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People’s Bank of China gave American Express the green light to start operating a card-clearing network that will process transactions in yuan. Today the price of AXP stock is growing.
American multinational financial services corporation American Express Company (NYSE: AXP) said that its joint-venture in mainland China finally got a confirmation from the People’s Bank of China (PBoC) for a network clearing license.
This means that the American Express will be the first foreign payment network that will be licensed to clear RMB transactions in mainland China. It is expected that the company begins with the processing of the transactions later this year.
From the company they said:
“We look forward to welcoming millions of new consumers, businesses and merchants in China to American Express, as well as continuing to enhance our support for our global customers when they travel to the region.”
American Express in China
Express (Hangzhou) Technology Services Company Ltd is American Express’s joint venture with Lianlian DigiTech Co., Ltd, a Chinese fintech services company. This new joint venture already has a well-arranged network made to clear local transactions charged on American Express cards. Everything is also made to be compatible with the key mobile wallet players in China.
Stephen J. Squeri, CEO of American Express, commented:
“We are pleased to be the first foreign company to receive this license. This approval represents an important step forward in our long-term growth strategy and is an historic moment, not only for American Express but for the continued growth and development of the payments industry in mainland China.”
Shares in AXP have been falling this year, approximately 18%. Experts are relatively optimistic while giving the ‘Moderate Buy’ consensus on the company’s outlook. This is made up of 8 recent buy ratings, 8 hold ratings and 1 sell rating. In the meantime, the average analyst price target of $102 is in-line with the current share price. At the time of writing the stock price was growing by 1.93% to $103.64 as predicted.
RBC Capital analyst Jon Arfstrom put a hold rating on the stock but recently grew his price target from $85 to $105.
Earnings Fell Due to Coronavirus
The company said earlier that its first-quarter net income was $367 million, or $0.41 per share, compared with net income of $1.6 billion, or $1.80 per share, a year ago.
“The first two months of 2020 continued the strong momentum we have delivered over the past two years, but we’re now in a different world. The deterioration in the economy due to COVID-19 impacts that began in the first quarter and accelerated in April has dramatically impacted our volumes.”
He also added that “in light of the current environment”, the company decided to aggressively reduce costs across the enterprise, while at the same time it intends to carefully invest in initiatives that help its long-term growth strategy. “We entered this crisis with particularly strong capital and liquidity positions that will enable us to remain financially strong,” Squeri concluded.