Citigroup Inc. analyst Donald Fandetti initiated coverage on American Express Co. Tuesday, giving the company a "sell" rating.

He projected that the New York card company's credit losses would rise more quickly than peers' because of its aggressive growth in 2006 and 2007. He also cited longer-term funding challenges and reliance on brokered deposits.

Citi corporate bond analyst Ryan O'Connell initiated coverage on Amex's bonds with a "market weight/hold" recommendation and wrote that he expected the company "to remain solidly profitable" next year even under stress. He also wrote that government funding programs should let Amex "pay its maturing obligations over the next 24 months."

Mr. Fandetti also initiated coverage on Discover Financial Services and Capital One Financial Corp. with "hold" ratings. Of the three companies, he wrote, Discover has the best credit outlook because of its slower asset growth and smaller exposure to weak housing markets, but Capital One has the best funding picture because of its large retail deposit business.

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