AmEx Profit Rises on Gain Tied to Costco Portfolio Sale

By Josh Beckerman 

American Express Co. said its second-quarter profit rose 37% on a big gain tied to the sale of its Costco cobrand card portfolio, lower expenses and higher card-member spending.

However, revenue slipped 0.6% to $8.24 billion, but increased 1% excluding currency effects. Revenue growth at American Express has been in focus lately because it has fallen short of internal growth targets. Analysts polled by Thomson Reuters expected $8.4 billion.

American Express has suffered from issues ranging from the loss of its 16-year exclusive relationship with warehouse-club retailer Costco Wholesale Corp., to heavy competition, to declines in corporate travel budgets.

Chief Executive Kenneth Chenault said earlier this year that the company was "taking significant actions to change the trajectory of our business" and would cut $1 billion in costs. That came a year after AmEx outlined plans to cut 4,000 jobs.

The company said Wednesday that its second-quarter expenses fell 15% to $4.8 billion.

Over all, American Express reported a profit of $2.02 billion, or $2.10 a share, up from $1.47 billion, or $1.42 a share, a year earlier. The latest results included a $677 million gain tied to the sale of the Costco portfolio. Analysts expected $1.95 a share.

American Express said it added 3 million new proprietary cards during the quarter.

Total loans rose 11% to $61.1 billion, excluding the Costco and JetBlue Airways Corp. co-brand cards loan portfolios, which were both sold this year.

The company backed its outlook for earnings excluding items of $5.40 to $5.70 a share this year and at least $5.60 in 2017.

After the Federal Reserve didn't object to the company's capital plan, American Express said June 29 that it planned to boost its dividend by 10% and buy back up to $3.3 billion of stock through the second quarter of 2017.

Visa Inc. and Capital One Financial Corp. are slated to report quarterly results Thursday, while MasterCard Inc. is scheduled for July 28. On Tuesday, Discover Financial Services said total loans rose 4%, but credit-card spending was on the low of end of its target range, partly due to aggressive cash-back promotions by rivals.

Write to Josh Beckerman at [e-mail]

(END) Dow Jones Newswires

July 20, 2016 16:32 ET (20:32 GMT)

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