Thursday, April 23, 2009

American Express profits tumble 56%

(CNNMoney.com) -- Profits at American Express declined by more than half in the latest quarter, the company said Thursday, as spending by cardmembers slowed and credit troubles continued to mount.

The credit card giant also said, however, that it was hoping to soon pay back money it received from the government as part of last fall's financial rescue package.

AmEx said it earned $437 million, or 31 cents a share during the first quarter ending in March, down 56% from $991 million, or 85 cents, during the same period a year ago. Revenues came in at $5.9 billion, down 18% from a year ago.

Analysts were expected a profit of just $142 million, or 12 cents a share, according to Thomson Reuters. But revenues were lower than forecasts of $6.45 billion.

American Express (AXP, Fortune 500) shares rose more than 6% in after hours trading, after finishing the session 8% higher.

But a decline in overall spending by cardmembers dragged on the firm's results, as did a boost to the company's reserves to cope for future loan losses. The company said provisions totaled $1.8 billion by quarter's end, up 49% from $1.2 billion a year ago.

Major credit card issuers like AmEx have ramped up their loan loss reserves over the past year amid rising unemployment levels and as more consumers default on their card payments.

AmEx also reported a spike in write-offs, or loans the company believes are not collectable. During the first three months of the year, write-offs soared to 8.5% from 6.7% in the previous quarter.

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