American Express Profits Soar; Credit Costs Plunge

American ExpressBolstered by a plunge in expenses for futures losses, American Express reported net income of $716 million, or 60 cents a share, up from $240 million, or 21 cents a share, in the same quarter a year earlier.
The earnings performance was buoyed by a significant cut in provisions for loan losses – $748 million, down 47 percent compared to $1.4 billion in the year-ago period. The decline reflected continued improvement in credit quality during the latter part of 2009.
The largest credit card issuer in the U.S. by purchases and the most-widely distributed charge card, American Express’s credit losses leveled off in the second half of last year. Its credit card delinquency rate – accounts 30 days late – have been running at about half of those of its credit card rivals. AmEx was also bolstered by declines in write-offs in the third quarter.
“We ended the year on a positive note with card member spending up 8 percent and credit indicators showing further signs of improvement,” said Kenneth I. Chenault, chairman and chief executive officer.
Its U.S. card cervices reported a fourth-quarter net income of $365 million, up from $64 million a year ago.  Provisions for losses totaled $346 million compared to $1.1 billion a year ago. The segment’s “total revenues net of interest expense” for the fourth quarter decreased 4 percent to $3.1 billion, primarily from lower commissions and fees, and lower net card fees – partially offset by slightly higher discount revenue.
Its international card services recorded fourth-quarter net income of $73 million, up from $36 million a year ago. Total revenues in the segment increased 11 percent to $1.2 billion, fueled by increased card member spending, increased net interest income and higher net card fees.
“We still face the challenge of high unemployment levels, depressed real estate values, and shrunken household balance sheets, but the overall economy and our company are in stronger shape than they were a year ago,” Chenault said in the statement. “While the economic recovery now under way is likely to be modest, we expect it to continue and have begun to shift our focus to growing American Express for the longer term.”
American Express was last year’s top performer in the Dow Jones Industrial Average.

One thought on “American Express Profits Soar; Credit Costs Plunge

  • February 11, 2010 at 12:50 pm

    “Its U.S. card cervices reported a fourth-quarter net income of”
    is “cervices” the plural for cervix?
    How does a company have US Card cervices yet international card services?

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