NEW YORK (Reuters) - American Express Co <AXP.N> on Monday said fourth-quarter profit dropped 10 percent, and its revenue missed analyst forecasts as customers defaulted more often, fanning worries the credit card and travel services company might struggle as the U.S. economy weakens.
By Jonathan Stempel
NEW YORK (Reuters) - American Express Co <AXP.N> on Monday said fourth-quarter profit dropped 10 percent, and its revenue missed analyst forecasts as customers defaulted more often, fanning worries the credit card and travel services company might struggle as the U.S. economy weakens.
Shares of American Express, part of the Dow Jones industrial average <.DJI>, fell $1.41, or 3 percent, to $45.99 after-hours.
Net income for the fourth-largest U.S. credit card issuer declined to $831 million, or 71 cents per share, from $922 million, or 75 cents, a year earlier. Profit from continuing operations was also 71 cents per share.
!ADVERTISEMENT!Analysts on average had expected profit of 71 cents per share. But net revenue, which rose 10 percent to $7.36 billion, was below the average forecast of $7.78 billion, according to Reuters Estimates.
Results included a $438 million charge, or $274 million after taxes, to boost reserves for soured U.S. credit card loans as consumer credit quality, especially in California and Florida, showed signs of weakening.
When American Express announced the charge on January 10, it worried investors who had thought its wealthy cardholders might be less likely to feel pressure as the economy slowed.
"We are not immune from further deterioration in the economic and credit environment," Chief Executive Kenneth Chenault said in a statement. "We believe our focus on the premium sector should help us to weather the current conditions better than many competitors."
Chenault said his outlook for 2008 remains "cautious," with slower earnings growth. For all of 2007, profit rose 8 percent to $4.01 billion, or $3.36 per share.
Return on equity rose to 37.3 percent from 34.6 percent.
Other large card issuers, including Citigroup Inc <C.N>, Bank of America Corp <BAC.N> and JPMorgan Chase & Co <JPM.N>, have also added to reserves for consumer credit losses. Capital One Financial Corp <COF.N>, another large independent card issuer, said fourth-quarter profit fell 42 percent.
American Express, based in New York, had on January 10 projected profit of 70 cents to 72 cents per share.
Its profit fell more than 98 percent in U.S. card services, to $7 million from $473 million.
International card services suffered a $68 million loss, compared with profit of $99 million a year earlier.
Profit in commercial services fell 6 percent to $110 million, but in network and merchant services rose 26 percent to $254 million.
Other profit totaled $536 million, largely for an antitrust settlement involving the credit card network Visa Inc. American Express shares closed Monday up $1.96, or 4.3 percent, at $47.40 on the New York Stock Exchange. They have fallen 18 percent in the last year, compared with a 27 percent decline in the Dow Jones U.S. Consumer Finance index <.DJUSSF>. American Express released results after U.S. markets closed.
(Reporting by Jonathan Stempel; Editing by Gary Hill)
