Does American Express' Minimum SCB Signal Strong Capital Discipline?

American Express Company AXP stated today that the Federal Reserve has set its preliminary Stress Capital Buffer (SCB) requirement at 2.5%, effective from Oct. 1, 2025, through Sept. 30, 2026. The requirement, determined through the 2025 Comprehensive Capital Analysis and Review, represents the regulatory minimum and aligns with the previously disclosed SCB in effect through Sept. 30, 2025. This preliminary SCB is pending final confirmation by the Federal Reserve, expected to be announced by Aug. 31, 2025.

This move enhances American Express’ financial position by allowing it to operate with greater capital flexibility. With less capital tied up in regulatory buffers, the company can more efficiently allocate resources toward strategic investments, product innovation and potential shareholder distributions, such as dividends and buybacks. This efficient use of capital can contribute to stronger return on equity and long-term profitability.

A testament to this financial strength and capital discipline is American Express’s decision to increase its quarterly dividend on common shares by 17% to 82 cents per share, beginning with the first-quarter 2025 dividend declaration. Additionally, the company returned $5.4 billion to its shareholders through share repurchases over the 12-month period ended March 31, 2025. The return on equity for American Express is currently 32.5%, which is higher than the industry’s average of 16.4%. This substantiates the company’s efficiency in utilizing shareholders’ funds.

AXP’s YTD Price Performance

Over the year-to-date period, shares of AXP have gained 8.6%, outperforming the industry and the Zacks S&P 500 Index composite index.

American Express’ Zacks Rank & Key Picks

AXP currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader finance space are Acadian Asset Management Inc. AAMI, Pagaya Technologies Ltd. PGY and Axos Financial AX. While Acadian Asset Management and Pagaya Technologies sport a Zacks Rank #1 (Strong Buy) each, Axos Financial carries a Zacks Rank #2 (Buy) at present.You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Acadian Asset Management’scurrent-year earnings is pegged at $2.86 per share, implying 3.6% year-over-year growth. The estimate remained stable over the past month. The consensus estimate for AAMI’s current-year revenues is pegged at $526.8 million, implying 4.2% year-over-year growth.

The Zacks Consensus Estimate for PGY’s current-year earnings is pegged at $2.45 per share, implying 195.1% year-over-year growth. Pagaya Technologies’ earnings surpassed estimates in the last quarter by 72.5%. The consensus estimate for PGY’s current-year revenues is pegged at $1.2 billion, implying 19.9% year-over-year growth.

AX’s earnings surpassed estimates in each of the last four quarters, the average beat being 4.5%.The Zacks Consensus Estimate for AX’s 2025 earnings is pegged at $7.39 per share. It has witnessed one upward revision in the past month against no movement in the opposite direction. The consensus estimate for Axos Financial’s current-year revenues is pegged at $1.3 billion, implying 5.3% year-over-year growth.

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This article originally published on Zacks Investment Research (zacks.com).

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