Bloomberg News

AmEx Profit Surpasses Estimates as Customer Spending Increases

April 17, 2014

American Express Co. (AXP:US), the biggest U.S. credit-card issuer by purchases, posted a first-quarter profit that beat analysts’ estimates as customer spending climbed.

Net income increased 12 percent to $1.43 billion, or $1.33 a share, from $1.28 billion, or $1.15, a year earlier, the New York-based company said yesterday in a statement. The average estimate (AXP:US) of 27 analysts surveyed by Bloomberg was for profit of $1.30 a share. Revenue advanced 4 percent to $8.2 billion, missing the analysts’ estimate for $8.7 billion.

Chief Executive Officer Kenneth I. Chenault, 62, is cutting expenses and seeking to broaden AmEx’s reach beyond affluent customers through partnerships and new products. Consumer spending in the U.S., where the company gets about 70 percent of its revenue, accelerated last month after snowstorms and harsh weather deterred shoppers earlier in the quarter.

“We are off to a good start to 2014, thanks to disciplined expense control, credit metrics near their historic low, higher revenues and a strong balance sheet,” Chenault said in the statement. “While consumers remain cautious about taking on additional debt, we continued to see a modest increase in card member loan balances.”

American Express slipped 0.6 percent to $86.90 at 8 p.m. yesterday in extended trading in New York. The shares declined 3.7 percent this year through the close of regular trading, compared with the 0.9 percent slide in the Dow Jones Industrial Average. AmEx was the second-best performer in the 30-company Dow last year, gaining 58 percent.

U.S. Business

Capital One Financial Corp. (COF:US), the McLean, Virginia-based bank that gets more than half its revenue from credit cards, posted first-quarter profit from continuing operations of $1.91 a share. That beat the $1.70 average estimate of 28 analysts surveyed by Bloomberg. Net income rose 9.3 percent to $1.15 billion from a year earlier, Capital One said yesterday in a statement.

AmEx worldwide card spending, or billed business, increased 6 percent from a year earlier, according to the statement, while expenses decreased about 1 percent to $5.5 billion.

Profit from its U.S. card business rose 9 percent to $876 million, while international earnings fell 11 percent to $159 million, according to the statement. Travel commissions and fees declined 3 percent.

OptBlue Program

AmEx agreed last month to sell a 50 percent stake in its business-travel division for $900 million, creating a joint venture with an investor group that includes Qatar Holding LLC, funds managed by BlackRock Inc. and Certares International Bank LLC.

American Express will offer its first no-fee credit product that grants holders access to all its rewards program, the company said last month. The lender also announced a program called OptBlue that will allow third-party merchant acquirers to contract directly with small U.S. businesses that handle less than $1 million in AmEx charges annually.

After passing the Federal Reserve’s annual stress tests last month, AmEx said it expects to increase its quarterly dividend 13 percent to 26 cents a share.

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

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net Steven Crabill, David Scheer


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Companies Mentioned

  • AXP
    (American Express Co)
    • $88.0 USD
    • -2.91
    • -3.31%
  • COF
    (Capital One Financial Corp)
    • $79.54 USD
    • -2.02
    • -2.54%
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