The company said on Thursday that consumers with American Express cards spent 14 percent more than they did a year ago, and its bad loan write-off rate dropped below 5 percent in September for the first time since early 2008.
'Things are relatively healthy,' said Michael Holland of Holland & Co in New York, which owns American Express shares.
Investors 'had been expecting a little bit better results (than the forecasts), and they produced it,' he said.
American Express shares closed up 1.4 percent at $40.27 on Thursday, but fell almost 1 percent in after-market trading.
The company, which generally lends to wealthier customers who pay their bills in full every month, is shifting its focus from lending to processing transactions. The processing business carries less credit risk and offers more growth opportunity while loan demand remains weak.
But U.S. regulators are increasingly scrutinizing processing networks, including American Express, which this month vowed to fight a government antitrust lawsuit that could cut into its long-term profits.
Chief Executive Kenneth Chenault said in the company's earnings announcement that American Express continued to improve its competitive position 'against the backdrop of regulatory and legislative changes that are reshaping the industry.'
Its shares have lost almost 4 percent since the beginning of the month, when the U.S. Justice Department sued American Express over its rules for merchants.
American Express does not allow merchants to charge lower prices to customers that pay for goods with competing credit cards. Merchants pay processing fees when a customer pays with a credit card, and fees to process American Express transactions tend to be high relative to competitors.
The company has said it would fight the lawsuit, because changing its rules could make it more expensive for consumers to use their American Express cards -- and would threaten the credit card company's profits.
American Express's wealthy customers were some of the first to recover from the severe financial recession and increase their spending. Revenues rose 17 percent from a year earlier to $7.0 billion.
But like other lenders, the company is struggling with weak loan demand, as unemployment remains high and consumers are reluctant to take on more debt.
The company's lending volumes 'remain below pre-recessionary levels,' Chenault said in the earnings announcement, adding that the company remains 'cautious about the economic outlook.'
American Express earned $1.1 billion, or 90 cents per share, in the third quarter, compared to a year-earlier profit of $640 million, or 53 cents per share. The year-earlier income included a $180 million accounting benefit for an investment in foreign subsidiaries.
Analysts on average had expected the company to report 86 cents per share, according to Thomson Reuters I/B/E/S.
(Reporting by Maria Aspan; Editing by Bernard Orr) Keywords: AMERICANEXPRESS/ (email@example.com; +1 646 223 6394) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.