American Express’s 1Q Profit Up as Spending Rises


American Express said Wednesday that its net income edged up 2 percent in the first quarter, as increased spending by cardholders helped boost revenue for the credit card issuer.

While the latest earnings were above Wall Street expectations, revenue fell short.

Management also announced plans to raise its dividend in the next quarter by 15 percent, to 23 cents, and said it will move to return up to $3.2 billion to shareholders through share buybacks this year. It plans up to an additional $1 billion in buybacks in the first quarter of next year.

The New York-based company said cardholder spending rose 6 percent during the quarter, or 7 percent excluding the impact of foreign currency exchange. Annual cardholder membership fees also increased from a year earlier.

“We are off to a strong start in 2013, thanks to our ability to grow revenue in a slow growth economy, control expenses and maintain a strong balance sheet,” CEO Kenneth I. Chenault said in a statement.

American Express cardholders tend to be more affluent than other credit card users, which was one reason the company has done well during the economy’s slow rise out of the last recession.

Even so, credit card spending traditionally slows in the first three months of the year, as consumers focus on paying down cards after going on a spending spree during the holiday season.

Sales at U.S. retailers declined a seasonally adjusted 0.4 percent in March. That followed a 1 percent gain in February and a 0.1 percent decline in January.

Some of that decline may have been due to an increase in Social Security payroll taxes that went into effect in January and has cut into many Americans’ paychecks.

The payroll tax squeeze was enough to elevate American Express’s revenue for the quarter ahead of the same period last year.

Total revenue grew 4 percent to $7.88 billion from $7.59 billion. But it fell short of the $8.01 billion, on average, that analysts expected, according to FactSet.

Net income rose 2 percent to $1.28 billion, or $1.15 per share, for the three months ended March 31. That compares with net income of $1.25 billion, or $1.07 per share, in the same period last year.

Analysts had forecast adjusted earnings of $1.12 per share.

American Express’s expenses rose 1 percent to $5.5 billion, reflecting ongoing investments and efforts to trim operating expenses.

The company has set itself a goal of keeping annual operating expense growth at less than 3 percent for the next two years as it moves to revamp its business, particularly its travel division.

Meanwhile, the company’s loan losses — mainly card balances that it is unable to collect from customers — remained near all-time lows. The money it set aside to cover bad loans, known as a “provision for losses,” shot up 21 percent to $497 million, but that reflected higher loan loss reserve releases a year earlier.

Shares ended regular trading down 46 cents to $64.13. The stock slipped 13 cents to $64 in after-market trading. Shares are up about 12 percent this year.

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