American Express profit falls 21%

American Express Co. said on Thursday that its third quarter net income fell 21% but it continued to clean up its balance sheet as loss provisions fell.


The company /quotes/comstock/13*!axp/quotes/nls/axp (AXP 37.10, +0.66, +1.81%) said it earned $640 million, or 53 cents a share in the third quarter, compared to $815 million, or 70 cents a share a year ago.

Total revenues net of interest expense fell 16%, to $6.02 billion from $7.16 billion a year ago. Analysts polled by FactSet Research had expected the company to earn 40 cents a share.

"At the start of the year the economy appeared to be in a freefall, the drop in cardmember spending was accelerating and loan loss rates were rising rapidly," Chief Executive Office Kenneth Chenault said in a press release. "Today, while there is still reason to be cautious about high unemployment levels, we are seeing broad-based improvements in credit quality, the trends in cardmember spending are encouraging, and there are signs that the recession may be approaching an end."

American Express shares have risen 90% in the year to date, and earlier this month Keefe, Bruyette & Woods analysts raised their outlook on the sector on what appears to be a declining deterioration in consumer credit.

"Despite continued underlying fundamental weakness in the economy in the third quarter, card stocks rose meaningfully since the end of the second quarter with issuers in our coverage up about 53%,," they said.

However the analysts also hedged, adding that, "Despite encouraging signs seen in the macro data and within the monthly credit quality trends of card issuers, we still don't have a concrete opinion on whether or not credit quality has peaked given that unemployment levels remain elevated," the analysts wrote.

- Via Market Watch