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Costco portfolio sale to hit American Express' Q3 earnings, Nomura says

Nomura analyst Bill Carcache downgraded to"reduce" from "neutral" on expectations that the company'sthird-quarter earnings results will be lower than expected following the CostcoU.S. co-brand card portfolio sale.

Loss of net interest income related to the sale of theCostco U.S co-brand card portfolio will weigh on American Express' third-quarterearnings results, the analyst said in an Oct. 6 note. Further, American Expressis expected to continue to lose market share in U.S. billings through at least2017 as competitors launch new products.

Carcache also pointed out that American Express' reliance onspend economics could pressure revenue growth amid increasing rewardscompetition as its spend-centric model limits the rewards it could offer tocustomers. He also noted investor concerns about the company's high annual feeand low reward value products.

The analyst cut the price target on American Express to $56from $62. His EPS estimates stayed at $5.67 for 2016 and $5.60 for 2017.