American Express Co., the biggest U.S. credit-card issuer by purchases, posted profit that exceeded most analysts’ estimates and said the recession may be nearing an end.
Third-quarter income from continuing operations fell 25 percent to $642 million, or 54 cents a share, from $861 million, or 74 cents, in the same period last year, the New York-based lender said yesterday in a statement. Excluding a one-time accounting change, the profit was 44 cents a share, beating the 38-cent average estimate of 20 analysts surveyed by Bloomberg.
“While there is still reason to be cautious about high unemployment levels, we are seeing broad-based improvements in credit quality, the trends in card-member spending are encouraging and there are signs that the recession may be approaching an end,” Chief Executive Officer Kenneth Chenault said in the statement.
Chenault signaled increasing confidence in the economic climate during the third quarter when he told his staff on Sept. 24 he’s reversing pay cuts imposed eight months ago. Card write- offs fell in September for the fifth straight month. Capital One Financial Corp., the card lender based in McLean, Virginia, also beat estimates by posting a 14 percent profit increase.
Total card spending at AmEx rose to $156.6 billion in the third quarter, from $151.4 billion in the preceding three-month period. Cardholders spent an average of $2,898, up from $2,712 in the quarter ended June 30.
Revenue Declines
Revenue fell 16 percent to $6.02 billion, the company said. U.S. card income fell 55 percent to $109 million from $244 million in the third quarter last year. International card income surged 90 percent to $127 million.
The company cut 1,500 jobs, or 3 percent of its global workforce, leaving it with 59,200 employees. The lender slashed marketing expenses by $807 million, or 17 percent, compared with the same period last year. Salaries and employee benefits fell $204 million, or 14 percent.
Chenault had said he would eliminate about 11,000 jobs, or 17 percent of the workforce, in the past year as part of a $2.6 billion “re-engineering” plan and slashed marketing expenses as the recession squeezed profit. As defaults eased, the company began to redirect $1.5 billion of those savings toward marketing and investments, Chief Financial Officer Daniel Henry said during a conference call with analysts.
Stock Price
American Express, this year’s top performer in the Dow Jones Industrial Average, rose $1.34 to $36.44 yesterday in New York Stock Exchange composite trading. The shares have gained 96 percent in 2009, compared with 15 percent for the Dow. They were little changed in extended trading yesterday, while Capital One rose more than 7 percent.
Provisions for losses fell 13 percent to $1.2 billion, AmEx said. Results included a $113 million one-time accounting benefit. Net income fell 21 percent to $640 million.
Annualized credit-card write-offs last month dropped to 8.4 percent after climbing as high as 10.1 percent in April, American Express said in an Oct. 15 federal filing. Loans at least 30 days overdue held steady at 4.1 percent. AmEx was the only one among the six biggest U.S. card lenders, including JPMorgan Chase & Co. and Citigroup Inc., that didn’t report higher defaults or delinquencies.
Jobless Rate
Rising U.S. unemployment still threatens to squeeze profit, even after AmEx posted five straight monthly declines in credit- card defaults, Michael Taiano, an analyst at Sandler O’Neill & Partners LP, wrote before earnings were released. Card write- offs typically track the U.S. jobless rate, which climbed to 9.8 percent last month, and economists surveyed by Bloomberg project it will reach 10 percent by the first quarter of 2010.
“We’re weathering the storm, but the storm is not over and we continue to face several significant risks,” said Capital One CEO Richard Fairbank in a conference call with analysts. “While the pace of deterioration appears to have slowed, labor markets have yet to actually improve
Third-quarter income from continuing operations fell 25 percent to $642 million, or 54 cents a share, from $861 million, or 74 cents, in the same period last year, the New York-based lender said yesterday in a statement. Excluding a one-time accounting change, the profit was 44 cents a share, beating the 38-cent average estimate of 20 analysts surveyed by Bloomberg.
“While there is still reason to be cautious about high unemployment levels, we are seeing broad-based improvements in credit quality, the trends in card-member spending are encouraging and there are signs that the recession may be approaching an end,” Chief Executive Officer Kenneth Chenault said in the statement.
Chenault signaled increasing confidence in the economic climate during the third quarter when he told his staff on Sept. 24 he’s reversing pay cuts imposed eight months ago. Card write- offs fell in September for the fifth straight month. Capital One Financial Corp., the card lender based in McLean, Virginia, also beat estimates by posting a 14 percent profit increase.
Total card spending at AmEx rose to $156.6 billion in the third quarter, from $151.4 billion in the preceding three-month period. Cardholders spent an average of $2,898, up from $2,712 in the quarter ended June 30.
Revenue Declines
Revenue fell 16 percent to $6.02 billion, the company said. U.S. card income fell 55 percent to $109 million from $244 million in the third quarter last year. International card income surged 90 percent to $127 million.
The company cut 1,500 jobs, or 3 percent of its global workforce, leaving it with 59,200 employees. The lender slashed marketing expenses by $807 million, or 17 percent, compared with the same period last year. Salaries and employee benefits fell $204 million, or 14 percent.
Chenault had said he would eliminate about 11,000 jobs, or 17 percent of the workforce, in the past year as part of a $2.6 billion “re-engineering” plan and slashed marketing expenses as the recession squeezed profit. As defaults eased, the company began to redirect $1.5 billion of those savings toward marketing and investments, Chief Financial Officer Daniel Henry said during a conference call with analysts.
Stock Price
American Express, this year’s top performer in the Dow Jones Industrial Average, rose $1.34 to $36.44 yesterday in New York Stock Exchange composite trading. The shares have gained 96 percent in 2009, compared with 15 percent for the Dow. They were little changed in extended trading yesterday, while Capital One rose more than 7 percent.
Provisions for losses fell 13 percent to $1.2 billion, AmEx said. Results included a $113 million one-time accounting benefit. Net income fell 21 percent to $640 million.
Annualized credit-card write-offs last month dropped to 8.4 percent after climbing as high as 10.1 percent in April, American Express said in an Oct. 15 federal filing. Loans at least 30 days overdue held steady at 4.1 percent. AmEx was the only one among the six biggest U.S. card lenders, including JPMorgan Chase & Co. and Citigroup Inc., that didn’t report higher defaults or delinquencies.
Jobless Rate
Rising U.S. unemployment still threatens to squeeze profit, even after AmEx posted five straight monthly declines in credit- card defaults, Michael Taiano, an analyst at Sandler O’Neill & Partners LP, wrote before earnings were released. Card write- offs typically track the U.S. jobless rate, which climbed to 9.8 percent last month, and economists surveyed by Bloomberg project it will reach 10 percent by the first quarter of 2010.
“We’re weathering the storm, but the storm is not over and we continue to face several significant risks,” said Capital One CEO Richard Fairbank in a conference call with analysts. “While the pace of deterioration appears to have slowed, labor markets have yet to actually improve
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