American Express Profit Up on Card Spending Rise of 7%

American Express Profit Up on Card Spending Rise of 7%American Express earnings rose 2 percent in the first quarter, beating Wall Street estimates on the strength of increased card spending.
Cardmember spending, which for AmEx represents a greater slice of affluent customers than most competitors, increased 7 percent, adjusted for foreign currency translations. While a solid number, it marks the fourth successive quarter of single-digit growth after nine quarters of double-digit expansion.
Net income went up 2 percent to $1.28 billion, from $1.26 billion. Revenue increased nearly 4 percent to $7.88 billion from $7.61 billion a year ago.
Revenue from annual cardmember fees was also up from a year ago.
Credit quality indicators continued to top industry-wide readings. American Express has the lowest delinquency rate of all the large credit card companies, including JPMorgan Chase, Discover Financial, Capital One, Bank of America and Citigroup.
“We are off to a strong start in 2013, thanks to our ability to grow revenue in a slow growth economy, control expenses and maintain a strong balance sheet,” said Kenneth I. Chenault, chairman and chief executive officer. “Cardmember spending grew 6 percent (7 percent adjusted for foreign currency translations) and we saw a modest increase in loans outstanding.”
Despite some recent signs of a slowdown in card spending, American Express has been one of the best-performing financial stocks this year, outpacing most of its credit-card competitors in loan growth while continuing to reduce losses from bad loans.
Consolidated provisions for losses totaled $497 million, up 21 percent from $412 million a year ago. The increase reflected a larger lending reserve release a year ago, partially offset by lower net write-offs in the current quarter.
American Express does have its share of challenges as well, including high operating expenses. In January, the company said it would cut 5,400 jobs this year primarily in its travel-services business, marking its biggest cost cuts in recent years.
In the first quarter, total expenses increased 1.4 percent to $5.5 billion. CEO Chenault said this was within the target of less than 3 percent annual growth in expenses.

Leave a Reply

Your email address will not be published. Required fields are marked *