By Saabira Chaudhuri and Josh Beckerman
American Express Co. disappointed investors Wednesday despite a
fourth-quarter rise in profit, as expenses climbed and the company
was hit by a large provision for loans that could sour.
Shares dropped 1.9% in trading after the market closed.
American Express said its fourth-quarter profit was $1.45
billion, or $1.39 a share, compared with $1.31 billion, or $1.21 a
share, a year earlier. Revenue, net of interest expense, rose 6.6%
to $9.11 billion from $8.55 billion a year earlier, helped by a
gain on the sale of its investment in Concur Technologies.
Analysts surveyed by Thomson Reuters expected a profit of $1.38
a share on revenue of $8.53 billion.
"We've made very good progress against the backdrop of an uneven
global economy and the negative impact of a strengthening U.S.
dollar," said Chief Executive Officer Kenneth Chenault in prepared
remarks, adding that the company faces "competitive and regulatory
challenges."
Ahead of American Express's earnings, Nomura analyst Bill
Carcache highlighted the card company as being his "top pick going
into results season," adding that it "faces the most favorable
setup for a strong year in 2015."
Wednesday, American Express, which issues credit and charge
cards and owns a processing network, said card-member spending rose
6%, while loan balances were up 7%.
Last month, Mr. Chenault said the company was seeing strong
holiday spending and that Cyber Monday represented the single
largest day of customer spending through its cards in the company's
history.
Still, despite the gain on Concur, American Express reported
companywide expenses came in at $6.3 billion, up 3%, or 6% when
adjusted for foreign exchange impacts, from a year earlier. The
company said it had used a big part of the Concur gain on
restructuring initiatives, spending on marketing and promotion, and
renewing its partnership with Delta Air Lines.
Meanwhile, American Express's provision for loans that could
sour came in at $582 million, up 22% from a year ago.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and Josh
Beckerman at josh.beckerman@wsj.com
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