Shares of credit card company American Express Co (AXP.N) fell as much as 5 percent on heavy volume on Wednesday, following the European Commission's plans to limit fees banks can charge to process card payments.
The commission will propose capping the fee that banks charge retailers to process card payments at 0.2 percent of the transaction value for debit cards and 0.3 percent for credit cards, according to a draft legislation seen by Reuters.
Jefferies analyst Daniel Furtado estimated the plan would reduce Amex's earnings per share by about 11 cents but said the company will have enough time to offset any loss through changes in its fees and rewards program.
The proposed cap will apply initially to cross-border transactions and would be extended to domestic payments using cards after two years.
"Though Amex does not explicitly charge interchange fees, the proposal would apply as it indicates there are 'implicit' charges and any card schemes using payment service providers to issue cards will be covered by the same cap," Credit Suisse analyst Moshe Orenbuch said in a note to clients.
American Express, which issues its own cards, said in a statement the plan proposes to primarily cap interchange fees charged by four-party payment systems such as Visa Inc (V.N) and Mastercard Inc (MA.N).
Shares of Amex, which is scheduled to report second-quarter results after the bell, pared some of their losses after the company's statement and were down 2 percent at $76.60 in midday trade. Nearly 1.3 million shares changed hands by 1230 ET.
Mastercard shares were flat at $589.80, while shares of Visa were down marginally at $188.47.