American Express Profit Up 12% On Card Spending

(RTTNews) - American Express Co. (AXP) Wednesday reported a 12 percent increase in profit for the first quarter, driven largely by higher card spending by its affluent customers despite a very harsh winter. Earnings for the quarter trumped Wall Street expectations, while revenues fell short of estimates.

New York-based American Express' first-quarter profit rose to $1.43 billion or $1.33 per share from $1.28 billion or $1.15 per share last year. On average, 25 analysts polled by Thomson Reuters expected earnings of $1.30 per share for the quarter. Analysts' estimates typically exclude special items.

American Express, which is the biggest credit-card issuer on the basis of purchases, said revenues, net of interest expense, for the first quarter rose 4 percent to $8.20 billion from $7.88 billion last year. Twenty-two analysts had a consensus revenue estimate of $8.36 billion for the quarter.

American Express' card member spending during the quarter rose 6 percent, with higher volumes in the US and internationally. American Express' cardholders are mostly affluent consumers and businesses, which helps the company to perform better than its peers even during weak economic conditions. Its results are keenly watched as it has a bearing on the state of luxury consumption.

American Express, famed for its credit card and traveler's checks, generates a major part of its revenue from merchants, charging them a discount rate for transactions processed. Revenue also come from cardholders, who pay fees and interest charges on balances.

Provisions for loan losses, the money set aside to cover bad loans, rose 17 percent to $485 million. Total expenses dropped 1 percent to $5.5 billion, reflecting a 4 percent decline in operating costs.

After the Federal Reserve's annual stress tests last month, AmEx said it expects to increase its quarterly dividend 13 percent and buy back $4.4 billion shares this year and an additional $1 billion during the first quarter of 2015.

AXP closed Wednesday's trading at $87.40, up $1.36 or 1.58%, on the NYSE. The stock, however dropped $0.60 or 0.69% in after-hours trade.