Markets may have been too hard on AmEx - Barron's

NEW YORK, Nov 16 (Reuters) - Fears that the deepening credit crisis could hurt American Express Co (AXP.N) may have been overblown, Barron's business weekly reported in its Nov. 17 edition.

Shares of the fourth-largest U.S. credit issuer are off more than 61 percent this year, reflecting concerns over AmEx's reliance on credit market financing, weakening consumer spending and rising losses on credit-card lending.

Barron's said while these concerns are legitimate, AmEx is likely to be solidly profitable through 2009 even if there are heavy losses on its $75 billion credit card loan portfolio.

Barron's assumes AmEx will have a $2 a share 2009 profit, compared with Wall Street's average expectation for earnings of $2.50. The publication pointed out that even under "the gloomy scenario" put forward by Barclays Capital analyst Bruce Harting last week, assuming charge-offs on AmEx's domestic card-loan portfolio rose to 9.2 percent in 2009 compared with 5.9 percent in the third quarter and 3 percent last year, the company was still expected to earn $1.60 a share.

The company has reportedly sought $3.5 billion from the U.S. government's $700 billion financial services rescue fund, at an attractive rate of 5 percent on preferred stock with warrants, the publication said.

Barron's said it was also possible that AmEx could merge with a bank in the next year, helping it achieve a goal of getting more of its funding from deposits.

If the company needs more cash it has the option of turning to its largest shareholder, billionaire Warren Buffett's Berkshire Hathaway (BRKa.N) (BRKb.N), said Barron's.

"While next year is likely to be difficult, the company should come through in good shape," said Barron's. "And if things get really tough, (CEO Ken) Chenault probably can pick up the phone and find a willing listener in Omaha," where Berkshire Hathaway is based.

Barron's said AmEx's strong brand, and Berkshire's stake, suggests the stock may be near a bottom. If the company navigates the credit crisis, and looks on track to hit a better than 30 percent return on equity in 2010, the shares could rise to $30 each in the next year.

American Express shares fell 3.8 percent to close at $19.99 on Friday. They were trading at $51.90 at the beginning of the year. (Reporting by Lilla Zuill; Editing by Tim Dobbyn)