American Express Delivers Solid Second Quarter Results

Second quarter profits at credit card company American Express nearly triples, and came in well ahead of analyst estimates, as spending by card holders vaulted 16 per cent.

American Express also benefited from having to put away less than half as much money to cover losses as it did in the previous year.

“While spending among affluent consumers and businesses remains strong, today’s card members are borrowing less and paying down more of their outstanding debt. We remain cautious about the economy and the challenging regulatory environment.” chairman and chief Executive Kenneth Chenault said.

The figures bode well for American Express which seems to have rebounded from last year, where its cardholders spent less on their cards, and fell behind its peers.

The card company like its rivals now face the prospect of encouraging increased spending without loosening its credit standards.

American Express, unlike most rivals, issues credit cards and is subject to legislation enacted earlier this year that limits rate increases, which will bite into income.

For the latest quarter, American Express posted a profit of $US1 billion ($1.12bn), or US84 cents a share, up from $US337 million, or US9c a share, a year earlier. Revenue, net of interest expense, rose 13 per cent to $US6.86bn.

The company’s US card business, its largest by revenue by far, swung to a profit as revenue, net of interest income, rose and provisions for losses plunged 56 per cent.

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