Happy Spending with American Express

Best Growth Stock – American Express Co.’s preliminary results which were released on 19th of January announced a profit of 49% in the fourth-quarter profit.

A remarkable rise was seen as compared to its income in 2009 which was 60cents per share or $707 million to 88cents per share or $1.05 billion even after paying preferred dividends. There was also a rise in its revenue by 13% to $7.32 billion as compared to $6.49 billion in the previous year

The preliminary results also included the charges of Job Cuts, which amounted $113million which were announced in the previous week. In spite of all this, they managed to make a profit of 94cents per share. Wall Street number crunchers had anticipated a profit of 95cents per share on the revenue of $7.28 billion.

The driving force behind exemplary rise in the fourth-quarter was the recorded high expenditure by the customers and cut in reserves. Overall spending by the customer which was $172.6billion last year rose by 15% this year to $197.7billion in the fourth quarter. The calculated expenditure per person went up to $3,629 which amounted to an increase by 13% as compared to the fourth quarter of 2009. In the above rise the number of cards held by the US customers remained steady at 48.9million whereas American Express Co. was successful in increasing its international numbers by 8% i.e. from 39million last year to 42.1 million this year.

The Chief Financial Officer of American Express Co., Dan Henry stressed the change of behavior of their customers in payment of the bills which benefited the growth. There were more and more customers paying off their bill every month rather than carrying balances for the future bills, this behavior of the customers of AmEx. is expected because of its policy to issue cards to affluent customers only. Due to the above shift there was a total fall of 40% in their net write offs i.e. from $194million last year to $117million this quarter. So the loans which were 30days overdue dropped to 2.1% from 3.7% which marked a leading indicator for write-offs. Due to such improvement the company had to keep aside less money in order to cover the unpaid balances of the customers.

There was an overall increase in American Express expenditure. The company spent on giving rewards and services to the card holders, there was a 31% hike in salaries of the employees and other employee benefits were also introduced. There was a leap of 27% in expending on professional services. So the overall expenditure went from $4.78billion in last year to $ 5.61billion this year which amounted to a rise on 17%.

AmEx is also planning to take up shifting of its branches from 1 city to another which would affect number of jobs in various areas. This shall affect jobs of around 3500 people.

The net-income for American Express Co. rose to $3.35 per share or $4.01billion in 2010, from $1.54 per share or $1.8billion in 2009. Revenue also leaped from $24.52billion to $27.82billion.