Credit card service provider American Express Co. (AXP) said Thursday its second quarter profit more than tripled from last year, helped by the strong performance in the U.S. Card Services division and a sharp decline in loan loss provisions. Earnings for the quarter surpassed Street expectations, as did revenues.
American Express, whose core business rely on cardmember spending, saw a 16% higher cardmembers spending during the quarter, hinting strong rebounding from the recessionary lows of last year. Further, the company continues to see improvement in credit metrics since second half of 2009.
American Express, however, believes consumers are managing their post-recessionary finances more cautiously throughout the industry and at American Express.
The New York-based company reported second quarter net income of $1.02 billion or $0.84 per share, compared to $337 million or $0.09 per share in the year-ago quarter.
On average, twenty analysts polled by Thomson Reuters expected the company to earn $0.78 per share for the quarter. Analysts estimates typically exclude special items.
The company noted that the year-ago results include a reduction of $0.18 per share from repurchase of preferred shares from the U.S. Department of the Treasury.
Total revenues, net of interest expense, for the quarter increased 13% to $6.86 billion from $6.09 billion in the prior-year quarter, as a result of the consolidation of securitized cardmember loans and related debt on to the balance sheet in the first quarter. Twelve analysts had a revenue consensus of $6.84 billion for the second quarter.
The company said that revenues also reflect higher cardmember spending, offset by a smaller loan portfolio and lower yields on both the securitized and non-securitized portions of the portfolio.
American Express' consolidated expenses for the second quarter increased 13% to $4.6 billion from $4.1 billion a year ago, reflecting higher investment in business building initiatives and higher rewards costs.
Consolidated provisions for losses totaled $652 million, compared to $1.6 billion in the year-ago period, reflecting continued improvement in credit quality for the charge and credit card portfolios.
U.S. Card Services division reported a second-quarter net income of $522 million, compared to a loss of $153 million a year ago. The division's revenues, net of interest expense, for the quarter increased 27% to $3.6 billion, mostly from the consolidation of securitized cardmember loans and related debt on to the balance sheet in the first quarter.
International Card Services division's net income for the quarter rose to $160 million from $78 million a year ago. The division's revenue, net of interest expense, grew 9% to $1.1 billion in the second quarter. International Card Services division's provision for losses declined 70% to $90 million, reflecting continued improvement in credit quality for the charge and credit card portfolios.
The company's Global Commercial Services division reported a second quarter net income of $117 million, up from $67 million a year ago, while its Global Network & Merchant Services division reported net income of $269 million for the quarter, up 13% from $239 million reported last year.
For the first half of fiscal year 2010, American Express reported net income attributable to common shareholders of $1.90 billion or $1.57 per share, compared to $774 million or $0.40 per share in the same period last year.
Total revenues, net of interest expense, for the six-month period were $13.46 billion, up from $12.02 billion in the similar period of 2009.
AXP closed Thursday's regular trading at $43.19, up $2.04 or 4.96%, on a volume of 10.78 million shares. In after-hours, the stock lost $0.59 or 1.37%, to trade at $42.60. In the past 52-weeks, the stock traded in the a range of $27.10 to $49.19, with a three-month average volume of 12.35 million shares.
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