Credit Commentary

Amex’ Earnings Fall by 84% in second quarter

By Zarana on Sunday, July 26 2009


American Express reported an 84% YOY drop in second-quarter earnings per share, at the same time expressed increased optimism for the coming quarter, reflecting improved trends by delinquent credit card and increase in purchase volume.
Amex posted earnings of $337m, or 9 cents per share, compared with earnings of $653m, or 56 cents per share, in the second quarter of last year. Excluding the cost of a buy-back of preferred shares from the US Treasury, which amounted to 18 cents per share, the company earned 27 cents per share.
Moreover, U.S. card services segment reported a loss of $200 million compared with a net income of $25 million a year ago. Additionally, the revenues fell by 22% from previous quarter driven by rising credit losses and lower securitization income.
Amex’s, who typically have higher credit profiles than customers of other card companies, reported net default rate of 10%, nearly double its rate from the same period last year and up by 150 basis points from 8.5% in the first quarter. In spite of those losses, the company was encouraged by recent trends.
Spending by basic cardholders sank 15% in the second quarter than a year ago, but at the same time it has increased by 8% from previous quarter as a hope of recovery in the credit card business. In addition, the purchases per credit card have increased by 16% from previous quarter.
Secondly, in line with the industry trend the delinquency rate for Amex has inched down to 4.4% from 5.1% in first quarter, a 70 basis points decline. While its provision for loan losses were $1.58 billion, down 13% from a year earlier and 12% from the first quarter.