Bloomberg News

American Express Profit Doubles on Advance in Consumer Spending

January 17, 2014

American Express Card

American Express Co.'s net income doubled to $1.3 billion, or $1.21 a share, from $637 million, or 56 cents, a year earlier, when results were hurt by one-time charges including costs tied to job cuts, the New York-based company said today in a statement. Photographer: Scott Eells/Bloomberg

American Express Co. (AXP:US), the biggest credit-card issuer by purchases, said fourth-quarter profit doubled as consumer spending climbed.

Net income was $1.3 billion, or $1.21 a share, compared with $637 million, or 56 cents, a year earlier, when results were hurt by one-time charges including costs tied to job cuts, the New York-based company said yesterday in a statement. Excluding some legal costs, profit was $1.25 a share, matching the average estimate (AXP:US) of 25 analysts surveyed by Bloomberg.

AmEx, the second-best performer in the Dow Jones Industrial Average (INDU) last year, is benefiting from a pickup in household wealth and consumer confidence that has propelled purchases on cards and mobile devices. Chief Executive Officer Kenneth I. Chenault is seeking to broaden the client base, signing deals with Wells Fargo & Co. and U.S. Bancorp to issue AmEx-branded cards.

“Results reflected a healthy increase in billed business in the U.S. and internationally,” Chenault, 62, said in the statement. “We ended the year on a strong note, with cardmember spending up 8 percent despite mixed reports during the holiday shopping season.”

American Express slipped 53 cents to $87.25 yesterday in extended trading in New York. It increased 58 percent (AXP:US) last year, outpacing the Dow’s 27 percent advance.

Card Spending

Worldwide card spending, or billed business, increased in the fourth quarter to $254 billion, AmEx said in a financial supplement. That boosted revenue, which rose 5 percent to $8.55 billion. Total expenses fell 8 percent to $6 billion from a year earlier.

U.S. retail sales rose 0.2 percent last month after a 0.4 percent advance in November, Commerce Department figures showed Jan. 14. An improvement in joblessness, a healing housing market, stock market gains and holiday-season deals prompted more consumers to spend during the month.

“American Express is a levered play on GDP growth,” Bill Carcache, an analyst at Nomura Holdings Inc., said in a Jan. 6 research note. “Any signs of growth in AmEx’s fee-based businesses would support the view that we are seeing the evolution of AmEx into a higher-return, lower-risk business.”

AmEx announced last month that it settled two lawsuits, allowing merchants to charge customers less if they use a competing debit card instead of an AmEx credit card. Related expenses cost AmEx $66 million in the quarter, Chief Financial Officer Jeffrey Campbell said on a conference call.

Business Travel

Travel commissions and fees decreased 2 percent in the quarter, according to the financial supplement. The firm is in talks to spin off half its business-travel unit and create a joint venture with Certares International Bank LLC. The transaction is expected to close in the second quarter of this year, Campbell said on the call.

Capital One Financial Corp. (COF:US), the McLean, Virginia-based lender, said fourth-quarter profit missed some estimates as expenses came in higher than the average analyst forecast. Net income rose 1.9 percent from the year earlier to $859 million as loan-loss provisions declined. Profit from the U.S. card segment declined 5.2 percent to $455 million.

To contact the reporter on this story: Elizabeth Dexheimer in New York at edexheimer@bloomberg.net

To contact the editor responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net


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Companies Mentioned

  • AXP
    (American Express Co)
    • $94.47 USD
    • 0.01
    • 0.01%
  • COF
    (Capital One Financial Corp)
    • $83.96 USD
    • 0.27
    • 0.32%
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