September 28, 2009
-
News: AmEx Reinstates Benefits
During the past year, credit card companies have taken drastic measures to reduce expenses in the wake of record number defaults. Earlier this year, American Express Co. one of the nation's largest credit card companies announced its plan to reduce expenses by giving upper management a 10% salary cut, a freeze on annual merit raises, and reduction of contributions to retirement plans. American Express also utilized nearly $3.4 billion of the Troubled Asset Relief Program (TARP) to carry the company over the rough spots in the wake of high credit card defaults and delinquencies.
In less than a year, the major credit card company appears to be recovering from the past year's slump as it bought back the Federal stake in the company as early as June. Adding to the good news was the latest announcement by Kenneth Chenault, Chief Executive Officer of American Express, that the company would be reinstating a number of benefits that had been taken away during the crunch. In his memo release, Chenault indicated that the credit card company will continue to monitor expenses and limit employee travel, entertainment, consulting and limited training. However, Chenault stated “The challenges we face are far from over.”
American Express has been hailed as the top performer in the past few months as credit card companies across the nation continue to experience reduced stock and earnings performance. Earlier this month, the company out-performed the top five competitors as the only one to report improved defaults and delinquencies. While American Express's defaults fell, the nation's average rose to 11.49 percent. According to Chenault's memo, the company's success in riding out the storm is attributed to cost reduction efforts and prudent investment decisions. Unlike Visa and MasterCard, American Express is both a card network as well as a lender. The company is based out of New York and is traded on the New York Stock Exchange (NYSE) under the symbol AXP.