AmEx Profit Beats Estimates on Card Spending, Costco Gain

Photographer: Andrew Harrer/Bloomberg
  • Net income increases 37% to $2.01 billion, or $2.10 a share
  • Revenue slides 0.6%, missing estimates, as expenses fall

American Express Co., the biggest U.S credit-card issuer by purchases, said second-quarter profit rose 37 percent as customers increased spending and the company booked a $1 billion gain from the sale of its Costco Wholesale Corp. portfolio.

Net income climbed to $2.01 billion, or $2.10 a share, from $1.47 billion, or $1.42, a year earlier, the New York-based company said Wednesday in a statement. Adjusted earnings per share, which exclude a restructuring charge, were $2.26, beating the $1.97 average estimate of 22 analysts surveyed by Bloomberg.

Revenue slid 0.6 percent to $8.24 billion, missing analysts’ estimates of $8.46 billion, while expenses declined 15 percent to $4.8 billion, exceeding predictions. Excluding the Costco sale and restructuring charge, expenses were flat for the quarter.

“We again made substantial investments in marketing and technology to help grow the business,” Chief Executive Officer Ken Chenault said in the statement. “At the same time, operating expenses continued to be well managed, and we moved forward aggressively with plans to take $1 billion out of our cost base on a run-rate basis by the end of 2017.”

AmEx expects full-year earnings per share to be at the high end of the previously forecast range of $5.40 to $5.70, while the prediction for 2017 remains unchanged at $5.60, Chenault said.

Shares Rise

Chenault, 65, has said quarterly results will be uneven as the company spends more on marketing to attract customers and competitors’ efforts to cut card fees crimp profits. The CEO has shuffled his top managers and pushed the firm to focus on lending as part of his efforts to reverse AmEx’s worst stock slump since the financial crisis.

AmEx shares rose 0.8 percent to $65 at 4:39 p.m. in extended trading in New York. The stock posted its sixth consecutive quarterly decline in the three months ended June 30, its longest losing streak since 2009.

American Express announced last year that it would part ways with Costco, its biggest co-brand partner, which accounted for 10 percent of AmEx cards in circulation. As banks and rival networks have bid aggressively to wrest away these partnerships, Chenault has vowed to avoid pursuing any deals where the terms don’t make economic sense.

Card Spending

Customer card spending advanced 2.8 percent to $269.3 billion from a year earlier. The average discount rate, a measure of the fees AmEx charges merchants, slipped to 2.43 percent from 2.49 percent, the company said. Loans decreased 13.2 percent to $59.9 billion from a year earlier.

Discover Financial Services, the credit-card issuer that’s expanded to student lending and unsecured personal loans, said Tuesday that second-quarter net income rose 3 percent from a year earlier to $616 million. Visa Inc., the largest U.S. payments network, is scheduled to report results Thursday, with Mastercard Inc. slated for July 28.

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