NEW YORK CITY (dpa-AFX) - American Express Co. (AXP) on Wednesday reported a drop in profit for the second quarter, hurt largely by lower revenues and the absence of a gain from a sale of a unit last year. Nonetheless, earnings for the quarter trumped Wall Street expectations, while revenues fell short of estimates.
New York-based American Express' second-quarter profit dropped to $1.47 billion or $1.42 per share from $1.53 billion or $1.43 per share a year ago. On average, 30 analysts polled by Thomson Reuters expected earnings of $1.32 per share for the quarter. Analysts' estimates typically exclude special items.
American Express, the biggest credit-card issuer on the basis of purchases, said revenues, net of interest expense, for the quarter dropped 4 percent to $8.28 billion from $8.63 billion a year ago. Twenty-one analysts had a consensus revenue estimate of $8.46 billion for the quarter.
American Express card member spending during the quarter rose 6 percent, however, revenues were weighed down by a strong US dollar.
American Express' cardholders are mostly affluent consumers and businesses, which helps the company to perform better than its peers even during weak economic conditions. The company's results are keenly watched as it has a bearing on the state of luxury consumption.
American Express, famed for its credit card and traveler's checks, generates a major part of its revenue from merchants, charging them a discount rate for transactions processed. Revenue also come from cardholders, who pay fees and interest charges on balances.
CEO Kenneth Chenault said. 'Disciplined expense control and a substantial return of capital to shareholders through share repurchases together with higher Card Member spending and loan volumes helped to mitigate the negative impact of a strong U.S. dollar and the year-ago benefits from Global Business Travel, which now operates as a joint venture.
Results were also impacted by the absence of a gain recorded last year - the sale Global Business Travel, which now operates as a joint venture.
Revenue from U.S. card services segment rose 6 percent, driven by a rise in card member spending and higher net interest income. International card services revenue dropped 10 percent, hurt largely by a stronger dollar. Revenues rose 5 percent on an adjusted basis.
Provisions for loan losses, the money set aside to cover bad loans, dropped 4 percent to $467 million from $489 million last year.
AXP closed Wednesday's regular trade at $78.99, up $0.04 or 0.05%, on the NYSE. The stock, however, shed $1.01 or 1.28%, to trade at $77.98 in after-hours.
Copyright RTT News/dpa-AFX