A relief for American Express
American Express (AXP) and JPMorgan Chase (JPM) have finally sealed a deal with Marriott International (MAR), a leader in the hotels business, for its credit card program. In 2018, Marriott will be coming up with co-branded products in which AXP will offer small-business and super-premium cards. JPM will provide premium-consumer and mass-consumer cards.
Until the deal takes effect, AXP and JPM still have their portfolios that offer the current products.
American Express has posted a return on equity of 22.6% on a TTM (trailing 12-month) basis. Peers (XLF) Green Dot (GDOT), Synchrony Financial (SYF), and Capital One Financial (COF) posted TTM returns on equity of 10.2%, 15%, and 7.7%, respectively.
Is it a win for AXP?
When Marriott acquired Starwood Hotels and Resorts, AXP investors seemed worried that the acquisition would prove harmful to the partnership between AXP and Starwood. Since competition in co-brand cards is seeing an upward momentum, large merchants such as Marriott could benefit from the deal, mainly due to issuers charging lower fees in order to catch the deals and increase market share.
According to Marriott management, its loyalty programs are very appreciated, which is largely due to its co-brand credit cards.
This agreement could be considered a positive situation for American Express and make up for the negative effect of the Costco (COST) breakup.