AmEx earnings dip on credit-related charge
American Express said its fourth-quarter earnings weakened, due to a previously announced charge of $438 million set aside to cover increased write-offs and delinquencies. Still, AmEx cheered its full-year results, with AmEx CEO Kenneth I. Chenault highlighting strong card spending and applications.
While citing “clear signs of a weakening economy and business environment in December,” Chenault said that “strong card-member spending and the nearly 8.5 million new cards we added in 2007 represented a continuing return on multi-year business-building investments.”
As for the charge taken to cover bad loans, credit-card and travel-services giant AmEx seemed relatively unflustered. “The fourth-quarter additions to reserves were appropriate for an environment that is more difficult than we have seen in recent years,” Chenault said. “While our outlook for 2008 remains cautious, and we continue to expect slower earnings growth in the year ahead, we are not changing our fundamental approach to managing the business.”
In its U.S. Card Services business, American Express saw quarterly earnings tumble amid higher credit costs and greater expenses related to Membership Rewards, even as revenue advanced 11 percent from the year-ago period.
Previously, AmEx had warned of slower spending and greater delinquencies and write-offs in the final month of 2007.