American Express Misses, Issues Profit Warning
American Express posted earnings well below forecasts, sending its stock down sharply in after-hours trading.
The fourth-largest U.S. credit card issuer saw its profit fall 38 percent as it set aside more money to cover credit losses.
The company said it was no longer on track to boost earnings per share by 4 percent to 6 percent this year because the U.S. economy has slowed, particularly in June.
"While we have been able to generate substantial earnings and returns relative to many in the financial sector, we do not expect to meet or exceed our long-term financial targets until we see improvements in the economy,'' Kenneth Cheanult, chairman and chief executive, said in a statement.
American Express shares fell more than 12 percent in after-hours trading.
The company said it earned $653 million, or 56 cents a share, in the second quarter, compared with $1.06 billion, or 88 cents a share, in the same quarter last year.
Net income was hurt by a $600 million pre-tax addition to U.S. lending-credit reserves, reflecting a deterioration of credit beyond what American Express had expected.
The company is often seen as catering to higher-end consumers compared to most other credit-card issuers.
But delinquencies on its cards have still crept higher as the U.S. mortgage crisis has weighed on the ability of even some wealthy consumers to pay their bills.
"What's getting people nervous is seeing this downturn affect their top super prime customers," said Paul Hickey, co-founder of Bespoke Investment Group. "While it is not surprising that no one is insulated from the crisis, everyone is really concentrating on how even the best of the best aren't doing so hot. It makes people a little weary."
American Express shares have fallen about 21 percent so far this year, compared with a roughly 14 percent decline in the Standard & Poor's 500 index.