American Express Co. (AXP:US), the biggest U.S. credit-card issuer by purchases, said second-quarter profit rose 8.5 percent as the company completed the spinoff of its business-travel unit and customer spending increased.
Net income climbed to $1.53 billion, or $1.43 a share, from $1.41 billion, or $1.27, a year earlier, the New York-based lender said today in a statement. The average estimate (AXP:US) of 28 analysts surveyed by Bloomberg was $1.38. Results included a net gain of 5 cents a share tied to the spinoff, AmEx said.
Chief Executive Officer Kenneth I. Chenault is expanding AmEx’s prepaid and credit-card businesses as he seeks to broaden the company’s reach beyond affluent consumers. AmEx sold half its stake in the travel unit and is working with technology startups as more people make payments online and with mobile phones.
“The gain we recognized on the business travel joint venture transaction gave us the flexibility to substantially increase spending on a number of growth initiatives,” Chenault, 63, said in the statement.
American Express fell 16 cents to $91.55 at 5:26 p.m. in extended trading in New York. The shares increased 1.1 percent this year through the end of regular trading, compared with the 2 percent advance of the 30-company Dow Jones Industrial Average. (INDU)
AmEx completed the sale of a 50 percent stake in the business-travel division for $900 million in June, creating a joint venture with an investor group that includes Certares International Bank LLC, Qatar Holding LLC and funds managed by BlackRock Inc. and Macquarie Capital Group Ltd.
Revenue rose 5 percent to $8.66 billion from a year earlier as card spending climbed 8.6 percent to $258.1 billion, AmEx said. Total expenses increased 2.2 percent to $5.86 billion as the company spent more on marketing, employee compensation and customer rewards, according to the statement.
The firm said it took a restructuring charge of $90 million for its corporate services group in the quarter and a $25 million charge for a contribution to its foundation. A portion of the $409 million gained from the travel unit’s sale was used to fund investments, according to the statement.
The lender said this year that it will allow third-party payment processors known as merchant acquirers to contract directly with small U.S. businesses that handle less than $1 million in AmEx purchases annually. The company forecasts that small-merchant acquisitions will increase at least 50 percent a year starting in 2015 because of the new program, called OptBlue.
AmEx is being sued by the U.S. Justice Department and 17 states in federal court in Brooklyn, New York, over claims the firm’s rule barring merchants from steering customers to use other card brands is stifling competition. AmEx argues the restrictions are needed to compete with the “duopoly” of networks Visa Inc. (V:US) and MasterCard (MA:US) Inc.
Visa, the world’s biggest bank-card network, said last week that profit for the three months ended June 30 rose 11 percent to $1.36 billion. MasterCard, the second-largest, will report results July 31.
To contact the reporter on this story: Elizabeth Dexheimer in New York at firstname.lastname@example.org
To contact the editors responsible for this story: Peter Eichenbaum at email@example.com Steven Crabill