AmEx: Saw Another Rise In Absolute-Dollar Spending In Oct
By Aparajita Saha-Bubna, Of DOW JONES NEWSWIRES
American Express Co. (AXP) said its customers spent more in absolute-dollar
terms in October and reported billing was up 3% during the same period.
Last month "saw another rise in absolute spend dollars," Kenneth I. Chenault,
AmEx's chairman and chief executive, said Tuesday during a Webcast of the Bank
of America Merrill Lynch Banking and Financial Services Conference. Reported
billing in October was the "best we've seen to date."
Chenault's comments Tuesday and the company's third-quarter results last month
underscore improvements in several important measures: The pace of decline in
the amount AmEx cardholders spend is slowing, and the volume of souring card
loans, although at still historically high levels, has fallen from the previous
quarter. Furthermore, consumers at least a month behind payments--a key gauge of
future losses--also fell from the second quarter.
AmEx shares recently traded at $39.35, up 30 cents, or 0.8%.
Chenault reiterated the company's intention to invest a sizable portion of
funds in its loss reserve to expand business as the quality of its credit-card
loans improves.
There are signs that "the recession is approaching an end," said Chenault.
But he warned that the economy won't grow at the same pace as it did in the
years ahead of the recession.
The economy "won't be returning to business as usual," he said. There will be
a "new normal with a number of substantial changes. A premium will be placed on
lean flexible companies."
Like other card issuers, AmEx is being hurt by cutbacks in spending and
customers who are falling behind on their bills. Unlike other card companies,
AmEx both issues cards and processes transactions. It issues both charge cards
requiring a monthly payoff and credit cards on which customers can carry a
balance. Therefore, a big chunk of its revenue comes from fees it charges banks
and merchants, such as grocery stores or gas stations, to process card payments.
But as economic woes and unemployment grow, consumer spending slows, eating into
the fees that AmEx earns from transactions.
As a result, the company reported third-quarter net income of $640 million,
down 21% from a year earlier, as customers reduced their spending by 11% during
the period.
-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-
bubna@dowjones.com
(END) Dow Jones Newswires
11-10-091357ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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