American Express Profit Drops 37% as More Cardholders Default; Shares Fall

from Bloomberg:



American Express Profit Falls on Higher Defaults (Update2)

By Hugh Son

July 21 (Bloomberg) -- American Express Co., the biggest U.S. credit-card company by purchases, withdrew its 2008 earnings forecast after second-quarter profit fell 37 percent on worse-than-expected consumer defaults. The shares slumped 11 percent in extended trading.

Profit from continuing operations declined to $655 million, or 56 cents a share, from $1.04 billion, or 86 cents a year earlier, the company said today in a statement. The average estimate of 17 analysts surveyed by Bloomberg was 82 cents. American Express said it added $600 million before taxes to reserves for U.S. loan losses.

``By almost any measure, the U.S. economy and business environment are much weaker than the assumptions'' the company had in January, Chief Executive Officer Kenneth Chenault said today in a conference call. ``Unemployment rates took the largest jump in over twenty years. Home prices declined at the fastest rate in decades and consumer confidence is at one of its all-time low points.''

The U.S. economic slowdown worsened in June, affecting even American Express's wealthier cardholders with high credit scores, Chenault, 57, said in the call. Late and uncollectible loans were higher than expectations in the quarter and will rise as the year progresses, Chenault said. The U.S. lost 62,000 jobs in June, the sixth straight period of shrinking payrolls.

American Express fell $4.55 to $36.40 in trading after the close of regular U.S. markets at 5:58 p.m. The company's results sparked a 0.9 percent decline in Standard & Poor's 500 Index futures contracts expiring in September. .....(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=adfHH7wZsJjY&refer=home

My donation to Obama is on my Amex, so if I get bailed out for not paying my bill within the first 14 days, Bush pays for my donation.

Stockholders get off

I was just playing along.

I'll have been a good customer and paid my bill off in plenty of time. Which I guess, makes me a bad customer because they're not getting any late fees or interest out of me. C'est la vie.

I had one credit card company add an annual fee after the fact. I told them to remove it or I would cancel the card immediately.

They wouldn't.

So I canceled.

I use their product at my convenience, not theirs. They already get 1-3% of the transaction, they don't need any more.

I work for a manufacturer that only sells to other businesses. 2 months ago we added a notation to every order quote and every invoiced order that all AMX transactions are subject to a 3% service fee. We don't nail every customer - we kind of pick and choose - but nearly everyone has switched over to Visa or MC if they want to pay via card.