American Express reported better-than-expected second-quarter results but net income fell 33% amid heavy promotional spending.

The company’s profit dropped to $1.3 billion, or $1.47 per share, from $2.0 billion, or $2.10 per share, in the same period a year earlier. Sales reached $8.31 billion, up 1% from a year ago.

Analysts polled by Thomson Reuters had expected earnings of $1.43 a share on sales of $8.2 billion.

AmEx’s results last year included a one-time gain of $1.1 billion from AmEx selling the Costco credit card portfolio to Citigroup. The decline in profit also reflects its increased spending on rewards to prevent its generally affluent customers from switching to competitors such as JPMorgan Chase and Citigroup.

For the second quarter, consolidated expenses were $5.8 billion, up 21% from $4.8 billion last year.

“There were many signposts of progress this quarter,” CEO Kenneth I. Chenault said in a news release, citing 8% growth in adjusted revenue growth, an 8% rise in adjusted card member spending, and strong new card acquisition — particularly among affluent consumers in the U.S.

“The work is not complete, but we’re now moving forward with a stronger foundation and a blueprint for growth in the years ahead,” he added.

ABC News noted that most AmEx cards have needed to paid in full at the end of each billing cycle, but the company recently has been encouraging customers to keep a balance, allowing the company to earn interest on those balances, along with the fees it collects from merchants to accept the cards.

“It gives us a unique opportunity — people we know really well, our existing customers — and try to get more of their borrowing behavior,” CFO Jeffrey Campbell said during an earnings call with analysts.

But in the U.S. consumer services segment alone, provisions for losses totaled $345 million, up 46% from $237 million a year ago, reflecting in part a higher lending write-off rate.

AmEx also confirmed its outlook for full-year earnings of $5.60 to $5.80 per share and said it was on track to cut $1 billion in expenses this year.

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