Credit card giant American Express Company (AXP) said Thursday that its second quarter profit fell 48%, amid mounting loan losses and the economic recession.
The New York City-based company reported second quarter net income of $337 million, or 9 cents per share, down from $653 million, or 56 cents per share, in the year-ago period. Excluding one-time charges of 18 cents per share related to buying back preferred shares from the U.S. Treasury, AmEx saw adjusted profits of 27 cents per share.
Revenue plunged 18% from last year, to $6.09 billion from $7.46 billion.
On average, Wall Street analysts expected slightly lower profits of 26 cents per share, excluding items, on higher revenue of $6.29 billion.
American Express Q2 Earnings Notes
- Non-interest revenue fell 18% to $5.35 billion.
- Interest income plunged 31% to $1.29 billion.
- AmEx set aside $1.6 billion for loan losses in Q2, compared with $1.8 billion last year, but difference was offset by higher write-offs.
- Loan-loss rates in U.S. credit card business almost doubled to 10% from 5.3% last year.
- Card services segment saw a net loss of $200 million, down from a profit of $21 million a year ago.
- Overall expenses were cut by 16% to $4.1 billion.
AmEx CEO Kenneth Chenault said that said despite the lackluster quarter, some signs of a potential recovery in June were seen, including a smaller-than-expected number of people falling behind on payments and less bankruptcy filings.
American Express shares fell $1.12, or -3.9%, in morning trading Friday.
The Bottom Line
We continue to avoid shares of AXP, as we have since our early June coverage began, when the stock was trading at $44.65. The company has a dividend yield of 2.44%, based on last night’s closing stock price of $29.45. The stock has technical support in the $22 price area. If the shares can firm up, we see overhead resistance around the $30-$33 price levels. We would remain on the sidelines for now.
American Express Company (AXP) is not recommended at this time, holding a Dividend.com DARS Rating of 3.1 out of 5 stars.
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