American Express (AXP) shares plummeted 5.02% in pre-market trading on Monday, as investors reacted to President Donald Trump's surprise proposal to cap credit-card interest rates at 10%. The announcement has sparked fears of reduced profitability for financial firms reliant on card lending.
The decline follows Trump's social-media post on Friday, where he called for a one-year cap on credit-card annual percentage rates starting January 20. Analysts estimate that such a cap could slash AXP's net interest margin from 9.2% to 5.7%, significantly impacting earnings. While the proposal is seen as unlikely to pass without congressional approval, the uncertainty has rattled markets.
Jefferies analyst John Hecht noted that a rate cap could force lenders to tighten credit standards, potentially hurting retail sales and economic growth. Other analysts, however, downplayed the immediate risk, citing legislative hurdles and historical resistance to similar measures.
