By Andrew R. Johnson
American Express Co. and Capital One Financial Corp. said
customers' credit-card spending rose during the holiday shopping
season, leading to higher fourth-quarter profits for both
firms.
As two of the country's largest credit-card issuers, AmEx's and
Capital One's results are viewed as a gauge for the health of
consumer spending. Recent positive economic data have fueled
optimism that consumer spending could pick up this year, providing
a boost to the credit-card industry.
AmEx's profit more than doubled to $1.31 billion, or $1.21 a
share, up from $637 million, or 56 cents a share, a year earlier,
which included a restructuring charge. Revenue, net of interest
expense, rose 5%, to $8.55 billion.
Capital One, which has traditionally lent to a broader swath of
consumers, said profit rose 2.1%, to $842 million, up from $825
million a year earlier. Per-share earnings, which include the
payment of preferred dividends, rose to $1.45 from $1.41. Net
revenue decreased 1.4%, to $5.54 billion, driven by a decline in
net-interest income.
Both companies' earnings, released after the closing bell, fell
short of analyst expectations Thursday, sending their shares
slightly down in after-hours trading.
New York-based AmEx, known for targeting affluent customers who
use their cards frequently, said billed business, a measure of
cardholders' spending, increased 7.9% world-wide, to $254 billion
in the quarter, which Chairman and Chief Executive Kenneth Chenault
noted came "despite mixed reports during the holiday shopping
season."
Capital One, of McLean, Va., said purchase volume on its
domestic cards rose about 3% from a year earlier, to $50.4 billion.
Excluding the company's portfolio of store credit cards, the figure
increased about 8%.
On Tuesday, the Commerce Department said retail sales increased
0.2% in December, or 0.7% excluding auto sales, fueling optimism
that economic growth is accelerating. An improving economic picture
could give credit-card issuers added momentum this year if
consumers begin to spend more.
"Key fundamentals are healthy and we could start seeing some
modest improvement in U.S. card loan growth and card spend on the
back of better consumer confidence and economic growth," Donald
Fandetti, an analyst with Citigroup Inc., wrote in a Jan. 13
research note.
Capital One's net charge-off rate, which measures loans lenders
deem uncollectable, for its U.S. credit cards was 3.89%, down from
4.35% a year earlier but up from 3.67% in the third quarter.
AmEx said its net charge-off rate for U.S. card loans was 1.5%,
down from 2% a year earlier and 1.7% in the third quarter.
In after-hours trading, AmEx fell 0.5%, to $87.34, while Capital
One declined 1.8%, to $75.06.
Write to Andrew R. Johnson at andrewr.johnson@wsj.com
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