Sector Snap: Credit Card Lenders

NEW YORK — A UBS Investment Research analyst cut his rating on credit card lenders on Monday, saying a recession will put more people out of work and many will not be able to pay their bills.

UBS Investment Research analyst Eric E. Wasserstrom, in keeping with UBS' outlook for a recession in the first half of the year, cut his rating on American Express Co., Capital One Financial Corp. and Discover Financial Services LLC to "Sell." He previously rated American Express a "Buy," and Capital One and Discover at "Neutral."

With the economy shrinking, Wasserstrom expects the unemployment rate to tick up. The job market is the most important pillar for credit quality, he said. With more people out of work, credit card lenders will report more bad debt on their books, he said.

Wasserstrom slashed his price target on American Express to $45 from $67. The stock closed Friday at $49.60, and in afternoon trading Monday lost $1.80, or 3.6 percent to $47.80.

Last month, the New York-based lender set aside $440 million to cover unpaid loans, and said growth in spending on its 84.7 million cards trailed off in December.

Wasserstrom cut his price target on Discover, which was spun off from Morgan Stanley last year, to $14 from $18. Discover's stock sank $1.72, or 9.6 percent, to $16.24. Discover Financial lost $391 million in the fourth quarter.

Shares of Capital One Financial fell $4.20, or 7.4 percent, to $52.81. The company's stock has lost about 30 percent of its value in the past year. Capital One wrote off $1.3 billion in loans in the fourth quarter and expects to write off $5.9 billion this year.

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