NEW YORK CITY (dpa-AFX) - American Express Co. (AXP) Wednesday reported an eight percent increase in profit for the third quarter, driven largely by higher card spending by its affluent customers. Earnings for the quarter trumped Wall Street expectations, while revenues fell short of estimates.
New York-based American Express' third-quarter profit rose to $1.48 billion or $1.40 per share from $1.37 billion or $1.25 per share last year. On average, 26 analysts polled by Thomson Reuters expected earnings of $1.36 per share for the quarter. Analysts' estimates typically exclude special items.
American Express, which is the biggest credit-card issuer on the basis of purchases, said revenues, net of interest expense, for the third quarter rose to $8.33 billion from $8.30 billion a year ago. Twenty-two analysts had a consensus revenue estimate of $8.35 billion for the quarter.
American Express card member spending during the quarter rose 9 percent, with higher volumes in the U.S. and internationally. American Express' cardholders are mostly affluent consumers and businesses, which helps the company to perform better than its peers even during weak economic conditions. Its results are keenly watched as it has a bearing on the state of luxury consumption.
American Express, famed for its credit card and traveler's checks, generates a major part of its revenue from merchants, charging them a discount rate for transactions processed. Revenue also come from cardholders, who pay fees and interest charges on balances.
American Express is trying new avenues to improve revenues by catering for non-affluent customers with partnerships with services like Uber, Apple Pay and McDonald's.
CEO Kenneth Chenault said, 'We developed new partnerships and services with Uber, Apple Pay and McDonald's that are helping us to capitalize on the convergence of online and offline commerce.'
'While the economy is stronger, it is not growing as fast or as steadily as most people would like,' he added. 'Our focus will be on delivering earnings growth in an environment that is characterized by rapidly changing technologies, intense competition, regulation and an economy that may continue to grow at only a modest pace.'
Provisions for loan losses, the money set aside to cover bad loans, rose 16 percent to $488 million, reflecting a larger credit reserve release a year ago.
AXP closed Wednesday's trading at $80.93, down $1.81 or 2.19%, on the NYSE. The stock, however, gained $0.09 or 0.11% in the after-hours trade.
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