American Express Co. (AXP: Quote) Wednesday reported a small increase in profit for the second quarter, as the company's affluent cardholders slowed down on spending and provisions for loan losses increased. Earnings for the quarter came in ahead of analysts' estimates, while revenues fell short of expectations.
American Express, which is biggest credit-card issuer on the basis of purchases, said its second-quarter net income improved to $1.33 billion or $1.15 per share, from $1.32 billion or $1.10 per share last year.
On average, twenty four analysts polled by Thomson Reuters expected earnings of $1.09 per share for the quarter. Analysts' estimates typically exclude special items.
The New York-based company's revenues, net of interest expense, for the second quarter grew about 5 percent to $7.97 billion from $7.62 billion a year ago. Nineteen Wall Street analysts on a consensus estimated revenues of $8.10 billion for the quarter.
Revenues grew on continuing growth in cardmember spending, higher other revenues and higher net interest income, the company said. Cardmember spending for the quarter rose 7 percent, or 9 percent adjusted for foreign currency translations.
Chief Executive Kenneth Chenault said, "Consumer, small business and corporate cardmember spending, along with the business volumes generated by our network of bank partners, remained healthy despite a very uneven economy."
However, the cardmember spending growth was slower when compared to past few quarters, when spending had grown in the double-digit range.
Chenault admitted that cardmember spending was slower, but he noted that "it comes on top of a very strong performance a year ago, and continues to grow faster than most of our large issuer competitors."
American Express' cardholders are mostly affluent consumers and businesses, which has helped the company perform better after the recession with its customers spending more than its peer's customers. However, the slowdown in spending among its affluent customers is a cause for concern as US job growth continues to weaken amidst weak European and Asian economies.
Headwinds in Europe and Asia also impacted the company's revenues. International revenues dropped 4 percent to $1.3 billion. Adjusted for foreign currency translations, revenues rose 2 percent from the year ago quarter.
Meanwhile, provisions for losses, the money set aside to cover bad loans, rose 29 percent to $461 million from $357 million a year ago, reflecting larger lending reserve releases in the year ago period, partially offset by lower net write-offs in the current quarter. Nevertheless, the company claimed that the credit quality continued to be at historically strong levels.
AXP closed Wednesday's trading on the NYSE at $58.29, down $0.39 or 0.66%, on a volume of 5.3 million. The stock further lost $0.49 or 0.84% in after-hours trade.
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by RTT Staff Writer
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