American Express profit falls

AP Photo/Elise Amendola, File

AP Photo/Elise Amendola, File

Published Jan 20, 2017

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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

 

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