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American Express Co., which reported earnings yesterday (CardLine, 10/21), told analysts during a conference call Tuesday that it will not acquire a retail bank, CardLine sister publication American Banker reported today. AmEx executives said during the call Monday evening that they intended to increase deposits, which currently account for about 12% of the company's funding. Analysts asked whether AmEx would acquire a retail bank, especially in the current buyer's market for such assets. Kenneth Chenault, AmEx chairman and CEO, said even though such a deal would have advantages, he was not looking for one. "As we look at becoming, if you will, a retail bank, we think there are other things that go with that that concern us," Chenault said in response to one analyst's question. Later, in response to another analyst's question, he said: "If an acquisition will accelerate our progress and improve our business model, we are open to it. But I think the important thing about the focus on retail deposits is it also comes with a lot of other stuff." Chenault did not offer a definition of "stuff," and AmEx said executives were unavailable for interviews Tuesday. Scott Valentin, an analyst at Friedman, Billings, Ramsey & Co. Inc., said in an interview with the American Banker that he interpreted the comment to mean that "most banks come with too much baggage" in terms of asset quality and balance sheets. If AmEx did buy a retail bank, it would "acquire a portfolio" where "one probably wouldn't have intimate knowledge of the quality." Daniel Henry, AmEx chief financial officer, said during the conference call that "over recent months, there has been a lot of discussion about the effectiveness of a wholesale-funding model versus the bank-deposit model. And while we see the merits of building a deposit capability, the reality is most people who have substantial deposits are also large capital-markets borrowers" anyway.
