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American Express profit falls 8.2% as expenses top estimates

Friday, January 20, 2017 - 06:59

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American Express Co, the largest US credit-card issuer by purchases, said fourth-quarter profit fell 8.2 per cent as expenses exceeded analysts' estimates and the firm set aside more money to cover bad loans.

[NEW YORK] American Express Co, the largest US credit-card issuer by purchases, said fourth-quarter profit fell 8.2 per cent as expenses exceeded analysts' estimates and the firm set aside more money to cover bad loans.

Net income dropped to US$825 million, or 88 US cents a share, from US$899 million, or 89 US cents, a year earlier, the New York-based company said Thursday in a statement. The average estimate of 25 analysts surveyed by Bloomberg was for adjusted per-share profit of 99 US cents.

Chief executive officer Ken Chenault has said quarterly results will be uneven and expenses will rise as the company spends more to recover from the loss of its largest co-brand card partner, Costco Wholesale Corp. The lender spent the year reassigning senior managers, consolidating marketing activities and embarking on a US$1 billion cost-cutting project to fill the void left by the retailer.

"We are ahead of plans to reset our cost base and improve our operating efficiency," Mr Chenault, 65, said in the statement. "We were able to make substantial investments to capitalide on opportunities in the marketplace and strengthen our competitive position."

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AmEx shares slipped 1.1 per cent to US$75.88 at 5:08pm in extended trading in New York. The stock gained 3.5 per cent this year through the close of regular trading, the third-best performance in the Dow Jones Industrial Average.

Revenue fell 4.4 per cent to US$8.02 billion from a year earlier, beating analysts' estimates of US$7.95 billion. The average discount rate, a measure of the fees AmEx charges merchants, increased to 2.44 per cent from 2.42 per cent, the company said.

Total expenses declined 2 per cent to US$6.24 billion even as marketing and promotional costs increased 35 per cent. Analysts had predicted total expenses of US$5.93 billion. Provisions for bad loans increased 9 per cent to US$363 million, reflecting higher loan growth and a rise in lending delinquency and net write-offs, the bank said.

As competitors have sweetened customer rewards and lowered acceptance costs to win business, AmEx has said it will increase lending in the US to bolster revenue. Loans climbed 11 per cent to US$65.3 billion from a year earlier.

Worldwide billed business, a measure of customer card spending, fell 3.7 per cent to US$263.2 billion. The company had 109.9 million credit cards issued at the end of the quarter, 7.9 million fewer than a year earlier, when it still owned the Costco portfolio.

AmEx raised its full-year 2017 forecast for earnings-per-share to a range of US$5.60 to US$5.80 from US$5.60.

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