Thread: American Express Has $275 Million Charge for Quarter (Update

American Express Has $275 Million Charge for Quarter (Update5)

By Hugh Son

Jan. 10 (Bloomberg) -- American Express Co., the third- largest U.S. credit-card network, will take a fourth-quarter charge of $275 million to cover rising customer defaults and forecast earnings this quarter below analysts' estimates.

The stock fell 7 percent in extended trading. American Express, based in New York, said today that first-quarter earnings from continuing operations will be less than 90 cents a share, missing the 93-cent average estimate of 12 analysts surveyed by Bloomberg.

American Express adopted a ``cautious view'' for 2008 after cardholder spending slowed and delinquencies rose in December amid a slowing U.S. economy, the company said in a statement. Capital One Financial Corp., the largest independent U.S. credit-card issuer, said today it may have $5.9 billion in unpaid loans next year, compared with an earlier forecast of $4.9 billion to the ``mid-$5 billions.''

``We did see some negative credit trends among U.S. consumers during December, particularly in California, Florida and other parts of the country most affected by the housing downturn,'' Chief Executive Officer Kenneth Chenault said in the statement.

Write-offs, or loans the company deemed uncollectible, rose to 4.3 percent in the fourth quarter from 3.7 percent in the third, the company said. It expects they will rise to 5.1 percent to 5.3 percent this year.

Sudden Worsening

Chief Financial Officer Daniel Henry said on a conference call today the rate that customers repaid loans worsened ``quite suddenly'' in December, leading to the change in 2008 estimates. The weakness was isolated to U.S. consumers, not overseas or business spenders, he said.

Henry told analysts in October the company's ``affluent and high-spending'' cardholders shelter the company from the problems of borrowers with the riskiest credit histories.

``Credit-card performance will noticeably deteriorate during the year, given spillover from residential mortgages, weaker economic trends, and higher levels of unemployment,'' Fitch Ratings said today in a report on the U.S. industry.

The fourth-quarter charge will be about $440 million before taxes, the company said. It will report earnings Jan. 28.

American Express dropped $3.67 to $45.25 in trading after the close of regular markets. It has declined 17 percent in the past year in New York Stock Exchange composite trading.

Visa Inc. and MasterCard Inc. operate the two biggest card networks by transactions processed. Discover Financial Services, the No. 4 company, and American Express, are lenders that offer cards as well as run networks.

Merrill Lynch & Co. Inc. analyst Kenneth Bruce last month recommended investors sell shares of American Express, Capital One and Discover Financial Services, predicting that consumer spending would deteriorate this year.

http://www.bloomberg.com/apps/news?pid= ... =worldwide

I thank GOD I have no credit cards and I feel sorry for these people as congress has protected these card companys with the new bankruptcy laws they passed.

Unbelieveable they are nothing but crooks!

Originally Posted by SOSADFORUS

I thank GOD I have no credit cards and I feel sorry for these people as congress has protected these card companys with the new bankruptcy laws they passed.

Unbelieveable they are nothing but crooks!

SOSADFORUS...I agree about not having any credit cards (I have one that I rarely use), but I disagree about feeling sorry for the credit card companies.

No disrepsect meant toward your opinion, but these credit card companies extend credit to high-risk borrowers, and they use marketing and advertising strategies to lure people into borrowing more than they can afford. When they get burned with bankruptcies, well...they get what they deserve.

I have no sympathy for credit card companies either and I do know they do suck people in and they don't realize it can take 30 years to pay off a balance - with no new charges.

Originally Posted by americangirl

Originally Posted by SOSADFORUS

I thank GOD I have no credit cards and I feel sorry for these people as congress has protected these card companys with the new bankruptcy laws they passed.

Unbelieveable they are nothing but crooks!

SOSADFORUS...I agree about not having any credit cards (I have one that I rarely use), but I disagree about feeling sorry for the credit card companies.

No disrepsect meant toward your opinion, but these credit card companies extend credit to high-risk borrowers, and they use marketing and advertising strategies to lure people into borrowing more than they can afford. When they get burned with bankruptcies, well...they get what they deserve.

"Americangirl" I have no sympathy for the credit card companys, you miss understood me I meant I feel bad for the card holders

I watched the hearing in congress on this,Congress slapped these companys on the hands for their sham interest rates they were charging these people and let them off scott free. People who started out with a 4% rate, after they got the card to a certain amount they raised the interest to 25% or more, I hear over 30% cent now. It just isn't right.

The only card I keep is a debit card so I know what ever I buy it is paid for.

Your right SOSAD the card companies have hoodwinked a lot of their customers who were given low FIXED RATE cards only to find out in the iddy biddy fine print the card companies reserved the right to raise their rate if the card company deemed it was necessary.

Our Congress should get the bill from card holders because in my thinking that is fraud and breaks the "Truth in Lending" laws. If a card says in BIG letters FIXED RATE then that is what it should mean.

About 6 mths ago a lot of card companies raised their rates drastically.A friend of mine said their rate went from 6.9% to 16% and a lot of consumers could not pay the interest let alone the principle.But the card companies don't mention those facts do they ?

Your right SOSAD the card companies have hoodwinked a lot of their customers who were given low FIXED RATE cards only to find out in the iddy biddy fine print the card companies reserved the right to raise their rate if the card company deemed it was necessary.

Our Congress should get the bill from card holders because in my thinking that is fraud and breaks the "Truth in Lending" laws. If a card says in BIG letters FIXED RATE then that is what it should mean.

About 6 mths ago a lot of card companies raised their rates drastically.A friend of mine said their rate went from 6.9% to 16% and a lot of consumers could not pay the interest let alone the principle.But the card companies don't mention those facts do they ?

pay cash or use a debit card. Save your $$, its not worth much, but it is king if a recession hits. Home prices will tank and be ripe for buying for those without any debt.