AmEx Profit Rises on Gain Tied to Costco Portfolio Sale
July 20 2016 - 5:00PM
Dow Jones News
American Express Co. said its second-quarter profit rose 37% on
a big gain tied to the sale of its Costco cobrand card portfolio,
lower expenses and higher card-member spending.
However, revenue slipped 0.6% to $8.24 billion, but increased 1%
excluding currency effects. Revenue growth at American Express has
been in focus lately because it has fallen short of internal growth
targets. Analysts polled by Thomson Reuters expected $8.4
billion.
American Express has suffered from issues ranging from the loss
of its 16-year exclusive relationship with warehouse-club retailer
Costco Wholesale Corp., to heavy competition, to declines in
corporate travel budgets.
Chief Executive Kenneth Chenault said earlier this year that the
company was "taking significant actions to change the trajectory of
our business" and would cut $1 billion in costs. That came a year
after AmEx outlined plans to cut 4,000 jobs.
The company said Wednesday that its second-quarter expenses fell
15% to $4.8 billion.
Mr. Chenault said the quarter reflected strong credit quality
and "lending momentum," but said the company continued to feel the
effects of a lower merchant discount rate and the strong
dollar.
Shares climbed 2% to $65.74 after hours.
Over all, American Express reported a profit of $2.02 billion,
or $2.10 a share, up from $1.47 billion, or $1.42 a share, a year
earlier. The latest results included a $677 million gain tied to
the sale of the Costco portfolio, partly offset by a $151 million
restructuring charge. Analysts expected $1.95 a share. Such
estimates typically exclude nonrecurring items.
American Express said it added 3 million new proprietary cards
during the quarter.
Total loans rose 11% to $61.1 billion, excluding the Costco and
JetBlue Airways Corp. co-brand cards loan portfolios, which were
both sold this year.
The company backed its outlook for earnings excluding items of
$5.40 to $5.70 a share this year and at least $5.60 in 2017.
After the Federal Reserve didn't object to the company's capital
plan, American Express said June 29 that it planned to boost its
dividend by 10% and buy back up to $3.3 billion of stock through
the second quarter of 2017.
Visa Inc. and Capital One Financial Corp. are slated to report
quarterly results Thursday, while MasterCard Inc. is scheduled for
July 28. On Tuesday, Discover Financial Services said total loans
rose 4%, but credit-card spending was on the low of end of its
target range, partly due to aggressive cash-back promotions by
rivals.
Write to Josh Beckerman at josh.beckerman@wsj.com
(END) Dow Jones Newswires
July 20, 2016 16:45 ET (20:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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