Moody's eyes American Express downgrade

NEW YORK, Aug 7 (Reuters) - American Express Co (AXP.N) may have its rating downgraded by Moody's Investor Service after the credit card and travel services company posted sharply lower quarterly earnings while facing declining customer spending in a difficult U.S. economic climate.

Moody's said on Thursday it has placed American Express on review for a possible downgrade of its A1 rating, likely by one notch, due to concern over its lending exposure in the U.S.

"Today's rating action reflects Moody's concerns over Amex's asset quality trends and lending exposures, particularly within geographic markets in the United States that have experienced sharp home price declines. Broad economic weakness in the U.S., heavy consumer debt burdens, and home price erosion have also combined to place a damper on Amex's card-member spending growth in the U.S.," Moody's said in a release.

Moody's said it will assess the outlook for Amex's core earnings generation and the related capacity to absorb elevated credit costs in the face of a more challenging revenue outlook, particularly in the U.S. market.

The review will include an assessment of cost flexibility as well, Moody's said.

American Express last month posted a surprising 38 percent decline in quarterly profit with worse than expected unpaid loans, and it withdrew its target for earnings growth of 4 percent to 6 percent. (Reporting by Bill Berkrot; editing by Carol Bishopric)