true concierge experience , like you would get at a Ritz Carlton or Four Seasons hotel. I hope they end up bought out and their arrogant management finds themselves unemployed.

  14. Here’s a highly soffisticated Wall Street analysis for this merger:
    WF + Amex = one happy uncle warren buffet!!!!

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