Record spending by customers during the holiday season helped lift American Express Co.'s fourth-quarter profit by 12 percent.
U.S.-based spending rose 11 percent over the 2010 quarter to $145.5 billion, an average of $4,091 per cardholder during the final three months of 2011, the company said Thursday. Outside the U.S., spending rose 10 percent to $73.5 billion, or an average of $3,537 per cardholder.
The high spending levels were accompanied by the lowest default rate in the credit card industry, 2.3 percent of balances on an annualized basis. That dropped from 4.3 percent in the 2010 fourth quarter. The rate of customers who are 30 days or more behind on payments fell to 1.5 percent of balances, from 2.1 percent the prior year.
The figures reflect the fact that New York-based American Express serves a more affluent customer than its peers. It's also quick to cancel cards if customers have problems making payments.
Even with high unemployment and continued doubts about the strength of the economy, credit card use has been on the rise. Discover Financial Services last month reported an 8 percent uptick in sales volume. MasterCard Inc. and Visa Inc. are also expected to show strong increases in card use _ and related profit growth _ when they report in the coming weeks.
The Federal Reserve that showed consumers have increased their borrowing in 13 of the past 14 months. Amex said revolving balances rose 3 percent in the quarter, a much slower rate than overall spending. That's a sign customers are trying to pay their balances each month.
Increased use and improving payment habits have also been seen in the results of the major card issuing banks. While Citigroup Inc. reporting a disappointing fourth quarter, for example, it said its credit card portfolio is improving. Likewise, JPMorgan Chase & Co. posted a profit decline, but reported strengthening numbers for its credit card business.
Amex said it earned $1.19 billion, or $1.01 per share, in the last three months of 2011. That compared with $1.06 billion, or 88 cents per share, in the 2010 fourth quarter.
The per-share figures reflect a 3 percent decrease in the number of outstanding shares, due to buybacks, which has the effect of increasing per-share results.
Revenue jumped 7 percent to $7.74 billion, from $7.24 billion last year. Strong online spending contributed to revenue growth.
Analysts were expecting profit of 97 cents per share, on revenue of $7.87 billion.
Expenses, an area of concern for Wall Street, rose 1 percent, with rewards spending up 10 percent. The company cut marketing and promotion spending by 12 percent; consulting fees and technology expenses dropped 6 percent; and employee salaries and benefits dipped 2 percent, helping to offset higher rewards and member services spending.
For the full year 2011, American Express posted net income of $4.94 billion, or $4.09 per share, up from $4.06 billion, or $3.35 per share, for 2010. Revenue rose 9 percent to $29.96 billion, up 9 percent from $27.58 billion last year.
The company did not provide a specific forecast for the new year. Chief Financial Officer Daniel Henry said during a conference call to discuss results that earnings in 2012 "will be the dependent on where the economy goes." He noted that Amex will face more difficult comparisons in coming quarters after posting very strong growth over the last two years.
Henry also noted that some benefits are not going to recur, like funds from a settlement with Visa Inc. and MasterCard Inc. that is now fully paid. Overall, the company maintained its long-term forecast for 8 percent revenue growth and 12 percent to 15 percent earnings per share growth each year.
Investors eyeing the revenue figures sent shares down aftermarket. The revenue shortfall in part reflected lower interest income than analysts expected. That was due in part to customers paying off their monthly balances as they try to avoid building up debt.
American Express was trading down $1.15, or 2.3 percent, at $49.80, from its close in the regular session at $50.95.