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AmEx Rises on US Bank Alliance

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Shares of American Express Co. (AXP - Free Report) or AmEx increased 2.1% to $83.95 as of Nov 21, following the company’s announcement that it will now be accepted on U.S. Bancorp’s (USB - Free Report) credit card platform.

Per agreement, U.S. Bank will issue credit cards that are accepted on AmEx’s card network. Effective post-Jun 2014, the alliance will allow AmEx-branded credit cards to be accessed across 3,088 branches of the U.S. Bank. These cards will also be available online and on mobile devices of all the U.S. Bank account holders.

The alliance marks AmEx’s efforts to step up its credit card network. As the largest issuer of credit and debit cards, U.S. Bank is renowned for the rewards and discounts offered on its cards to its customers. U.S. Bank also enjoys association with superior brands across the nation, which will in turn enhance the credit card experience of AmEx cardholders.   

Such alliances not only support AmEx’s growth strategies but also boost its market presence. The latter is particularly significant in order to gain edge in an industry characterized by intense competition. In this regard, Wells Fargo & Co. (WFC - Free Report) also partnered with AmEx to offer credit cards on the latter’s card network in Aug 2013.

Cards-in-force improved 8% in the U.S. at the end of Sep 2013. Going ahead, the addition of U.S. Bank and Wells Fargo will further escalate the company’s credit card spending, which is a primary revenue growth driver for AmEx.

AmEx’s operations are based on a spend-centric business model. We believe that improved credit trends, new business initiatives, capital flexibility and stable ratings bode well for the company’s long-term growth.

AmEx presently carries a Zacks Rank #3 (Hold). However, some better-ranked stocks in the financial sector include Euronet Worldwide Inc. (EEFT - Free Report) and FleetCor Technologies Inc. (FLT - Free Report) . Both these stocks carry a Zacks Rank #1 (Strong Buy).

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