July 23, 2009
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News: AmEx Top Performer
American Express (AmEx), one of the nation's largest credit card companies is expected to report a 54% decrease in profit for 2nd quarter. Analysts say that AmEx will post adjusted earnings of 300.8 million down from $655 million same time last year. For the fourth consecutive month, AmEx's defaults declined and are lowered than previously expected. In a Federal filing, the AmEx reported that in April, the company's credit card defaults were 10.1%, in May they dropped to 10%, and in June to 9.9%. The company is optimistic that write-off's have peaked and defaults will continue to trend downward. However, other U.S. lenders have not fared as well as the nation's defaults rose to record breaking highs in June of 10.76%. American Express has out-performed the industry while other major credit card companies' defaults are not expected to peak until early 2010.
In June, the nation's unemployment rate rose to 9.5%. While unemployment continues to climb to the highest level in over 25 years, rising loan delinquencies and defaults including credit card debt have risen to record breaking highs. However, American Express reported that credit card delinquencies of at least 30 days, dropped to 4.4% from 4.7% in May. Additionally, Reuters' forecasts reports that AmEx should realize a $162 million net income at 26 cents a share down from 56 cents a share for same period last year.
American Express is unique in the industry in that over 60% of their revenue is generated from transaction fees unlike most other major lenders whose earnings come from interest and penalties. Additionally, AmEx lead the industry in jumping on cutting risks earlier on when they offered a $350 incentive to their customers to pay down their balance. They were also ahead of other companies in making personnel cuts and slashing the marketing budget. The company's strategies have proven to be successful as American Express is this year's top performer in the credit card arena.