(Recasts; adds analysts' comments, share movement)
Nov 11 (Reuters) - American Express Co, the No 4 U.S. credit card issuer, should be able to address its funding concerns by converting itself into a bank holding company and gaining access to the U.S. Treasury's bailout plan, analysts said.

"This was the right move for the company, given the uncertain economic climate and still extreme financial market volatility and illiquidity," Fox-Pitt Kelton analyst Howard Shapiro said.
Given its premium valuation, American Express could consider an accretive acquisition to build deposits, Shapiro said, but added that management will act cautiously as it is not really interested in traditional banking business.

"Whether institutions like it or not, the only prudent thing to do is assume a protracted worst-case funding scenario," said Oppenheimer analyst Meredith Whitney, who believes this was the strategy that influenced the company's decision to transform.
American Express said on Monday it won approval to become a bank holding company, in a step that could cut its borrowing costs and give it more access to government money.
The transformation to a bank holding company would give American Express a more stable funding mix and more optionality on its funding mix, Whitney said in a note to clients.
American Express offered more credit to more customers even as the housing crisis began last year, and is paying the price as delinquencies rise.
Adding to its difficulties, its main sources of funding have grown more expensive as secured and unsecured bond markets have shut down.
Analyst Whitney, however, said her primary concern about American Express was consumer credit losses, and not funding.
Whitney maintained her "perform" rating on the stock.
In recent years, American Express expanded faster than rivals such as Discover Financial Services, Capital One Financial Corp, JPMorgan Chase & Co and Citigroup Inc by signing up more middle-class clients.
Now, American Express is paying the price of its expansion. The default rate among its credit card clients in the United States almost doubled in the third quarter of 2008 from a year earlier.
Shares of the company fell to a low of $22.02 but pared some losses and were down 6 percent at $22.54 in midday trade on the New York Stock Exchange.

(Reporting by Anurag Kotoky in Bangalore; Editing by Amitha Rajan, Deepak Kannan) Keywords: AMERICANEXPRESS/RESEARCH OPPENHEIMER (anurag.kotoky@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: anurag.kotoky.thomsonreuters.com@reuters.net)

COPYRIGHT

Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.