AmEx seen saving up to $600 million to cushion losses

NEW YORK (Reuters) - American Express Co (AXP.N), faced with falling revenue and rising credit card losses, could save up to $600 million more in 2009 by cutting 3,000 jobs and slashing marketing and rewards costs, according to analysts.

A 22 percent reduction in costs helped the company report better-than-expected quarterly earnings last week, but American Express said it was planning more job cuts and other actions to offset shrinking revenue and mounting credit losses.

Analysts are betting the additional cuts will be deep.

"Given the secular shift in consumers opting for less debt, spending less," the company may need fewer employees and other resources, said Scott Valentin, an analyst at Friedman, Billings, Ramsey.

It would be the second round of cuts by the fourth-largest U.S. credit card company in the past six months. Last October it announced plans to eliminate 7,000 jobs, slash advertising and other expenses, and scale back investments to save $1.8 billion this year -- its biggest restructuring since 2001.

Chief Financial Officer Dan Henry said last week, "We think people have less value in their homes. So when (the credit environment) turns and gets better, it may not return to the levels that we saw in '06 and '07. And so we want to construct a cost base that will enable us to be competitive and to invest."

Henry said the company was reviewing its plans but declined to give details.

3,000 MORE LAYOFFS?

New savings of $400 million to $600 million, or up to 4 percent of its total expenses, could help the company maintain its quarterly dividend of 18 cents per share, the analysts said.

They estimated American Express could cut 3,000 more jobs, around 70 percent of them in the United States. The cuts would amount to 5 percent of its workforce.

In addition, the company could slash its marketing and promotion expenses by an additional 10 percent by selectively scaling back sponsorships and advertising, they said.

But Valentin offered a caveat: "You want to be cautious because one of the real values of AmEx is its brand, and the way to maintain a brand is through marketing."

He added that American Express could trim rewards programs by changing redemption rates, or the mix of rewards, from air travel tickets to TVs or audio equipment.

While analysts warned about the impact of these actions on future revenue, American Express has said costs cuts will not harm its long-term growth.

"We are always very careful not to cut into the muscle," Henry said. "We would not take actions that would hurt our ability to perform well when things start to turn."

Sanjay Sakhrani, an analyst at Keefe Bruyette & Woods, said, "We're seeing weakness on the credit side of the equation, as well as volumes, so American Express needs to counteract the weakness that we're seeing on the top line."

In the first quarter, American Express slashed marketing and promotions by 42 percent, rewards by 18 percent, and salaries and employee benefits by 15 percent.

Revenue fell 18 percent in the quarter, while spending volume on American Express cards globally fell 16 percent, partially because consumers are spending less but also because the company has been scaling back lending.

Henry said spending was decreasing in April at the same pace as in the first quarter.

American Express spokeswoman Joanna Lambert declined to comment on analysts' speculation about job and spending cuts.

In recent years, American Express -- often seen catering to relatively wealthy customers and to companies -- expanded faster than credit card rivals such as Discover Financial Services (DFS.N), Capital One Financial Corp (COF.N), JPMorgan Chase & Co (JPM.N) and Citigroup Inc (C.N) by widening its clients base.

But the strategy has backfired, according to analysts, as the default rate among its U.S. credit card clients almost doubled in the first quarter from a year earlier.

Shares of American Express, a component of the Dow Jones industrial average, were down 2.3 percent to $24.71 in Monday morning trade on the New York Stock Exchange. The shares soared 20 percent Friday on the surprisingly strong first-quarter earnings. Through Friday, the stock was up 34 percent this year and had more than doubled in price since hitting a 14-year low in early March.

(Reporting by Juan Lagorio; Editing by John Wallace)