By Juan Lagorio and Jonathan Stempel
NEW YORK, July 23 (Reuters) - American Express Co and Capital One Financial Corp said rising customer delinquencies hurt second-quarter profits, sending the shares of both companies down around 5 percent after hours.
Profit fell 84 percent at American Express, while Capital One reported its third straight quarterly loss. Both are writing off close to one out of every 10 dollars they lend, even after the government let both credit card issuers repay federal bailout money.
Card issuers are hurting as consumers and businesses struggle keeping current on payments through the worst economic slowdown in decades.
Analysts and economists say charge-off rates are closely tied to the nation's unemployment rate, which at 9.5 percent is the highest since 1983 and which is widely expected to soon reach double digits.
American Express said quarterly net income available to common shareholders fell to $102 million, or 9 cents per share, from $650 million, or 56 cents, a year earlier. Before preferred stock dividends, net income was $337 million.
Excluding items, profit was 27 cents per share, according to Reuters Estimates, matching the average analyst forecast. Net revenue fell 18 percent to $6.09 billion. Analysts expected $6.36 billion.
In the U.S. card business, managed net charge-offs, or loans the company does not expect to be repaid, rose to 10 percent from 8.5 percent in the previous quarter.
Chief Executive Kenneth Chenault expressed some optimism, saying the charge-off rate could fall below 10 percent over the rest of the year, lower than the company had forecast.
Capital One, based in McLean, Virginia, had a quarterly net loss available to shareholders of $275.5 million, or 65 cents per share, compared with a profit of $452.9 million, or $1.21, a year earlier. Before preferred stock dividends, profit was $224.2 million.
Excluding items, the loss per share was 64 cents, according to Reuters Estimates, larger than the average 51 cents loss projected by analysts. Managed revenue rose 1 percent to $4.15 billion. Analysts expected $3.85 billion.
In the U.S. card business, charge-offs rose to 9.23 percent from the first quarter's 8.39 percent.
Both companies took charges tied to the repayment of funds taken from the government's Troubled Asset Relief Program.
American Express repaid $3.39 billion and Capital One $3.55 billion after regulators conducted 'stress tests' of both companies and found they did not need more capital.
Other major card issuers have also suffered rising credit losses, including Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co.
JPMorgan Chief Executive Jamie Dimon projected that his bank's card business will not make money in 2009 or 2010.
Defaults on U.S. credit cards rose to a record 10.76 percent in June and could reach 13 percent by the middle of 2010, Moody's Investors Service said on Wednesday.
In after-hours trading, American Express shares fell 4.6 percent to $28.12, while Capital One fell 3.7 percent to $26.80. American Express had closed regular trading up 69 cents at $29.45, and Capital One rose $1.36 to $27.83.
(Reporting by Juan Lagorio and Jonathan Stempel; editing by Andre Grenon) Keywords: AMERICANEXPRESS CAPITALONE/ (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. 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.
NEW YORK, July 23 (Reuters) - American Express Co and Capital One Financial Corp said rising customer delinquencies hurt second-quarter profits, sending the shares of both companies down around 5 percent after hours.
Profit fell 84 percent at American Express, while Capital One reported its third straight quarterly loss. Both are writing off close to one out of every 10 dollars they lend, even after the government let both credit card issuers repay federal bailout money.
Card issuers are hurting as consumers and businesses struggle keeping current on payments through the worst economic slowdown in decades.
Analysts and economists say charge-off rates are closely tied to the nation's unemployment rate, which at 9.5 percent is the highest since 1983 and which is widely expected to soon reach double digits.
American Express said quarterly net income available to common shareholders fell to $102 million, or 9 cents per share, from $650 million, or 56 cents, a year earlier. Before preferred stock dividends, net income was $337 million.
Excluding items, profit was 27 cents per share, according to Reuters Estimates, matching the average analyst forecast. Net revenue fell 18 percent to $6.09 billion. Analysts expected $6.36 billion.
In the U.S. card business, managed net charge-offs, or loans the company does not expect to be repaid, rose to 10 percent from 8.5 percent in the previous quarter.
Chief Executive Kenneth Chenault expressed some optimism, saying the charge-off rate could fall below 10 percent over the rest of the year, lower than the company had forecast.
Capital One, based in McLean, Virginia, had a quarterly net loss available to shareholders of $275.5 million, or 65 cents per share, compared with a profit of $452.9 million, or $1.21, a year earlier. Before preferred stock dividends, profit was $224.2 million.
Excluding items, the loss per share was 64 cents, according to Reuters Estimates, larger than the average 51 cents loss projected by analysts. Managed revenue rose 1 percent to $4.15 billion. Analysts expected $3.85 billion.
In the U.S. card business, charge-offs rose to 9.23 percent from the first quarter's 8.39 percent.
Both companies took charges tied to the repayment of funds taken from the government's Troubled Asset Relief Program.
American Express repaid $3.39 billion and Capital One $3.55 billion after regulators conducted 'stress tests' of both companies and found they did not need more capital.
Other major card issuers have also suffered rising credit losses, including Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co.
JPMorgan Chief Executive Jamie Dimon projected that his bank's card business will not make money in 2009 or 2010.
Defaults on U.S. credit cards rose to a record 10.76 percent in June and could reach 13 percent by the middle of 2010, Moody's Investors Service said on Wednesday.
In after-hours trading, American Express shares fell 4.6 percent to $28.12, while Capital One fell 3.7 percent to $26.80. American Express had closed regular trading up 69 cents at $29.45, and Capital One rose $1.36 to $27.83.
(Reporting by Juan Lagorio and Jonathan Stempel; editing by Andre Grenon) Keywords: AMERICANEXPRESS CAPITALONE/ (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. 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.