By Saabira Chaudhuri and Josh Beckerman
American Express Co. disappointed investors Wednesday, reporting
a rise in fourth-quarter expenses and provisions for loans that
could sour.
As part of a larger restructuring plan, American Express plans
to cut 4,000 jobs across the company over the course of this year,
according to a person familiar with the matter. The company has
close to 63,000 employees world-wide.
Shares dropped 1.7% in trading after the market closed even as
the company reported an 11% rise in profit for the quarter.
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
American Express's investment in Concur Technologies.
Analysts surveyed by Thomson Reuters expected a profit of $1.38
a share on revenue of $8.53 billion.
While expected by some analysts to show strong expense controls,
American Express reported that 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. It took a pretax
restructuring charge of $313 million in the fourth quarter.
"A substantial gain allowed us to accelerate some critical
initiatives: reengineering to make American Express more
efficient," said Chief Executive Officer Kenneth Chenault in
prepared remarks.
American Express also spent more on marketing and promotion, and
renewing its partnership with Delta Air Lines.
The company's provision for loans that could sour came in at
$582 million, up 22% from a year ago.
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.
"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 Mr. Chenault on Wednesday, even as he cautioned that
the company faces "competitive and regulatory challenges."
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com and Josh
Beckerman at josh.beckerman@wsj.com
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