American Express profit beats Wall Street estimates

NEW YORK American Express (AXP) 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 came ahead of Wall Street expectations, revenue fell short.

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

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"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 recession.

Even so, credit card spending traditionally slows in the first three months of the year, as consumers focus on paying down cards after more spending 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 cut into many Americans' paychecks.

Despite the payroll tax squeeze, American Express revenue for the quarter came in ahead of the same period last year.

"In the quarter, spend growth continued to be healthy, and was relatively consistent with the past several quarters, despite the negative impact of having an extra billing day in the first quarter of 2012 because of leap year," Dan Henry, American Express' chief financial officer, said during a conference call with analysts.

Total revenue grew 4 percent to $7.88 billion, but it fell short of the $8.01 billion 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 $1.25 billion, or $1.07 per share, in the same period last year.

Analysts had forecast adjusted earnings of $1.12 per share.

Expenses rose 1 percent to $5.5 billion, reflecting ongoing investments and efforts to trim operating costs.

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 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 at $64.13 amid a broad market decline. The stock fell 38 cents to $63.75 in after-hours trading. Shares are up about 12 percent this year.