NEW YORK CITY (dpa-AFX) - American Express Co. (AXP) Wednesday posted a 5 percent increase in second-quarter profit, topping Wall Street estimates, as the credit card company benefited from higher cardmember spending.
The results of American Express, which is patronized by affluent corporate customers, is keenly tracked as it has a bearing on the state of luxury consumption. While weak economic conditions has put pressure on such spending, the company has been through the well-trodden path, seeking to cut costs and restructure its workforce.
American Express earns a large part of its revenue from merchants, charging them a discount rate for transactions processed, and also earns revenue from cardholders.
The company reported second-quarter net income of $1.41 billion or $1.27 per share, compared to $1.34 billion or $1.15 per share a year ago.
On average, 27 analysts polled by Thomson Reuters expected earnings of $1.22 per share for the quarter.
Total revenues for the quarter, net of interest expense, climbed 4 percent to $8.25 billion from $7.97 billion last year. Analysts expected revenues of $8.28 billion for the quarter.
Revenues at U.S. Card Services were up 5 percent, on higher cardmember spending and loans. Nevertheless, international revenues percent were flat.
Global Commercial Services revenues edged up 1 percent, on higher cardmember spending, partly offset by lower business travel commissions and fees. Global Network & Merchant Services revenues rose 5 percent, on higher merchant-related revenues.
Meanwhile, provision for losses in the quarter increased 29 percent to $593 million from $461 million a year ago. However, the company indicated credit indicators continued to be at historically strong levels.
Earlier in the day, American Express revealed the European Commission's intent to cap fees that banks can charge to process card payments. While American Express's proprietary consumer- and corporate-card businesses would not be covered by the proposed pricing caps, three-party systems, such as American Express, would be covered when they license other institutions to issue cards.
American Express stock closed Wednesday at $76.80, down 1.88%, on a volume of 16 million shares on the NYSE. In after hours, the stock dropped $1.10 or 1.43%.
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