• Wednesday, February 21, 2024
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BusinessDay

American Express profit doubles on advance in spending

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American Express Co., the biggest credit-card issuer by purchases, said fourth-quarter profit doubled as consumer spending climbed.

Net income was $1.3 billion, or $1.21 a share, compared with $637 million, or 56 cents, a year earlier, when results were hurt by one-time charges including costs tied to job cuts, the New York-based company said last week in a statement.

Excluding some legal costs, profit was $1.25 a share, matching the average estimate of 25 analysts surveyed by Bloomberg.

AmEx, the second-best performer in the Dow Jones Industrial Average last year, is benefiting from a pickup in household wealth and consumer confidence that has propelled purchases on cards and mobile devices.

Chief Executive Officer Kenneth I. Chenault is seeking to broaden the client base, signing deals with Wells Fargo & Co. and U.S. Bancorp to issue AmEx-branded cards.

“Results reflected a healthy increase in billed business in the U.S. and internationally,” Chenault, 62, said in the statement. “We ended the year on a strong note, with card member spending up 8 percent despite mixed reports during the holiday shopping season.”

American Express slipped 53 cents to $87.25 Thursday in extended trading in New York. It increased 58 percent last year, outpacing the Dow’s 27 percent advance.

Worldwide card spending, or billed business, increased in the fourth quarter to $254 billion, AmEx said in a financial supplement. That boosted revenue, which rose 5 percent to $8.55 billion. Total expenses fell 8 percent to $6 billion from a year earlier.

U.S. retail sales rose 0.2 percent last month after a 0.4 percent advance in November, Commerce Department figures showed Jan. 14. An improvement in joblessness, a healing housing market, stock market gains and holiday-season deals prompted more consumers to spend during the month.

“American Express is a levered play on GDP growth,” Bill Carcache, an analyst at Nomura Holdings Inc., said in a Jan. 6 research note. “Any signs of growth in AmEx’s fee-based businesses would support the view that we are seeing the evolution of AmEx into a higher-return, lower-risk business.”