American Express Profit Up 9%

(RTTNews) - Credit card company American Express Co. (AXP), Wednesday reported a nine percent growth in third-quarter profit, on some higher card member spending and net interest income. Both earnings and revenue for the quarter topped Wall Street estimates.

"Despite an uncertain environment, we generated a healthy increase in revenues and stronger card member spending across all regions," said CEO Kenneth Chenault.

The results of American Express, which is patronized by affluent customers, is keenly tracked as it has a bearing on the state of luxury consumption. It also shows how things stand as the shutdown-affected economy trudges into the holiday season.

American Express earns a large part of its revenue from merchants, charging them a discount rate for transactions processed, and also earns revenue from cardholders.

While weak economic conditions has put pressure on card spending, the company has fared well and has cut costs by pruning its workforce.

American Express posted third-quarter net income of $1.37 billion or $1.25 per share, compared with $1.25 billion or $1.09 per share a year ago.

On average, 26 analysts polled by Thomson Reuters expected earnings of $1.22 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the third quarter, net of interest expense, climbed 6 percent to $8.3 billion from $7.9 billion last year. Analysts had a consensus revenue estimate of $8.19 billion for the quarter.

Revenue at U.S. Card Services were up 6 percent, while International revenue rose 3 percent. Global Commercial Services revenue climbed 6 percent and Global Network & Merchant Services revenue grew 5 percent.

Provision for losses in the quarter increased 3 percent to $492 million from a year ago, even as the company said credit indicators remains at historically strong levels.

Also of interest to investors is American Express' proposed joint venture with an investor group led by Certares International Bank. An update is expected on this proposed JV, which was announced last month.

As per the terms, American Express would sell half of its business-travel unit to the investor group and create a JV that would be run by a separate board with involvement from both sides, along with independent directors. The investor group would invest $700 million to $1 billion into the JV.

American Express stock closed Wednesday at $76.26, up $1.01 or 1.34%, on a volume of 5.5 million shares on the NYSE. In after hours, the stock gained $0.23 or %0.30 at $76.55. The shares trade in a 52-week range of $53.02 - $78.63.