Amex income inches up as customers slow spending

AP News
Posted: Jul 18, 2012 6:31 PM
Amex income inches up as customers slow spending

NEW YORK (AP) — American Express' well-heeled customers put the brakes on spending in the April-to-June period when there were big swings in global financial markets.

The credit card issuer's net income grew one percent to $1.34 billion, or $1.15 per share, in the second quarter. Revenue jumped 5 percent to $8 billion.

Wall Street was expecting a profit of $1.10 per share and revenue of $8 billion.

CEO Kenneth Chenault said spending among the company's consumer, small business and corporate card members was slower than in recent quarters, but faster than at its competitors.

Amex's stock was off 54 cents at $57.75 in after-hours trading.

American Express has been doing well after the recession as affluent shoppers spent freely. That's because Amex cardholders are about a third more affluent than other credit cardholders.

Unlike Visa and MasterCard, which only process transactions, American Express issues its own cards. When cardholders charge more on their Amex cards, the company earns even more in interest income and a variety of fees.

However, the slowdown in Europe and Asia seems to have curbed spending among its customers.

Its international revenues fell 4 percent to $1.3 billion. Even after adjusting for the strength of the dollar, revenue in that division rose only 2 percent.

The revenue that Amex collects from other countries fell after being converted back into dollars. Barclays Capital analyst Mark DeVries said in a report to clients that the euro's value against the dollar declined 11 percent, and the British pound declined 3 percent in the quarter.

Spain and Italy were the hardest hit markets, a sign that even the wealthiest in those countries are worried. Customers in Spain, where banks are teetering, spent 5 percent less. In Italy, Amex revenue was flat. However, revenue grew 4 percent in U.K. and 5 percent in Germany, according to American Express chief financial officer Daniel T. Henry, who made a presentation to analysts on Wednesday evening after releasing earnings.

The U.S. stock market also swung wildly in the quarter. The Standard & Poor's 500 index fell 3.3 percent and the Nasdaq 5 percent.

Amex's results provide investors insight into how the affluent consumer is doing. According to Citi Research the affluent account for about nine-tenths of stock owners in the country and are the most impacted by stock market volatility. These same high-income consumers also account for about half of all spending in the U.S.

Amex's growth slowed in the U.S. Compared to the 35 percent income growth in the first three months of the year, Amex's income in the second quarter rose 8 percent, and revenue grew by 7 percent in the U.S.