Massive profit rise posted by American Express

The third quarter profits of American Express have increased steeply to touch 71% even as customers have gone ahead and spent more, with a 14% increase reported. The company has also faced some losses because of bad card loans. The credit card customers of AmEx mostly consist of companies and consumers in a good shape and almost heeled from the economic downturn. An insight into the optimism of these customers is clearly evident from the results of the third quarter for AmEx. The profits of the company also represent the changing dynamics of the credit card industry after being hit by the economic downtourn.

Part of the profits is because of reduction in losses due to bad loans along with some demand for new loans. However, most credit card members are still managing their finances carefully which is suggested by the fact that the volume of lending is way below what it was before the recession. The shares of AmEx were up by 54 cents or 1.4% to reach 40.27 dollars on the New York Stock Exchange. AmEx unlike most other credit lending companies takes care of both lending as well as processing part of the transactions to cut the middle man cost. It issues credit cards where an outstanding balance can be carried as well as charge cards that need to be paid off in full at the end of every month. A large revenue stream for the company is from the fees charged on merchants, including groceries and gas stations and other banks for the processing of credit card payments made by customers.

The net income of the company for the third quarter was 1.09 billion dollars which represents earnings of 90 cents per share. This is considerably above the 640 million dollar mark at the same time the previous year. This also slightly beats the analysts’ forecast of 90 cents per share earnings. The US card business showed a net income of 595 million dollars, more than three times the amount a year ago. American Express has also stashed away 373 million dollars for protection against future losses. This amount though is 68% less than last year’s number, primarily because of lower rate of delinquencies and less expectations to have any losses in the near future. This has also boosted the income of the company. The company has written off 5.2% of the US card loans, 1% down from the previous quarter and more than 3.5% down from the 3^rd quarter last year.