January 11, 2008 / 1:45 PM / 10 years ago

UPDATE 1-Friedman, Goldman downgrade American Express

Jan 11 (Reuters) - At least two brokerages downgraded American Express Co (AXP.N), a day after the credit card company said it expects quarterly pretax charges of about $440 million, due to a slowdown in cardholder spending and rising delinquencies.

“We expect increasing unemployment to continue to adversely impact credit quality and spending growth, thus limiting earnings growth,” analyst Scott Valentin of Friedman Billings Ramsey said in a note to clients.

He downgraded the stock to “underperform” from “market perform” and cut his price target to $40 from $66.

Analyst James Fotheringham of Goldman Sachs downgraded American Express to “neutral” from “buy” and cut his price target to $55 from $81.

With their recent profit warnings, American Express and rival Capital One Financial Corp (COF.N) join the spate of companies that are struggling to weather the credit crunch and housing slump.

Fotheringham of Goldman said it was yet to see the worst of residential mortgage credit deterioration, with housing prices being over-valued throughout the United States and growth in mortgage debt outstanding continuing to fall.

“U.S. housing fundamentals get worse before they get better, in our view,” he added.

American Express shares fell more than 7 percent to $45.35, while Capital One shares were down more than 4 percent at $41 in early electronic trade on the New York Stock Exchange. (Reporting by Nachiket Kelkar in Bangalore; Editing by Amitha Rajan)

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