American Express spins off financial advisory business

AMERICAN EXPRESS will spin off its nationwide brokerage arm into a separate company potentially worth $10bn (pounds 5bn) to focus on its faster- growing card and travel business.

The move marks a radical reorganisation for the credit card giant, which is on a drive to improve profitability. It comes after a change in US law ending the control Visa and MasterCard have over the credit card market, dramatically increasing American Express' potential to sign joint ventures with banks and other financial services providers.

After the spin-off, expected to be completed in the third quarter of the year, American Express will consist of the world's largest charge and credit card business, its global travel agency and Travelers Cheque business. It also owns an international bank that serves other financial institutions, as well as private clients.

American Express Financial Advisors (AEFA), which employs 12,000 brokers across America, offers financial planning and advice services, as well as asset management, insurance, and annuities. It generated revenues of $7bn and $700m of net income in 2004, accounting for 21 per cent of the New York-based company's total net income last year. Shares in American Express surged 5 per cent in New York in morning trade.

As an independent company, AEFA will compete with Wall Street's heavyweights, such as Merril Lynch. Kenneth Chenault, the chief executive of American Express, said the move would better enable the advisory business to respond rapidly to market trends. "As an independent company, AEFA would not have to compete for capital or management resources with other American Express businesses, and therefore would be able to react more quickly to market opportunities for new products, partnerships and expansion," he said.

Under the plan, investors in the parent company will receive shares in the advisory business. Warren Buffett, the chief executive of Berkshire Hathaway, is the biggest shareholder in American Express.

James Cracchiolo, 46, the brokerage unit's chief executive and president, will become chief executive of the spun-off company. The two companies will be independent, have separate public ownership, boards of directors and management. They will form exclusive marketing affiliations that will allow AEFA to continue to use the American Express name for a transition period after the spin-off.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Assistant / Buyer

£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

Day In a Page

Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test
Tour de France 2015: Twins Simon and Adam Yates have a mountain to climb during Tour of duty

Twins have a mountain to climb during Tour of duty

Yates brothers will target the steepest sections in bid to win a stage in France
John Palmer: 'Goldfinger' of British crime was murdered, say police

Murder of the Brink’s-MAT mastermind

'Goldfinger' of British crime's life ended in a blaze of bullets, say police
Forget little green men - aliens will look like humans, says Cambridge University evolution expert

Forget little green men

Leading evolutionary biologist says aliens will look like humans
The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

The Real Stories of Migrant Britain

An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

Dying dream of Doctor Death

Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy