New York - American Express, the largest US credit-card
issuer by purchases, said fourth-quarter profit fell 8.2 percent as expenses
exceeded analysts’ estimates and the firm set aside more money to cover bad
loans.
Net income dropped to $825 million, or 88 cents a share,
from $899 million, or 89 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 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.
The lender spent the year reassigning senior managers, consolidating marketing
activities and embarking on a $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,” Chenault, 65, said in the statement. “We were able
to make substantial investments to capitalize on opportunities in the marketplace
and strengthen our competitive position.”
AmEx shares slipped 1.1 percent to $75.88 at 5:08 p.m. in
extended trading in New York. The stock gained 3.5 percent this year
through the close of regular trading, the third-best performance in the Dow
Jones Industrial Average.
Revenue declines
Revenue fell 4.4 percent to $8.02 billion from a year
earlier, beating analysts’ estimates of $7.95 billion. The average discount
rate, a measure of the fees AmEx charges merchants, increased to 2.44 percent
from 2.42 percent, the company said.
Total expenses declined 2 percent to $6.24 billion even
as marketing and promotional costs increased 35 percent. Analysts had predicted
total expenses of $5.93 billion. Provisions for bad loans increased 9 percent
to $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 percent to $65.3 billion
from a year earlier.
Worldwide billed business, a measure of customer card
spending, fell 3.7 percent to $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 $5.60 to $5.80 from $5.60.
BLOOMBERG