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January 23, 2010

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Credit card spree fills coffers at AmEx

AMERICAN Express yesterday said its profit jumped in the final three months of last year as the company set aside less money to cover bad loans.

The New York-based credit card company earned US$716 million in the quarter, or 60 cents per share, up from US$240 million, or 21 cents per share, in the same period a year ago.

On an adjusted basis, excluding discontinued operations, the company earned 59 cents per share, which beat analysts' estimates of 57 cents, according to Thomson Reuters.

The gain broke a streak of eight consecutive quarters of falling profits for AmEx, which traditionally caters to a more affluent clientele.

Quarterly revenue edged lower to US$6.49 billion from US$6.51 billion last year. However, provisions for loan losses dropped 47 percent to US$748 million, from US$1.4 billion a year ago. Net write-off and 30-day past due rates remained high but declined from the previous quarter.

The total amount spent on AmEx cards rose to US$172.6 billion, up from US$160.5 billion the same period last year. The growth reflected a rise in both the number and size of transactions.

Average spending by basic card members rose to US$3,209, up from US$2,792 the same time last year. Revenue from card fees rose to US$549 million, up from US$536 million the same time last year.

Marketing and promotion costs rose 36 percent to US$713 million in the quarter, up from US$524 million.

The company earned US$1.54 per share for the full year, just missing analysts' forecast of US$1.55 per share. The company earned US$2.32 per share in 2008.

AmEx Chairman Kenneth Chenault noted in a release that while the economic outlook is improving, the company still faces the challenges of elevated unemployment levels, depressed real estate values and weaker household finances.


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