American Express Co. (AXP) Wednesday reported a 2 percent increase in first-quarter profit that also beat estimates, driven mainly by higher spending by consumers.
American Express, which is biggest credit-card issuer on the basis of purchases, said its first-quarter profit improved to $1.28 billion or $1.15 per share from $1.26 billion or $1.07 per share last year. Analysts polled by Thomson Reuters expected earnings of $1.12 per share for the quarter. Analysts' estimates typically exclude special items.
The New York-based company's revenues, net of interest expense, for the quarter grew 4 percent to $7.88 billion from $7.59 billion last year. The increase reflects strong cardmember spending as well as higher net interest income and annual cardmember fees.
Twenty Wall Street analysts had a consensus revenue estimate of $8.05 billion for the quarter.
Commenting on the results, Chief Executive Kenneth Chenault said,"We are off to a strong start in 2013, thanks to our ability to grow revenue in a slow growth economy, control expenses and maintain a strong balance sheet.
American Express, known for its credit card and traveler's checks, earns a large part of its revenue from merchants, charging them a discount rate for transactions processed.
Cardmember spending for the quarter rose 6 percent, or 7 percent adjusted for foreign currency translations, but at a slower pace from a year ago.
Credit card spending, usually, slows down in the first-quarter of the year as customers try to pay down card debts incurred from shopping spree during the holiday season. However, 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.
"We made good headway throughout the business and continue to see very encouraging customer response to initiatives like our reloadable prepaid products and loyalty marketing initiatives that are expanding our footprint into newer segments of the market," Chenault said.
In January, Chenault had announced 5,400 job cuts this year aimed to curb expenses. The job eliminations will mainly affect travel services, a fast-changing business where consumers have switched more to digital technology for bookings.
Moving forward, Chenault said that the company plans to increase dividend by 15 percent to $0.23 cents per share next quarter.
"We are also moving ahead with plans to repurchase common shares that would return up to $3.2 billion to shareholders during the remainder of this year and up to an additional $1.0 billion in the first quarter of 2014," Chenault said.
AXP closed Wednesday's trading at $64.13, down $0.46 or 0.71%, on the NYSE. The stock further lost $0.38 or 0.59% in after hours.
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