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Why Amex’s Global Network Services Could Face Pressure



Higher volumes

In 1Q17, while American Express’s (AXP) US Consumer Services segment saw a 32% YoY (year-over-year) fall in its income, its International Consumer and Network Services segment posted a 16% YoY rise in income. Amex is expected to see higher purchase volumes in 2Q17 on the back of strong international markets.

Amex’s International Consumer and Network Services segment operates primarily in two parts: Global Network Services and International Consumer Card Services. The company’s Global Network Services segment will likely face some pressure in 2Q17 due to changes in the regulatory environments of China, the EU, and Australia.

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Buffett’s plan to increase stake

Berkshire Hathaway (BRK.B) had been seeking permission from the Fed to increase its stake in American Express (AXP) to 25% from the current stake of 17%. If things go as planned for Warren Buffett, Amex’s share could experience an upward momentum. Buffet plans to hold the shares of the credit card giant for the long term, but if the Fed doesn’t approve, shares of Amex could see a downward momentum.

American Express’s (AXP) operating margin on a trailing-12-month basis stood at 24.49%, compared with the following margins of its consumer financial peers (XLF):

  • Visa (V): 67.2%
  • MasterCard (MA): ~54.7%

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