American Express Co., the biggest credit-card issuer by purchases, reported a third-quarter profit that beat analysts’ estimates as customer spending climbed.
Net income rose 9.3 percent to $1.37 billion, or $1.25 a share, from $1.25 billion, or $1.09, in the same period a year earlier, the New York-based company said yesterday in a statement. That beat the $1.22 average estimate of 26 analysts surveyed by Bloomberg. Net revenue rose 5.6 percent to $8.3 billion, the company said.
Chief Executive Officer Kenneth I. Chenault is cutting 5,400 jobs this year, mostly in travel services, and plans to spin off part of that business. The firm also is vying to drive more spending to its global payments network, signing a deal in August with Wells Fargo & Co., which will issue AmEx-branded cards and give the San Francisco-based bank more options to reward customers for their loyalty.
“Despite an uncertain environment, we generated a healthy increase in revenues and stronger card member spending across all regions this quarter,” Chenault, 62, said in the statement. Card loans “continued the modest growth rates we have been seeing for the past several quarters,” he said.
American Express rose 25 cents to $76.57 in extended trading in New York yesterday after results were announced. The shares climbed 33 percent this year through the close of regular trading, outpacing the 17 percent advance for the Dow Jones Industrial Average.
“AmEx operates the most stable rewards program, best positioned to continue to create value for both consumers and shareholders for years to come,” Bill Carcache, an analyst at Nomura Holdings Inc., said last month in a research note. “Even in the face of aggressive competitor reward campaigns, we expect AmEx to continue to outperform.”
The lender, which issued its first traveler’s check in 1891, is cutting jobs as consumers and businesses rely more on digital technology for bookings. Travel commissions and fees rose 5.4 percent in the third quarter from a year earlier, reversing a decline in the preceding three-month period, according to a financial supplement.
The company has been in talks to spin off half of its business-travel unit and create a joint venture with Certares International Bank LLC. An investor group led by Certares would inject $700 million to $1 billion in return for a 50 percent stake, AmEx said in a Sept. 25 statement.
Worldwide card spending, or billed business, rose 7.3 percent to $236.2 billion, AmEx said. Individuals spent an average of $4,037 in the quarter, a 3.9 percent increase from a year earlier. Provisions for loan losses increased 3 percent to $492 million, AmEx said.
Total expenses climbed 5.3 percent to $5.81 billion in the quarter from the prior year. Operating expenses were little changed in the first nine months of the year compared with the same period in 2012, according to AmEx. Chenault has said he’s seeking to limit annual operating expense growth to 3 percent.
U.S. card income rose 12 percent to $782 million from the same period a year earlier, according to the statement. International card income fell 13 percent to $142 million.