Photographer: Andrew Harrer/Bloomberg

American Express Profit Falls 8.2% as Expenses Top Estimates

Updated on
  • Lender increases forecast for full-year earnings-per-share
  • Net income declines to $825 million, or 88 cents a share

American Express Co., the largest U.S. credit-card issuer by purchases, said fourth-quarter profit fell 8.2 percent as expenses exceeded analysts’ estimates and the firm set aside more money to cover bad loans.

Net income dropped to $825 million, or 88 cents a share, from $899 million, or 89 cents, a year earlier, the New York-based company said Thursday in a statement. The average estimate of 25 analysts surveyed by Bloomberg was for adjusted per-share profit of 99 cents.

Chief Executive Officer Ken Chenault has said quarterly results will be uneven and expenses will rise as the company spends more to recover from the loss of its largest co-brand card partner, Costco Wholesale Corp. The lender spent the year reassigning senior managers, consolidating marketing activities and embarking on a $1 billion cost-cutting project to fill the void left by the retailer.

“We are ahead of plans to reset our cost base and improve our operating efficiency,” Chenault, 65, said in the statement. “We were able to make substantial investments to capitalize on opportunities in the marketplace and strengthen our competitive position.”

AmEx shares slipped 1.1 percent to $75.88 at 5:08 p.m. in extended trading in New York. The stock gained 3.5 percent this year through the close of regular trading, the third-best performance in the Dow Jones Industrial Average.

Revenue Declines

Revenue fell 4.4 percent to $8.02 billion from a year earlier, beating analysts’ estimates of $7.95 billion. The average discount rate, a measure of the fees AmEx charges merchants, increased to 2.44 percent from 2.42 percent, the company said.

Total expenses declined 2 percent to $6.24 billion even as marketing and promotional costs increased 35 percent. Analysts had predicted total expenses of $5.93 billion. Provisions for bad loans increased 9 percent to $363 million, reflecting higher loan growth and a rise in lending delinquency and net write-offs, the bank said.

As competitors have sweetened customer rewards and lowered acceptance costs to win business, AmEx has said it will increase lending in the U.S. to bolster revenue. Loans climbed 11 percent to $65.3 billion from a year earlier.

Worldwide billed business, a measure of customer card spending, fell 3.7 percent to $263.2 billion. The company had 109.9 million credit cards issued at the end of the quarter, 7.9 million fewer than a year earlier, when it still owned the Costco portfolio.

AmEx raised its full-year 2017 forecast for earnings-per-share to a range of $5.60 to $5.80 from $5.60. 

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