American Express Earnings Drop 56%

123jump.com Staff
23 Apr, 2009
New York City

American Express reported first quarter revenues declined 18% and earnings dropped 56%. Rising unemployment and weak economy lifted charge-off for the third quarter in a row.

[R]7:10AM New York – American Express reported first quarter revenues declined 18% and earnings dropped 56%. Rising unemployment and weak economy lifted charge-off for the third quarter in a row.[/R]

American Express ((AXP)) reported first quarter net revenues declined 18% to $5.9 billion from a year ago of $7.2 billion. Rising charge offs in the domestic market and slower economy around the world lowered the earnings sales. Revenues in the fourth quarter 2008 declined at 11%.

Earning in the quarter dropped 56% to $437 million from a year ago and earnings per share declined 64% to 31 cents from 85 cents a year ago. The quarterly results were the weakest since 2001 first quarter when the company reported earnings of 22 cents and in the third quarter of the year earned only 13 cents a year.

Cost cutting improved the consolidated costs in the company and consolidated expenses in the quarter declined 22% to $3.6 billion from $4.6 billion a year ago.

Lending reserves in the quarter increased to $1.8 billion from $1.2 billion related to write-offs and past due loans.

Return on average equity declined to 16.3% from 35.9% a year ago and declined from 21.7% in the fourth quarter.

In the quarter across global network the company authorized $63 billion in U.S. charge cards spending compared to $73 billion in the fourth quarter 2008 and at the end of the quarter had $207 billion of open credit available to individuals and small businesses.

In the quarter company raised $3.5 billion of new deposits and ended the quarter with $25 billion of excess cash and marketable securities. In 2008 the company raised $6.2 billion through retail certificate of deposit program.

Kenneth I. Chenault, chairman and chief executive officer said, “While we did see some recent improvement in early delinquency rates, overall credit indicators reflected rising unemployment levels and the broad-scale weakness in the economy.

Based on current indicators, we expect second quarter U.S. lending write-off rates on a managed basis to rise between 200 and 250 basis points over the first quarter levels. We expect an additional increase of 50 basis points or less in the third quarter, before leveling off during the fourth quarter.”

Segment Results

U.S. based card services segment reported quarterly loss of $25 million compared to a net income of $523 million a year ago.

Provisions for losses surged 57% to $1.4 billion from $502 billion. Net write-offs were 8.5% up from 7% in the fourth quarter and 4.5% from a year ago. Net write offs have increased for the third quarter in a row.

International card services first quarter net income plunged to $39 million from $133 million. Provision for losses surged 46% to $335 million.

Global network and merchant services first quarter net income increased 6% to $237 million from $223 million and net revenues decreased 17% to $836 million.

American Express ((AXP)) increased 8% or $1.54 to 420.97 and in after-hours added another 7% to $22.43.