AmEx revenue misses as spending growth moderates

Wed Jul 18, 2012 6:44pm EDT

American Express and American Express corporate cards are pictured in Encinitas, California October 17, 2011. REUTERS/Mike Blake

American Express and American Express corporate cards are pictured in Encinitas, California October 17, 2011.

Credit: Reuters/Mike Blake

(Reuters) - Credit card company American Express Co's (AXP.N) second-quarter revenue marginally missed Wall Street estimates as cardmember spending growth moderated amid low consumer confidence.

U.S. retail sales fell in June for the third straight month, the longest run of consecutive drops since 2008, and consumer sentiment is now at its lowest level in seven months as Americans take a dim view of their finances and job prospects.

"Overall cardmember spending rose 7 percent, or 9 percent adjusted for foreign currency translations. That's slower than the increases we've seen in the recent quarters," Chief Executive Officer Kenneth Chenault said in a statement.

Cardmember spending at the company, which focuses on the affluent customer, grew in the double-digit range for the last nine quarters.

American Express said spending growth rates slowed across all business lines and all segments.

The company's card data is widely held as an indicator of the spending sentiment of the more affluent consumer, signaling that the weak recovery is taking its toll across all economic segments.

CARD LITIGATION

American Express, which lends directly to consumers and also competes with Visa Inc (V.N) and MasterCard Inc (MA.N) to process credit card transactions, said it does not believe it will be affected by merchant cases related to interchange or "swipe" fees it charges.

Visa and MasterCard -- which together control more than 60 percent of the payment processing market -- and the banks that issue their credit cards agreed to a $7.25 billion antitrust settlement on Friday, but some merchant cases are still being litigated.

"American Express does not have market power. We continue to believe that there's no merit to the separate merchant cases that we are involved in, and we believe that we have strong legal defenses," a company executive said on a conference call.

The anti-trust settlement will also allow stores to start charging customers extra for using certain credit cards in an effort to steer them toward cheaper forms of payment.

American Express said 50 percent of its U.S. billings come from states that currently prohibit surcharging, and it will continue to require parity treatment from merchants.

REVENUE MISSES

In the second-quarter, the company earned $1.34 billion, or $1.15 per share, compared with $1.33 billion, or $1.10 per share, a year earlier.

The number of outstanding shares fell 4 percent from a year earlier.

Total revenue, net of interest expense, was $7.96 billion, up 5 percent.

Analysts on an average had expected the company to earn $1.09 per share, on revenue of $8.06 billion, according to Thomson Reuters I/B/E/S.

American Express has the lowest delinquency rate among the large credit card issuers, including JPMorgan Chase (JPM.N), Discover Financial (DFS.N), Capital One (COF.N), Bank of America (BAC.N) and Citigroup (C.N).

Shares of the company, which have risen 11 percent in the last year, were down 1 percent in trading after the bell. They closed at $58.29 on Wednesday on the New York Stock Exchange. (Reporting by Jochelle Mendonca in Bangalore; Editing by Roshni Menon)

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