American Express Triples Profit on Higher Card Spending

American ExpressBolstered by higher card-member spending and fewer bad loans, American Express beat expectations with a second-quarter 2010 profit of $1 billion, about three times more than the $337 million in earnings a year ago.
Per share income was 84 cents, compared to 9 cents last year. Analysts were expecting 77 cents a share for the top credit card issuer by purchases.
American Express said its net income and billings were at or near pre-recession levels.  
Net revenue increased 13 percent in the second quarter to $6.86 billion.
Total card spending rose 16 percent to $175.3 billion. Individual card members spent an average of $3,288, an increase of 21 percent from a year earlier.
Spending jumped across all card segments, with the largest increases coming from corporate cards, cards issued by bank partners, charge cards and premium co-brand products where many card holders tend to pay in full each month.
Helping its solid results is a significant rebound in loan losses.
Consolidated provisions for losses totaled $652 million, compared to $1.6 billion in the year-ago period, reflecting improvement in credit quality for the charge and credit card portfolios.
In June, American Express had the lowest 30-day delinquency rate among the biggest U.S. credit-card issuers.
While spending among its affluent consumers and businesses remains strong, “today’s cardmembers are borrowing less and paying down more of their outstanding debt,” said Kenneth I. Chenault, chairman and chief executive officer.
That has led to lower-interest revenue.
“We remain focused on charge – or pay-in-full – products, fee-based revenues, and on expanding our high quality cardmember base. In all, these factors have helped to improve our risk profile during the past year,” Chenault said.

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