American Express Co., the biggest credit-card issuer by purchases, posted a second-quarter profit that beat analysts' estimates as customer spending increased.

Net income rose 4.9 percent to $1.41 billion, or $1.27 a share, from $1.34 billion, or $1.15, a year earlier, the New York-based lender said today in a statement. The average estimate of 26 analysts surveyed by Bloomberg was $1.22.

Chief Executive Officer Kenneth I. Chenault is trimming the firm's workforce to contain expenses and investing in new products such as a prepaid card sold by Wal-Mart Stores Inc. to broaden the lender's reach beyond more affluent customers.

"We are well on track with the restructuring and related initiatives that we announced earlier this year," Chenault said in the statement. "They are helping us contain expense growth and that, in turn, is giving us the flexibility to make substantial investments designed to grow the business and expand into newer segments."

Consumer spending in the U.S., where AmEx gets about 70 percent of its revenue, climbed at a 1.5 percent annualized rate in the second quarter and retail sales rose 0.4 percent in June, less than forecast, according to Commerce Department figures disclosed earlier this week.

American Express dropped the most in a year earlier today, falling as much as 4.7 percent, after some analysts said a European Commission proposal to cap bank-card fees would crimp profit. The shares pared losses, declining 1.9 percent to $76.80 at 4:02 p.m. in New York after the company said the impact would be limited. The stock gained 34 percent this year.

No Hurry

Write-offs for loans deemed uncollectible averaged 1.97 percent for AmEx in the second quarter, according to data compiled by Bloomberg. Loans at least 30 days overdue, a signal of future defaults, averaged 1.1 percent, the lowest among the six biggest U.S. credit-card issuers, the data show.

Chenault, 62, who said April 15 that he's in no hurry to retire, is overseeing a transition in senior management. That same day, Ed Gilligan, 54, was promoted to president from vice chairman, rekindling questions about succession plans. Last month, AmEx appointed McKesson Corp.'s Jeffrey C. Campbell to succeed Chief Financial Officer Dan Henry, who's retiring after more than 20 years with the lender.

Former International Business Machines Corp. CEO Samuel J. Palmisano and ex-Areva SA chief Anne Lauvergeon joined AmEx's board in March. Palmisano, 61, serves on the governance and compensation committees, and Lauvergeon, 53, is a member of the audit and public responsibility committees.

Palmisano is a senior adviser to Bloomberg LP, the parent of Bloomberg News.

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