Tags: amex | credit | card | financial

AmEx Profit Rises on Card Spending, Lower Defaults

Wednesday, 19 Oct 2011 05:38 PM

American Express Co., the biggest credit-card issuer by purchases, posted a third-quarter profit that beat analysts’ estimates as customer spending increased and fewer borrowers defaulted.

Net income climbed 13 percent to $1.24 billion, or $1.03 a share, from $1.09 billion, or 90 cents, a year earlier, the New York-based lender said today in a statement. The average estimate of 23 analysts surveyed by Bloomberg was for earnings per share of 96 cents.

“Cardmember spending was strong during the period, growing 16 percent to record levels and again outpacing most of the major bank card issuers,” Chief Executive Officer Kenneth I. Chenault, 60, said in the statement. “Credit quality continued to be excellent.”

Chenault is expanding AmEx’s reach beyond its affluent credit-card clients with a new payment system for smartphones and computers as it vies for customers who prefer debit cards, the most-used U.S. payment method. The electronic wallet, called Serve, may draw more transactions to AmEx’s network, the world’s fourth-biggest. In June, the company introduced a no-fee prepaid card that also targets a broader client base.

American Express fell 55 cents to close at $46.13 in New York and slid 1.3 percent at 4:50 p.m. in extended trading. The shares have advanced 7.5 percent this year.

U.S. Card Income

Write-offs for loans AmEx deems uncollectible fell to 2.6 percent in the third quarter, from 5.1 percent last year, the company said in a financial supplement. Loans at least 30 days past due, a signal of future defaults, fell to 1.5 percent from 2.5 percent.

U.S. card income rose 23 percent year-over-year to $733 million, according to the statement. International card income climbed 53 percent to $221 million.

Worldwide card spending, or billed business, rose 16 percent to $207.7 billion, the company said. Individuals spent an average of $3,739, an increase of 12 percent from a year earlier, when AmEx had fewer cards outstanding.

Net revenue advanced 8.6 percent to $7.57 billion, according to the statement. Funds set aside to cover future loan losses fell 33 percent to $249 million.

Expenses climbed 13.1 percent to $5.6 billion as AmEx boosted investments in rewards programs and other initiatives, the company said.

“The growth in operating expenses moderated this quarter, as planned, and we expect to further slow that growth towards the end of this year and into next,” Chenault said.

AmEx handled 3.91 percent of 120.4 billion purchase transactions worldwide last year as it was supplanted as the third-biggest network by Shanghai-based China UnionPay Co., which boosted its market share to 4.03 percent, according to the Nilson Report, an industry newsletter. San Francisco-based Visa Inc. had 66.01 percent of the market, compared with 25.18 percent for MasterCard Inc., based in Purchase, New York.

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American Express Co., the biggest credit-card issuer by purchases, posted a third-quarter profit that beat analysts estimates as customer spending increased and fewer borrowers defaulted. Net income climbed 13 percent to $1.24 billion, or $1.03 a share, from $1.09...
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Wednesday, 19 Oct 2011 05:38 PM
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