* 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 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
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
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
Analysts on average had expected the company to earn $1.09
per share, on revenue of $7.90 billion, according to Thomson
The company has the lowest delinquency rate among the large
credit card companies, including JPMorgan Chase,
Discover Financial, Capital One, Bank of America
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