American Express Co., the biggest U.S. credit-card issuer by purchases, posted a first-quarter profit that exceeded analysts’ estimates as consumers stepped up spending.
Net income rose 1.9 percent to $1.28 billion, or $1.15 a share, from $1.26 billion, or $1.07, a year earlier, the New York-based lender said today in a statement. The average estimate of 25 analysts surveyed by Bloomberg was $1.12.
Chairman and Chief Executive Officer Kenneth I. Chenault, 61, is cutting about 5,400 jobs this year to contain expenses as AmEx rolls out products such as a prepaid card sold by Wal-Mart Stores Inc. to broaden the lender’s client base beyond more affluent credit and charge-card customers.
“We made good headway throughout the business and continue to see very encouraging customer response to initiatives like our reloadable prepaid products and loyalty marketing initiatives,” Chenault said in the statement.
Net revenue for the quarter increased 3.9 percent to $7.88 billion, less than the $8.04 billion average estimate of analysts surveyed by Bloomberg.
American Express fell 13 cents to $64 at 4:53 p.m. in extended trading in New York. The shares had gained 12 percent this year through the close of regular trading, compared with a 9.7 percent advance for the Standard & Poor’s 500 Financials Index of 81 U.S. companies.
Retail sales in the U.S., where AmEx gets about 70 percent of its revenue, dropped in March by the most in nine months, pointing to a slowdown in consumer spending as the quarter drew to a close. The firm is cutting about 5,400 jobs this year to contain expenses as AmEx rolls out products such as a prepaid card sold by Wal-Mart Stores Inc. to broaden the lender’s client base beyond its more affluent charge-card customers.
Worldwide card spending, or billed business, rose 6.3 percent to $224.5 billion, AmEx said in a financial supplement. Customers spent an average of $3,905, an increase of 3.5 percent from a year earlier, when AmEx had fewer cards outstanding. Expenses rose 1 percent to $5.48 billion as the lender reduced compensation costs.
The job cuts announced in January mainly affect travel services as consumers and businesses rely more on digital technology for bookings. Travel commissions and fees declined 3 percent in the first quarter amid a slide in worldwide sales, AmEx said.
The lender had posted a 47 percent drop in fourth-quarter profit and recorded after-tax charges totaling $594 million, including costs tied to severance and changes in how the firm estimates future redemptions of credit-card rewards.
U.S. card income rose 6.9 percent to $804 million and international card income fell 9.6 percent to $178 million, AmEx said.
Vice Chairman Ed Gilligan, 53, who oversees AmEx’s global consumer, small business, merchant and network groups, was promoted to president on April 15, rekindling questions about the company’s succession plans. Chenault, who had been a candidate to succeed Timothy F. Geithner as U.S. Treasury secretary, said a few hours later that he’s in no hurry to retire.
“I’m happy to keep doing this for a period of time,” Chenault said during a round-table discussion at the Economic Club of Washington, D.C. “You shouldn’t do a job that you can’t be passionate about, and I’m really excited about the opportunities that we have as a company, what our future is, and I’m in good health.”
AmEx added more than 575,000 new customers through its Bluebird reloadable prepaid card in the four months after introducing the product at Wal-Mart stores in October, the lender said. The cards, which target so-called “unbanked” consumers, allow holders to write checks and have government benefits such as Social Security payments deposited directly into their accounts, which are now eligible for backing from the Federal Deposit Insurance Corp.
The deal with Bentonville, Arkansas-based Wal-Mart may help AmEx benefit from U.S. caps on debit-card “swipe” fees that have cut annual revenue for the biggest banks by about $8 billion and prompted some lenders to charge customers for checking accounts. Congress, in passing the fee limits as part of the 2010 Dodd-Frank Act, exempted reloadable prepaid cards
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