American Express Co. began 2009 on a negative note but ended the year positively with cardmember spending rising 8% from the previous year. But the year overall proved challenging.
“Despite the weak economy, the frozen credit markets in the first half of 2009 and high credit losses across the entire card industry, I believe we came out of the year in a strong position with an established foundation for growth,” CEO Kenneth Chenault said in February during an analyst conference call.
AmEx reported net income of $2.1 billion for the year, down 22.2% from $2.7 billion in 2008. Revenue totaled $21.4 billion, down 13.4% from $24.7 billion. Net income for AmEx’s U.S. Card Services unit was $249 million, down 70.8% from $852 million. Revenue totaled $11.9 million, down 15% from $14 million.
International card services generated net income of $303 million, down 13.7% from $351 million. Revenue totaled $4.5 million, down 6.3% from $4.8 million.
AmEx’s billed business, or annual charge volume, in the U.S. totaled $423.7 billion last year, down 10.1% from $471.1 billion in 2008. AmEx reported 48.9 million total cards in force in the U.S. at the end of December, down 9.4% from 54 million cards a year earlier.
“Cards-in-force continue to be down, largely due to our proactive risk actions,” Chenault explained during the call. “Growth in cardmember loans remains negative partly because consumers are paying down balances and deleveraging to not take on new debt in this environment.”
AmEx managed $52.6 billion in U.S. card loans last year, down 15.7% from $62.4 billion in 2008 (
Charge volume on AmEx cards issued outside the U.S. totaled $196.1 billion in 2009, down 7.6% from $212.2 billion the previous year. AmEx reported 48.9 million cards issued in the U.S. as of the end of December, down 9.4% from 54 million a year earlier.
Total loans on cards AmEx issued outside the U.S. reached $9.2 billion by the end of 2009, down 3.2% from $9.5 billion a year earlier.
Revenue growth rates from Global Network Services and the U.S. commercial card business improved last year, with Global Network Services launching nine new partners and 12 new airline cobrands, according to Chenault.
AmEx launched several reorganization initiatives in 2008 to save the company approximately $1.8 billion in 2009, including reductions in staff, compensation and operating costs. It also spent less on investments.
Early last year, the company announced another phase of initiatives that included cutting back on spending on marketing and business development and on certain professional services, travel and general overhead expenses. AmEx launched the initiatives in the second quarter, recording a net charge of $182 million.
In December, AmEx reached a settlement with Heartland Payment Systems stemming from the 2008 breach of Heartland’s database. Heartland will pay AmEx a one-time payment of $3.6 million.
Also in December, AmEx announced an agreement to acquire alternative payments company Revolution Money Inc., and in January this year it finalized the deal, paying $300 million in cash.
Additionally, AmEx developed the Zync Card, a charge card marketed to 20- and 30-somethings with customized rewards, variable annual fees and a social network called the Zync Tank. AmEx conducted beta tests of the card in December, and it expected to roll out the card officially in the next few months. PS
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