American Express profit falls on higher defaults!
NEW YORK - July 21, 2008 - 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, said Chenault. Late and uncollectable loans were higher than expectations in the quarter and will rise as the year progresses, he said. The U.S. lost 62,000 jobs in June, the sixth straight period of shrinking payrolls.
