American Express Co. has struck back against Citigroup Inc., winning exclusive rights to issue credit cards for Hilton Worldwide Holdings Inc. and ending an agreement in which the two banks shared the business.

The arrangement takes effect Jan. 1, Hilton said Thursday in a statement that didn’t disclose terms.

Amex shares had struggled after the company lost out to Citigroup in a bidding war for Costco Wholesale Corp.’s card portfolio and failed to renew its partnership with JetBlue Airways Corp. in 2015. The lender also has been buffeted by intensifying competition for its wealthy clients, prompting Chief Executive Officer Ken Chenault to shuffle top managers, boost spending on marketing and sweeten rewards to keep customers.

Hilton hotel
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“This announcement is clearly positive for American Express as this breaks a string of defections,” Sanjay Sakhrani, a KBW analyst, said in a note to clients. “It also potentially signals a peak in the competitive intensity of these deals.”

American Express climbed 0.4 percent to $77.24 at 9:38 a.m. in New York. The shares have gained 4.2 percent this year, outpacing the 0.3 percent decline for the 65-company S&P 500 Financials Index.

Amex’s Starwood Preferred Guest card, which accounts for about 4 percent of the company’s loans and 2 percent of total spending, is at risk after Marriott International Inc.’s takeover of rival Starwood Hotels & Resorts Worldwide. Marriott has a co-brand deal with JPMorgan Chase & Co., the largest U.S. credit-card lender, and Visa Inc., the world’s biggest payments network.

Amex winning the Hilton portfolio takes some of the sting out of losing its partnership with Costco, a much bigger partnership that accounted for 20 percent of worldwide loans and 8 percent of card spending. The largest U.S. warehouse chain decided in 2015 to end its 16-year relationship with Amex after the firms couldn’t agree on card fees. Last year, Citigroup became the exclusive credit-card issuer for the retailer.

Citigroup said the terms of the Hilton deal didn’t make economic sense for a relatively small portfolio. Hilton represents about 1 percent of the bank’s $126.4 billion U.S. credit-card loans.

“For over 15 years, Citi and Hilton enjoyed a terrific co-brand credit card partnership, however during negotiations it became clear that terms of exclusivity given the relatively small size of the portfolio were not economically viable,” Jud Linville, CEO of Citi’s global cards business, said in a phone interview.

Citigroup intends to focus on "core" co-brand partners including Costco, American Airlines Group Inc. and AT&T Inc., he said.

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