NEW YORK -- Financial services giant American Express Co. said yesterday it will spin off its financial advisory business so it can focus on the faster-growing charge and credit card, payments processing, and travel businesses. Its shares rose more than 6 percent.
The revelation by the New York company comes a day after Citigroup Inc., the nation's largest financial institution, said it was selling its Travelers life insurance and annuity business to MetLife Inc. for $11.5 billion.
Both moves are aimed at improving the profitability of the parent company and suggest that the ''supermarket" approach to financial services that was so popular in the 1980s and 1990s may be proving cumbersome.
American Express said its shareholders would get all of the shares of the new company, which will include the American Express Financial Advisors unit, based in Minneapolis, as well as Threadneedle Asset Management, which American Express acquired in 2003.
The spinoff is to be completed in the third quarter, American Express said.
American Express shares rose $3.40 to close at $56.75 after surpassing their previous 52-week high of $57.05 earlier in the day on the New York Stock Exchange. Citigroup shares advanced 43 cents to close at $49.48, also on the Big Board.
American Express stock was depressed in 2002 and 2003, in part because of investment losses in the advisory unit. Its share price has improved this year as American Express has begun capitalizing on court rulings that forced Visa and MasterCard associations to allow their member banks to issue American Express and Discover cards.
James Cerruti, president of Vivaldi Partners, a marketing strategy firm in New York, said the American Express deal was an acknowledgment of the difficulty of cross-selling products to different economic groups.
The Citigroup decision to sell its Travelers insurance business, Cerruti said, had more to do with the difficulty of ''retooling sales forces" to cross-sell products and that Citigroup wanted better earnings than insurance was yielding.
American Express chairman and chief executive Kenneth I. Chenault told a conference call with analysts that the company could raise its target for return on equity to a range of 28 percent to 30 percent from the current 18 percent to 20 percent.