July 22, 2010
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News: AmEx Triples Income
Lenders' profits have begun a slow climb upward as credit card delinquencies and defaults taper off. Although all lenders have struggled, one has consistently out-performed all other credit card companies in the industry; American Express (AmEx). Once again the company released second quarter results that demonstrate their outstanding performance. American Express, the biggest credit card company by purchases, announced that second quarter profits tripled as consumer card spending increased and defaults decreased. According to the report, net income increased to $1.02 billion while net revenue increased by 13 percent during the quarter to $6.86 billion.
American Express credit card holders increased spending by 16 percent during the second quarter, a 21 percent increase from same time last year. The average AmEx cardholder spent $3,288 with an overall total of $175.3 billion. The company already had the lowest credit card delinquencies among the six largest U.S. card issuers in the previous quarter. During second quarter, the card delinquencies fell to 2.7 percent, again the lowest among the top six. Card delinquencies are an important indicator of the amount of defaults the company expects in the near future. The company set aside $652 million for future card losses, a 59 percent decreased from the same time last year.
In his statement, Kenneth I. Chenault, Chief Executive Office for American Express, said that "net income and billed business are back at, or near, their pre-recession levels." Unlike Visa and MasterCard, the company is unique in that it not only issues cards, but it processes payment as well. Both Visa and MasterCard are expected to undergo some changes as new legislation will place more stringent guidelines on their debit card business. Whereas AmEx earns income from fees and interest in addition to the card processing fees, Visa and MasterCard earn the majority of their income from debit and credit card processing.