October 23, 2009 / 12:09 AM / 10 years ago

American Express profit beats estimates

NEW YORK (Reuters) - American Express Co posted stronger-than-expected quarterly earnings on Thursday as the credit card company trimmed costs, consumer spending declined at a slower pace and credit losses were lower than forecasts.

An American Express Blue card is seen in a handout photo. REUTERS/PRNewsFoto

“Overall billings have stabilized during the last few months and we saw indications that spending by corporate card members is beginning to pick up,” Chief Executive Kenneth Chenault said in a statement.

Net income fell to $640 million, or 53 cents per share, from $815 million, or 70 cents per share, a year earlier, the largest U.S. credit card company by purchases said in a statement.

The third-quarter results included a $180 million nonrecurring benefit associated with the company’s accounting for a net investment in consolidated foreign subsidiaries.

Excluding that benefit, American Express posted adjusted earnings from continuing operations of 44 cents per share. On that basis, analysts expected earnings per share of 38 cents, according to Thomson Reuters I/B/E/S.

Total revenue fell 16 percent to $6.0 billion, but consolidated expenses declined 17 percent to $3.9 billion as the company trimmed jobs, marketing, and rewards costs.

Total card spending fell 11 percent from the third quarter of 2008. However, it showed an improvement against a 16 percent contraction in the second quarter.

Chief Financial Officer Dan Henry said the improvement is month after month, adding spending could decline in the low single digits or be flat in the fourth quarter compared to a year ago. He also said spending levels have been stable since May.

“We have seen some encouraging signs of progress over the last several months. However, while the global economy will recover, we do expect the result in the environment will be characterized by slower billings growth as consumers and business remain cautious about their spending,” Henry said.

In the U.S. card service business, net charge-offs — a measure of bad loan write-offs — fell to 8.9 percent from 10.0 percent in the previous quarter, although they were up compared with the third quarter of 2008.

American Express credit card charge-off rate is expected to decline in the fourth quarter compared to the third quarter, Henry said.

Provisions for losses decreased 13 percent to $1.2 billion, and Henry said they were expected to improve in the current quarter.

“What we have seen is stabilization, and where we go from here really depends on the psyche of the consumers over the next two and a half months,” Henry said.

Analysts have said American Express, which relies on affluent and corporate customers more than its peers, is recovering faster from the financial meltdown as economic jitters ease.

“American Express looks like it has been able to rebound in this time of turmoil and still be in a good position to take advantage of the recovering economy,” Aite Group analyst Adil Moussa said in an email.

American Express shares fell 0.50 percent to $36.26 in after-hours trading after closing up 3.82 percent to $36.44 on the New York Stock Exchange. The company, the biggest Dow component gainer so far in 2009, is up 95 percent this year.

Reporting by Juan Lagorio; Editing by Steve Orlofsky, Phil Berlowitz

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