Here’s how Amex’s inventory may stand out from its friends

Amex’s lesser reliance on late charges is notable, in Arfstrom’s view, as a result of he thinks the Consumer Financial Protection Bureau may finalize its crackdown on late charges this fall and set it up for a 2024 implementation. The CFPB has mentioned it needs to cap charges for late funds at $8 versus $30, for instance.

Read: Helping shoppers—or pure revenue for banks? The newest within the bank card late-fee debate.

Though Arfstrom thinks the patron remains to be wholesome, he famous that inflation has triggered some spending pressures and flagged that delinquencies within the business are driving. In that context, he wrote that Amex and Discover Financial Services
DFS,
-0.87%
have “higher concentrations of super prime and prime customers,” which “should drive better than peer losses over the cycle.”

See additionally: Why American Express is feeling good about credit score, even because it builds reserves

Arfstrom downgraded Synchrony Financial
SYF,
-1.53%
and Bread Financial Holdings Inc. shares
BFH,
-2.50%
to sector carry out from outperform in his newest report, saying that whereas he likes the businesses over the long term, the shares may battle to outperform by means of the steadiness of 2023.

Those firms are “potentially more exposed to the challenges of the late-fee proposal and will need to spend more time focusing on mitigating this earnings headwind,” Arfstrom mentioned, although he additionally deemed his downgrades “a thematic adjustment of our ratings preferences due to the evolving macro and regulatory environment rather than comments on the fundamental health of each specific company.”

Amex shares had been rising practically 1% in Tuesday’s premarket motion, whereas Synchrony shares had been down 1.6% and Bread shares had been off 1.9%.

See additionally: Is there a subprime credit-card disaster on the horizon?