AmEx sees Q4 spending improving

NEW YORK (Reuters) - American Express Co (AXP.N), the largest U.S. credit card company by purchases volume, forecast that spending trends will improve in the fourth quarter compared with the third quarter, Chief Financial Officer Dan Henry said on Monday.

Last week, the company said credit card spending rose 3 percent in October compared with a year earlier, the first increase in more than a year -- and another sign that the worst of the financial crisis may have passed.

Total card spending fell 11 percent in the third quarter from a year earlier, and 16 percent in the second quarter.

"It (the improvement) is really pretty broad based. We saw it in the U.S., as well as internationally, we saw it across all of our products. Probably more in charge cards compared to credit cards, but it was broad based in consumers, small business and our corporate cards," Henry said at the Reuters Global Finance Summit in New York.

"We will see improvements compared to what we saw in the third quarter," Henry said.

Spending volumes rose to about $56 billion in October after being stable at about $52 billion for several months, Henry said, a sign he called encouraging.

"But we have to be cautious here because unemployment is still a big uncertainty, is forecast to continue to rise, and so we have to take a cautious outlook, even though things are notably better than they were a year ago at this time and certainly better than they were early this year," he warned.

Although credit card chargeoffs -- loans the company does not expect to be repaid -- fell to 7.8 percent in October from 8.4 percent in September, Henry said it was uncertain how long it will take for them to return to a more normal level of about 5 percent.

"Generally, (a decline in chargeoffs) from the peak down to a normal level happens through eight quarters. Whether we will see that same trend this time or whether it will stay stubbornly high longer ... will be very dependent on what takes place in the economy," Henry said.

American Express chargeoffs peaked at a record 10 percent in the second quarter -- and declined to 8.9 percent in the third quarter.

Henry forecast chargeoffs will keep falling in the fourth quarter, as delinquencies eased in recent months.

American Express was the fastest growing credit card company from 2003 through 2007 as it relaxed lending standards. But it paid a heavy price in the financial meltdown, and bad loans soared.

The company cut 11,000 jobs and reduced spending to save $2.5 billion, part of which it will invest now to grow.

Analysts have said American Express is recovering faster from the recession and is expected to emerge stronger than other credit card issuers, as it relies more than its peers on affluent and corporate customers.

Henry said American Express was not planning and did not need to raise capital given that its capital ratios were strong.

But he also said the credit card company had no plans to raise its dividend or buy back shares now to return capital to stockholders.

"Things are a lot better than they were six months ago, but let's face it, we are still in an economic environment that's pretty uncertain, and I think that we are going to move through this in a cautious fashion," Henry said.

Early this year, analysts estimated American Express could be forced to cut its dividend to raise capital, and forecast the company could post its first loss in 17 years.

However, the company founded in 1850 as an express delivery kept its dividend and remained profitable.

Its stock, which in early March fell to a 14-year low, has more than doubled so far this year and is the biggest gainer in the Dow Jones industrial index.

American Express shares closed up 2.7 percent at $41.44, after touching their highest price since July 2008.

(Reporting by Juan Lagorio; Editing by Gary Hill)