October 23, 2009
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News: AmEx Optimistic With 3rd Qtr Results
As expected, American Express Co. (AmEx) did well and performed better than analysts predicted this quarter. American Express, one of the largest credit card companies in the U.S., posted third quarter profits of 44 cents a share over the 38 cents estimate. Income fell by 25 percent to $642 million down from $861 million in third quarter last year. Consumers increased spending on their AmEx credit card as spending rose to $156.6 billion for third quarter up from $151.4 billion in second quarter. During the third quarter, American Express credit cardholders spent the average of nearly $200 more than the previous quarter.
American Express credit card defaults also dropped to 8.4 percent from 10 percent last quarter while rising from the 5.9 percent for same time last year. The elite card company also fared better than its top competitors in overdue accounts as credit card delinquencies of 30 days or more remained even at 4.1 percent. In a statement released with the third quarter results, Kenneth Chenault, Chief Executive Officer of American Express, noted that the company remains confident that the increased spending is a signal that we are near the end of the recession. However, in the wake of the continued rise in unemployment, the company will remain cautious as card defaults historically correlate with this number. The U.S. unemployment rate reached 9.8 percent in September and is expected to peak at 10 percent by early 2010.
Last month, Chenault reinstated some employee benefits that had been cut in the first quarter which was a sign of increased confidence that the company was gaining momentum. However, the company did take measures to reduce expenses by cutting 1,500 jobs and reducing marketing expenses by 17 percent. Credit card consumers have been outraged over recent steps that JPMorgan Chase, Bank of America, Capital One, and Citibank to increase interest rates, slash credit limits, and close accounts. Although AmEx has received their fair share of consumer complaints, overall public opinion has treated the company less harshly than its competitor.