Amex Profit More than Doubles on Spending, Lower Loan Losses

By Sara Lepro

American Express Co. churned out a first-quarter profit that was more than double what it earned a year earlier, as spending on its cards rebounded sharply and loan losses diminished.

The New York company, known for its well-heeled clientele, said Thursday that it earned $873 million after paying preferred dividends.

Spending on American Express cards in the U.S. rose 11% from the first quarter of 2009, to $108 billion. Worldwide transactions jumped 16% to $161 billion. Average cardholder spending rose 23% to $3,012.

Meanwhile, credit expenses moderated. The company's quarterly provision for future losses declined 48% to $943 million.

The rate of losses in its U.S. card unit fell for a third consecutive quarter, dropping 30 basis points to 7.2%. Delinquencies also declined, with the percentage of loans 30 days or more past due falling to 3.3% of total loans from 5.1% a year earlier. That was better than the 3.6% delinquency rate analyst John Stilmar of SunTrust Robinson Humphrey had predicted.

In a recent research note, Stilmar said American Express has shown "significant delinquency improvement." The company should continue to benefit from the rebound in spending by high net worth individuals, he wrote. However, margins might not be as fat from now on, as credit card companies get more aggressive with their rewards programs.

Indeed, American Express increased its spending on cardholder rewards by 44% during the quarter to $1.22 billion.

The company also said its marketing and promotion expenses climbed 72% year-over-year to $595 million as it steps up efforts to win new customers.

Results also surpassed analysts' expectations. The company's 73 cents-per-share profit easily beat the average analyst estimate of 63 cents per share, according to a poll by Thomson Reuters.

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