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American Express Q1 profits top views on rise in consumer spending

American Express Q1 profits top views on rise in consumer spending


Shares of American Express Co. (NYSE:AXP) edged higher Thursday, after the company reported first quarter profits that topped analyst expectations as cardholder spending rose seven per cent.

For the three months ended March 31, American Express reported net income of $1.28 billion or $1.15 per diluted share, compared to net income of $1.25 billion or $1.07 per diluted share a year earlier.

Revenue rose four per cent to $7.88 billion from $7.58 billion.

Analysts polled by Thomson Reuters were expecting per share earnings of $1.12 on revenue of $8.03 billion.

“We are off to a strong start in 2013, thanks to our ability to grow revenue in a slow growth economy, control expenses and maintain a strong balance sheet,” said chairman and CEO Kenneth I. Chenault. 

“Card member spending grew six per cent - seven per cent adjusted for foreign currency translations - and we saw a modest increase in loans outstanding. Revenue from annual card member fees was also up from a year ago, reflecting the value our customers see in their relationship with American Express.”

Total provisions for losses totaled $497 million, up 21 per cent from $412 million a year ago. The company said the increase was a result of a larger lending reserve release a year ago, partially offset by lower net write-offs in the current quarter. Credit indicators continued to be at “historically strong” levels, it added.

The company's return on average equity (ROE) was 23.2 per cent, down from 27.1 per cent a year ago.

By segment, American Express said its U.S. card services unit saw net income rise seven per cent, while revenues increased five per cent, driven by a rise in card member spending and higher net interest income.

Income in the international card services segment dropped 10 per cent, while revenues added one per cent due to higher card member spending and growth in annual card member fees. 

The company’s global commercial services unit reported an eight-per-cent rise in net income and revenues that grew by one per cent on more spending by corporate card members, partially offset by lower travel commissions and fees.

Meanwhile, the global network and merchant services unit posted a four-per-cent rise in net income and revenue, reflecting higher merchant-related sales driven by global card member spending, as well as an increase in revenues from the company’s bank partners. 

“Capital strength is also a critical advantage in uncertain times, and the advantages of our spend-centric business model were again underscored by results of the Federal Reserve’s annual stress test,” said Chenault.  “Our performance was among the best in the hypothetical severe stress scenario and as a result, we plan to increase our dividend to 23 cents per share next quarter, a 15-per-cent increase for shareholders.”

American Express said it is also moving ahead with plans to buy back common shares that would return up to $3.2 billion to shareholders during the remainder of 2013 and up to an additional $1.0 billion in the first quarter of 2014.

Shares of the company were up 0.19 per cent just ahead of market open, trading at $64.25.


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