American Express Co said on Monday that its profit tumbled 79 percent in the fourth quarter as cardholders cut back their spending amid the harsh economy and the company took a significant severance-related charge.
For the final three months of last year, the credit card company earned US$172 million, or US$0.15 per share, compared with earnings of US$831 million, or US$0.71 per share, a year earlier.
Results included a US$273 million charge primarily related to severance costs from previously announced job cuts, as well as a US$66 million increase in the company’s membership rewards reserve related to a partnership agreement with Delta Air Lines.
On an adjusted basis, excluding discontinued operations, the company earned US$238 million, or US$0.21 per share.
Analysts polled by Thomson Reuters were expecting earnings of US$0.22 per share. Analysts typically exclude one-time items from their estimates.
In its US card unit, American Express said loan defaults surged to 6.7 percent of loans from 3.4 percent a year earlier.
Lenders are closing unused accounts and scaling back credit lines to insulate against further losses as the US Federal Reserve approved rules last month to curtail interest-rate increases on current balances.
Total revenue declined 11 percent to US$6.51 billion from US$7.32 billion. This missed analysts’ forecast of US$7.22 billion.
For the full year, the company said net income fell 34 percent to US$2.63 billion, or US$2.27 per share, from US$4.01 billion, or US$3.36 per share.
American Express got US$3.39 billion from the US Treasury this month to boost capital as surging consumer defaults forced it to set aside more reserves and the market for bonds backed by credit-card debt seized up.
CEO Kenneth Chenault cut 7,000 jobs and froze hiring and management raises to help reduce expenses by US$1.8 billion this year. The company raised US$6.2 billion by selling certificates of deposit in the quarter.
Shares of American Express jumped US$1.05, or 6.6 percent, to US$16.14 in after-hours trading, having closed the regular session at US$15.20.