Tags: AmEx | american express | credit card | default | bank

AmEx Profit Jumps on Card Spending, Lower Defaults

Wednesday, 18 April 2012 04:39 PM

American Express Co., the biggest credit-card issuer by purchases, reported a 6.7 percent increase in first-quarter profit as customer spending climbed and the lender posted the industry’s lowest default rates.

Net income rose to $1.26 billion, or $1.07 a share, from $1.18 billion, or 97 cents, a year earlier, the New York-based company said Wednesday in a statement. The average estimate of 22 analysts surveyed by Bloomberg was for earnings per share of $1.01.

AmEx, led by Chairman and Chief Executive Officer Kenneth I. Chenault, is increasing the dividend and repurchasing shares after Federal Reserve stress tests showed the lender was among the best-equipped of 19 banks examined to withstand a severe recession. The firm said this week that write-offs for soured loans fell to 2.4 percent in March from 3.7 percent a year earlier, the lowest of the six biggest U.S. credit-card issuers.

“Higher cardmember spending, excellent credit metrics and disciplined expense management helped us to start 2012 with record first-quarter earnings and revenues,” Chenault, 60, said in the statement.

American Express fell 14 cents to $58.04 at 4 p.m. in New York. The shares have gained 23 percent this year, the fourth-best performance in the Dow Jones Industrial Average after Bank of America Corp., JPMorgan Chase & Co. and Home Depot Inc.

The lender boosted its quarterly dividend last month by 11 percent to 20 cents a share and said it may repurchase as much as $5 billion of its stock within the next year, including $4 billion in 2012.

Amex accounted for 25 percent of $2.05 trillion in U.S. credit-card spending last year and almost a third of the industry’s $179.9 billion increase from 2010, according to the Nilson Report, an industry newsletter. New York-based JPMorgan had the second-biggest share of spending with 18 percent.

Chenault has sought to expand AmEx’s reach beyond the company’s affluent credit-card clients with a new payment system for smartphones and computers as it vies for customers who prefer debit cards. The electronic wallet, called Serve, may draw more transactions to the firm’s payments network, the fourth biggest after Visa Inc., MasterCard Inc. and China UnionPay Co.

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Wednesday, 18 April 2012 04:39 PM
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