AmEx Profit Rises on Gain Tied to Costco Portfolio Sale -- 2nd Update
July 20 2016 - 5:16PM
Dow Jones News
By Josh Beckerman
American Express Co. said its second-quarter profit rose 37% on
a big gain tied to the sale of its Costco cobrand card portfolio,
lower expenses and higher card-member spending.
Revenue, however, slipped 0.6% to $8.24 billion, while
increasing 1% excluding currency effects. Top-line growth at
American Express has been in focus lately because it has fallen
short of internal targets. Analysts polled by Thomson Reuters
expected $8.4 billion in revenue for the quarter.
American Express has suffered from issues ranging from the loss
of its 16-year exclusive relationship with warehouse-club retailer
Costco Wholesale Corp., to heavy competition, to declines in
corporate travel budgets.
Chief Executive Kenneth Chenault said earlier this year that the
company was "taking significant actions to change the trajectory of
our business" and would cut $1 billion in costs. That came a year
after AmEx outlined plans to cut 4,000 jobs.
The firm said Wednesday that operating expenses declined 31% in
the quarter, though that metric was flat when excluding the Costco
portfolio sale and a restructuring charge.
Mr. Chenault said the quarter reflected strong credit quality
and "lending momentum," but said the company continued to feel the
effects of a lower merchant discount rate and the strong
dollar.
He added that the company plans to "continue spending at
elevated levels during the remainder of 2016 in order to capitalize
on the opportunities we see in a very competitive marketplace."
Notwithstanding the higher level of spending, he said AmEx expects
its results for the year to be at the high end of its previous
guidance.
Over all, American Express reported a profit of $2.02 billion,
or $2.10 a share, up from $1.47 billion, or $1.42 a share, a year
earlier. The latest results included a $677 million gain tied to
the sale of the Costco portfolio, partly offset by a $151 million
restructuring charge. Analysts expected $1.95 a share. Such
estimates typically exclude nonrecurring items.
American Express said it added 3 million new proprietary cards
during the quarter.
Total loans rose 11% to $61.1 billion, excluding the Costco and
JetBlue Airways Corp. co-brand cards loan portfolios, which were
both sold this year.
After the Federal Reserve didn't object to the company's capital
plan, American Express said June 29 that it planned to boost its
dividend by 10% and buy back up to $3.3 billion of stock through
the second quarter of 2017.
Visa Inc. and Capital One Financial Corp. are slated to report
quarterly results Thursday, while MasterCard Inc. is scheduled for
July 28. On Tuesday, Discover Financial Services said total loans
rose 4%, but credit-card spending was on the low of end of its
target range, partly due to aggressive cash-back promotions by
rivals.
Shares climbed 0.3% to $64.70 after hours.
Write to Josh Beckerman at josh.beckerman@wsj.com
(END) Dow Jones Newswires
July 20, 2016 17:01 ET (21:01 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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