Quarter Positive but AmEx Sets Aside More for Losses

American Express Co. yesterday reported third quarter income of $1.1 billion, up from $934 million in the same period a year ago. Revenues came in at $6.9 billion, up more than 9 percent from nearly $6.3 billion a year ago. Third quarter revenues include those from American Express Bank Ltd., an international subsidiary that AmEx announced it would sell to Standard Chartered for $860 million. 

“Our strong earnings growth this quarter reflected a 16 percent rise in combined spending by consumers, small businesses and corporate Cardmembers,” Kenneth I. Chenault, chairman and CEO, said in a statement. Chenault reported the company distributed an additional 2.5 million cards during the quarter.

AmEx increased its provision for losses 25 percent to $982 million from $787 million. Worldwide, the AmEx charge card reported a net loss ratio of 0.26 percent and a 90-day delinquency rate of 2.78 percent, both figures unchanged from a year ago.

U.S. Card Services reported third quarter net income of $592 million, up 6 percent from $558 million a year ago. Average U.S. cardholder spending was $3,192, up 5 percent. Revenues increased 12 percent to $3.6 billion, reflecting higher spending and borrowing by consumers and small businesses, which were partially offset by higher interest expense.

In the U.S., the charge card 90-day past-due rate rose to 3.9 percent from 3.5 percent while the net loss ratio was 0.34 percent, compared with 0.33 percent a year ago. Receivables on the charge card rose to $19.4 billion from $18.2 billion.

Total expenses for the division increased 6 percent, driven primarily by increases in higher rewards costs while the company lowered spending on marketing and promotion. Human resources and other operating expenses increased 5 percent.

International Card Services reported third quarter net income of $140 million, up 32 percent from $106 million a year ago. Revenues increased 17 percent to $1.1 billion, reflecting higher card holder spending, as well as higher loan balances. Human resources and other operating expenses increased 10 percent, while marketing, promotion, rewards and cardholder services expenses increased 8 percent. Provisions for losses increased 24 percent from year-ago levels, primarily reflecting higher volumes.

Global Network & Merchant Services reported third quarter net income of $266 million, up 25 percent from $212 million a year ago. Revenues rose 17 percent to $980 million. Spending on Global Network Services cards increased 45 percent from year-ago levels reflecting continued growth in spending on cards issued by bank partners. Cards-in-force issued by bank partners increased 32 percent. Total expenses increased 12 percent, reflecting higher human resources costs and expanded marketing and promotion activities.