Some Advice to American Express

With rumors flying around about American Express being pursued by acquirers like Citigroup, I would like to offer the following “white knight” strategy for AMEX to reverse its sagging stock price and remain independent.

Regional banking!

No, I’m not crazy. Just hear me out on this one. I would like to describe a proposed “hat trick” that puts the AMEX stock on steroids and creates the buyer of choice for well-performing, but slow-growing regional banks around the country. Here’s my dream transaction:

• With Graham Leach Blah Blah now a reality, AMEX acquires the well-managed but awfully named Fifth Third Bancorp. This move gets AMEX seriously into the banking business, by adding nearly $1 billion of net income to the measly $30 million that American Express Bank earns today. Banking would immediately contribute 25% to AMEX earnings.
• With this first deal, AMEX gets a high performing banking organization and the opportunity to enjoy the fat margins of commercial banking, asset management and ATM processing that Fifth Third brings.
• Fifth Third gets to immediately become associated with the most recognized financial brand in the world! If you’ve ever seen the studies, AMEX’s recognition is off the charts, but this brand has never been leveraged in banking.
• From this point, American Express Bank goes on an acquisition tear of regional banks that have strong commercial banking and asset management businesses. For round numbers, let’s say they pick up $100 billion in assets over five years.
• The synergy of these acquisitions is real and compelling. Fifth Third’s management and technology infrastructure provides the ability to cut major costs in each acquisition. AMEX picks up armies of commercial lenders, private bankers and trust officers from some of the best banks and best markets in the country.
• For the regional bank, a sale to AMEX solves a lot of issues. These banks get to trade their sleepy brands for the world class American Express name. On the business banking side, they get to marry their strong commercial franchises with the card services, merchant services and travel services of AMEX. On the retail side, they get the sexy “Blue” card as the centerpiece of their consumer e-commerce strategy. For the flailing retail investment business, they get the name, infrastructure and muscle of American Express Financial Advisers.

At the end of the day, AMEX and regional banks could join together to create a national high-brow banking franchise that doesn’t screw with the successful customer focus that regional banks have today, but it adds the stock liquidity, brand, infrastructure, investment and e-commerce products that all financial institutions are craving to compete in the future.

So this message goes out to American Express CEO Ken Chenault: “Dude, call me…I’ve got an idea.”
-spw