American Express Co said on Monday its profit fell 24 percent in the third quarter as cardholders restrained their spending and had more trouble paying down debt.
The results were better than anticipated, and propelled Amex’s shares higher. Still, the company’s report echoed recent results from JPMorgan Chase & Co, Citigroup Inc and Capital One Financial Corp showing that the credit-card environment is worsening — even for companies like American Express that pride themselves in catering to more well-heeled borrowers.
The credit-card issuer said net income was US$815 million, or US$0.70 a share, in the July to September period, down from US$1.07 billion, or US$0.90 a share, in the same timeframe last year.
Analysts polled by Thomson Reuters on average had predicted earnings of US$0.59 per share, excluding one-time items. AmEx’s income from continuing operations is US$0.74 a share.
The company took a US$1.36 billion provision for loan losses, 51 percent higher than its provision in the third quarter last year.
It saw its loan-loss rates nearly double to 5.9 percent from 3 percent a year ago on a managed basis, which includes card loans that are securitized.
“We saw clear signs earlier this year of a weakening environment and the recent volatility in the financial markets has reinforced our view that consumer and business sentiment is likely to deteriorate further, translating into weaker economies around the globe well into 2009,” said CEO Kenneth Chenault in a statement.
“Loan growth will be restrained, in part because of the steps we are taking to reduce credit risks and credit indicators are likely to reflect the continued downturn in the economy and throughout the housing sector,” he said.
Separately, Merrill Lynch & Co, the biggest US brokerage, plans to cut about 500 jobs in its trading division as chief executive officer John Thain shrinks the workforce to gird for a recession, three people with knowledge of the plan said.
Merrill could notify affected employees as soon as this week, according to the people, who declined to be identified because the decision hasn’t been disclosed publicly. The cuts, which make up about 1 percent of New York-based Merrill’s 60,900 employees, will be global and include traders and institutional salespeople in the firm’s fixed-income and stock departments, two of the people said.
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