American Express Earnings Rise As Cardmember Spending Grows -- Update

By Saabira Chaudhuri and Josh Beckerman 

American Express Co. disappointed investors Wednesday despite a fourth-quarter rise in profit, as expenses climbed and the company was hit by a large provision for loans that could sour.

Shares dropped 1.9% in trading after the market closed.

American Express said its fourth-quarter profit was $1.45 billion, or $1.39 a share, compared with $1.31 billion, or $1.21 a share, a year earlier. Revenue, net of interest expense, rose 6.6% to $9.11 billion from $8.55 billion a year earlier, helped by a gain on the sale of its investment in Concur Technologies.

Analysts surveyed by Thomson Reuters expected a profit of $1.38 a share on revenue of $8.53 billion.

"We've made very good progress against the backdrop of an uneven global economy and the negative impact of a strengthening U.S. dollar," said Chief Executive Officer Kenneth Chenault in prepared remarks, adding that the company faces "competitive and regulatory challenges."

Ahead of American Express's earnings, Nomura analyst Bill Carcache highlighted the card company as being his "top pick going into results season," adding that it "faces the most favorable setup for a strong year in 2015."

Wednesday, American Express, which issues credit and charge cards and owns a processing network, said card-member spending rose 6%, while loan balances were up 7%.

Last month, Mr. Chenault said the company was seeing strong holiday spending and that Cyber Monday represented the single largest day of customer spending through its cards in the company's history.

Still, despite the gain on Concur, American Express reported companywide expenses came in at $6.3 billion, up 3%, or 6% when adjusted for foreign exchange impacts, from a year earlier. The company said it had used a big part of the Concur gain on restructuring initiatives, spending on marketing and promotion, and renewing its partnership with Delta Air Lines.

Meanwhile, American Express's provision for loans that could sour came in at $582 million, up 22% from a year ago.

Write to Saabira Chaudhuri at [e-mail] and Josh Beckerman at [e-mail]

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