American Express Co. warned investors on Monday that its first-quarter profits will probably fall 18% because of losses sustained in the junk bond market.

In a press statement, the company said it will be forced to take a $185 million pretax charge from the writedown and sale of high-yield debt held in the portfolio of its investment subsidiary, American Express Financial Advisors. It said that per-share earnings should drop 18% from the 48 cents reported in the first quarter of 2000.

Analysts surveyed by Thomson Financial/First Call had been expecting Amex to post per-share earnings of 51 cents for the quarter.

But American Express did not stop there. It also told Wall Street that it expects earnings growth to come in under its previous projections of 12% to 15%, that earnings will probably be uneven from quarter to quarter, and that pressure on earnings will be pronounced in the first half.

American Express said that it expects a second-half earnings boost from a stronger economy and more market stability.

American Express Financial Advisors will report a first-quarter earnings decline of 80% as a result of losses in high-yield investments. It had $3.5 billion - about 11% of its total portfolio - in that area. The company said that it also expects losses to be substantially lower in the second half.

Analysts described the problem as largely confined.

"The bulk of the bad news" is in high-yield investments, said Bruce Harting, an analyst at Lehman Brothers. Mr. Harting has issued a "market perform" rating on American Express stock and projects per-share earnings of $2.14 for 2001.

The company had already laid the groundwork in warning investors, he said, so the stock is not down as much as it could be. "This is the culmination of months of Amex giving cautionary advice for the first half of the year," he said.

Robert Hottensen, an analyst with Goldman Sachs Group, slashed $5 from his target price of $60 for the year after American Express' warning Monday. He said that earnings expectations will continue to lag in the second quarter because of Financial Advisors but that he expects earnings and revenue growth by the fourth quarter.

Mr. Hottensen said American Express shares would outperform the market over the long haul. Credit quality trends are excellent in its travel-related services unit, whose first-quarter earnings are expected to rise 13% to 15%, he wrote in his report Monday.

The earnings warning came amid renewed rumors that the company is up for sale, with Citigroup again emerging as a prospective buyer. Neither company has commented on reports of a possible merger.

American Express stock fell 3.85%, to $39.71, Monday as the broader market's losing streak continued. The Dow Jones Industrial Average fell 1.02%, the Nasdaq 3.11%, and the American Banker index of 225 bank stocks 0.76%.

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