Analyst says 'buy the dip' in top bank stock after credit card cap drop

Core Viewpoint - President Trump's proposal to cap credit card interest rates at 10% has led to a significant sell-off in credit card stocks, particularly affecting American Express [1][4]. Group 1: Impact of Interest Rate Cap - A 10% cap on credit card interest would represent a major shift, as the average rate is currently 19.6% [2]. - This cap poses a substantial risk to credit card issuers that depend on interest for revenue and profits [2]. - Despite the sell-off, some analysts believe that American Express is less vulnerable due to its reliance on fees rather than interest income [2][4]. Group 2: American Express's Business Model - American Express focuses on higher-income households willing to pay annual fees for premium card perks, differentiating it from competitors like Synchrony Financial, which relies on no-fee, high-interest cards [5][9]. - The company generates significant revenue from merchant swipe fees, which, combined with card fees, accounted for 65% of its total revenue in the last quarter [10][11]. - American Express's write-offs are lower than those of competitors, indicating a more stable customer base [11]. Group 3: Market Reaction and Analyst Insights - Following the announcement of the interest rate cap, American Express shares fell by 7.3%, including a 4.3% drop on January 12 [3]. - Analysts suggest that the recent decline presents a buying opportunity, as the stock is expected to rebound [3][12]. - The stock price chart indicates a pullback to reliable support levels, with expectations of recovery as earnings are reported on January 30 [7].