American Express Co., the lender that plans to cut 5,400 jobs this year, said profit at its U.S. card business declined 42 percent in the fourth quarter as the firm set aside more money to cover soured loans.
Net income in the segment was $423 million, down from $727 million a year earlier, New York-based AmEx said Thursday in a statement. The company reported the staff cuts and preliminary results, including a 47 percent profit decline and $594 million in after-tax charges, on Jan. 10.
American Express, led by Chief Executive Officer Kenneth I. Chenault, 61, said last week that the largest job reductions will come in travel services as consumers and businesses rely more on digital technology for bookings. The cuts will be spread proportionally in the U.S. and abroad and mostly involve positions that don’t directly generate revenue, the lender said.
“The restructuring will enable the company to maintain a lower expense-growth trajectory, with part of the savings reinvested in new initiatives,” Richard Shane, a JPMorgan Chase & Co. analyst, said in a Jan. 11 note to clients.
American Express, the biggest U.S. credit-card issuer by customer spending, rose 11 cents to $60.73 at 4 p.m. in New York. The shares have climbed about 5.7 percent in 2012 on top of last year’s 22 percent advance.
Fourth-quarter net income was $637 million, down from $1.19 billion a year earlier, as the company took charges tied to severance and changes in how it estimates future redemptions of credit-card rewards, AmEx said last week.
American Express provides clients worldwide with travel- booking and advisory services. Competitors include Internet firms Priceline.com Inc., the most valuable online-travel agency, Expedia Inc. and Orbitz Worldwide Inc.
Dan Schulman, AmEx’s president of enterprise growth, has helped lead the company’s digital and mobile expansion as it seeks a bigger foothold in the growing market for Internet commerce and payments over wireless devices. Schulman, 54, who joined AmEx in 2010 from Sprint Nextel Corp., previously was CEO of Norwalk, Connecticut-based Priceline.
The staff cuts account for about 8.5 percent of AmEx’s 63,500-person workforce, a number that will be mitigated as the company refills some jobs, according to last week’s statement. The total number of employees by year-end will drop by 4 percent to 6 percent and American Express expects to hold increases in annual operating expenses to less than 3 percent, the firm said.
Customer card spending, the company’s biggest revenue source, climbed 8 percent in the three months ended Dec. 31 from a year earlier even after “a brief dip” in late October and early November as Hurricane Sandy affected consumers in the U.S. Northeast, the lender said last week. AmEx, which has the lowest rate of soured loans among the biggest U.S. credit-card issuers, said write-offs in the quarter were 2 percent.
Total revenue rose 5.2 percent to $8.14 billion, the company said. Full-year operating expenses climbed 12 percent to $12 billion from $10.7 billion in 2011, AmEx said. Adjusted 2012 operating expenses, which exclude $580 million in costs tied to a legal settlement with Visa Inc. and MasterCard Inc., rose 8.6 percent.
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