* Q3 EPS $1.09 vs $1.03 a year earlier
* Q3 revenue up 4 pct
* Corporate belt-tightening holds back growth
By Jochelle Mendonca
Oct 17 (Reuters) - American Express Co's third-quarter profit rose only marginally and spending growth remained muted for the second quarter in a row as corporate executives cut spending on travel and entertainment.
Expense accounts have come under greater scrutiny as companies look to cut costs to protect profit margins, hurting the credit card lender, which gets more than a quarter of its U.S. billed business from corporate customers.
Amex shares dipped 1 percent in after-hours trading after it reported a modest 1 percent rise in quarterly profit.
Travel and entertainment volumes grew 4 percent, the slowest rise this year and far below the 12 percent growth seen a year earlier.
Total card member spending in the United States rose 8 percent from a year earlier, the second quarter in a row that growth has been in single digits, after nine quarters of double-digit growth.
The slowing growth echoes that of other large credit card issuers. U.S. credit card volume growth decelerated at both Bank of America and U.S. Bancorp, which reported results earlier on Wednesday.
American Express, which has a market value of more than $66 billion, is looking to expand its market beyond the affluent, for whom there is stiff competition in the card market.
The company has teamed up with Wal-Mart Stores Inc, the world's largest retailer, to offer a prepaid debit card to target lower-income shoppers who may not have bank accounts.
"It does push more volume onto our network..it's a growing market," Chief Financial Officer Dan Henry said on a post-earnings conference call.
It is also a more cheery sector. U.S. consumer confidence hit a five-year high last month but chief executives has sunk to their grimmest outlook for the economy in three years.
The move gives Amex access to tens of million of new consumers at a time when regulators are clamping down on credit insurance and other add-on credit card products.
Amex agreed this month to refund $85 million to customers to resolve charges that three subsidiaries broke consumer protection laws in the way it marketed credit card add-ons.
Henry said the company would stop selling account and ID protection products at the end of this year, given the regulatory concerns. He added the products were not a significant source of revenue for the company.
The slowing card spending growth saw Amex's profit rise just 1 percent to $1.25 billion, or $1.09 per share.
Revenue grew at the slowest rate in 11 quarters. Total revenue, net of interest expense, was $7.86 billion, up 4 percent.
Analysts on average had expected the company to earn $1.09 per share, on revenue of $7.90 billion, according to Thomson Reuters I/B/E/S.
The company has the lowest delinquency rate among the large credit card companies, including JPMorgan Chase, Discover Financial, Capital One, Bank of America and Citigroup.
But it set aside $479 million to cover future bad loans, reflecting its larger lending portfolio, 92 percent more than it had provisioned last year.
The large increase also reflects a $421 million reserve release in the year-ago quarter.
"We didn't have the same benefit from substantial reserve releases as last year when write-offs and delinquencies were declining at a faster rate," Chief Executive Kenneth Chenault said in a statement.
American Express, which lends directly to consumers and also competes with Visa Inc and MasterCard Inc to process credit card transactions, said global network and merchant services revenue grew 5 percent to $1.3 billion.
Shares of the company, which have risen more than 24 percent so far this year, were down about 1 percent at $58.80 after the bell. They closed at $59.37 on Wednesday on the New York Stock Exchange.