UPDATE 2-American Express card defaults fall, stock surges

* CFO says charge-off rate fell to 9.2 pct in July

* Charge-off rate seen under 10 percent in 2009

* Shares rise 5.8 percent to 10 month-highs (Updates with CEO, CFO comments, adds financial details, and byline)

By Juan Lagorio

NEW YORK, Aug 5 (Reuters) - American Express Co (AXP.N) said on Wednesday credit card defaults fell for a second straight month in July, helped by lower-than-expected bankruptcies, boosting its shares to a 10 month-high.

The largest U.S. credit card company by sales estimated its charge-off rate -- loans the company does not expect to be repaid -- fell to 9.2 percent in July from 9.9 percent in June, Chief Financial Officer Daniel Henry said during an investor meeting.

He also forecast that the company's charge-off rate would end 2009 below 10 percent.

In addition, Henry said billed business declined 13 percent in July, compared to a 14 percent fall in June and a 17 percent drop in May.

Chief Executive Kenneth Chenault said the decline in chargeoffs was not seasonal, but warned higher bankruptcies and unemployment figures would still weigh on defaults.

"We are not ready to declare victory on the economy," Chenault said, adding the next six to 18 months will be challenging.

American Express said the U.S. economy -- around 70 percent of the firm's business -- will start recovering in coming months, but will only reach growth levels that preceded the financial crisis in the fourth quarter of 2010.

In addition, unemployment -- a key factor in credit card defaults -- is seen peaking at around 10.1 percent in the first quarter of 2010. It rose in June to 9.5 percent, the highest level in nearly 26 years.

Bankruptcy filings, at the highest level in three years, are also expected to keep growing in the second half of 2009.

American Express was the fastest growing credit card company during the credit boom of 2003-07, but the company paid a heavy price when the bubble burst last year and mounting credit losses sent its earnings spiraling lower.

Since then, American Express has been slashing lending, trimming costs and divesting to shore up its balance sheet.

American Express shares rose 5.8 percent to close at $30.36 on the New York Stock Exchange, its best closing price in 10 months. The stock is up 64 percent so far this year. (Reporting by Juan Lagorio; editing by Andre Grenon, Bernard Orr)