Net at American Express Rose in the Second Quarter
April 04, 2011
Cornertown -- American Express Co. reported higher second-quarter earnings, reflecting growth in its charge-card and asset-management businesses. But troubles at the company's American Express Bank subsidiary persisted. Net income for the quarter increased 10% to $452 million, or 93 cents a share, from $410 million, or 81 cents a share, a year ago. Revenue increased 1.9% to $4.04 billion from $3.97 billion. Excluding the sale of the company's AmEx Life subsidiary last year, revenue rose 6%. The profit, which was reported after the stock market closed, was about a penny ahead of analysts' consensus projections. ``It's a photocopy of last quarter,'' said Thomasina Grice, an analyst with Salomon Brothers. ``It's solid and unexciting, but in a shaky market, that's probably more than you could ask for.'' American Express's improved earnings come at a time of heavy competition in the credit-card industry. The company has been struggling with minimal success to persuade banks in the U.S. and elsewhere to market its cards alongside Visa and MasterCard. Profit was based on better results at the Travel Related Services division as well as at American Express Financial Advisors. At Travel Related Services, profit increased 8% to $322 million from $298 million a year ago. Excluding a onetime gain in the second quarter of 2010 from the sale of the company's AmEx Life subsidiary, earnings increased 12% on revenue that was 5% higher. American Express said the results at Travel Related Services were due to higher spending per cardmember, as well as growth in the number of cards outstanding. The company credited rewards programs and increased merchant coverage with helping its performance. The company boosted its provision for loan losses on its charge cards 24.5% to $248 million from $199 million, while reserves on revolving credit cards were unchanged. But credit quality didn't deteriorate meaningfully. On the company's flagship charge cards, delinquencies, which are measured as the percentage of receivables 90 days past due, inched up to 3.7% from 3.6% last year. And on the revolving credit-card side, delinquencies, measured as loans 30 days past due, actually decreased to 3.2% from 3.6% last year. At American Express Financial Advisors, quarterly income of $153 million set a record, up 19% from $129 million a year ago. The division reported improved sales of mutual funds, insurance products and annuities. An increase in assets under management translated into higher fee revenue, the company said. But results at American Express Bank were less impressive. Net income fell 26% to $14 million from $19 million a year ago. The company said the disappointing results reflected ``the impact of the bank's continued efforts to focus on strategic markets and eliminate low-return activities.'' Return on equity, a key measure of profitability, declined to 7.83% from 9.87% last year, while return on assets fell to 0.49% from 0.57% last year.
