AmEx profit hit by loss of Costco deal
A merican
Express Co’s fourth-quarter profit fell 8% from the same period a year earlier, hurt by the loss of the Costco credit card business and higher expenses to retain customers.
The company said it had a slight increase in delinquencies, a not good sign for a company whose customers are marketed among the most creditworthy and wellto-do in the country.
The New York-based credit card company said it earned $825 million, or 88 cents a share, down from $899 million, or 89 cents per share, in the same period a year ago.
The results came in well short of what Wall Street analysts were looking for, who expected AmEx to earn 98 cents per share, according to FactSet Research Systems Inc.
AmEx is in transition following the loss of the Costco credit card business in 2016. The retail giant moved its credit card processing to Visa, and Citigroup won the credit card portfolio. That partnership ended in June.
Before this happened, Costco represented a sizeable portion of American Express’ credit card loans and its billed business. To recover, AmEx has been focusing on retaining those customers through promotions and marketing and developing new offerings.
“While we continue to operate in a very challenging environment, we ended the year in a stronger position than we started and have built momentum across our business,’’ Kenneth Chenault, AmEx chairman and chief executive officer, said in a prepared statement.
AmEx’s US consumer business, the company’s biggest division by revenue and profit, reported quarterly earnings of $351 million, down 35% from a year earlier. The year-earlier quarter included revenue from Costco.
The US consumer business had to set aside $363 million to cover delinquencies and charge-offs, up 9% from a year ago.
Despite the tick-up in charge-offs and delinquencies, AmEx chief financial officer Jeffrey Campbell said that there has been “no change’’ in the company’s outlook on its credit metrics.
The credit card issuer and global payments company posted revenue of $8.02 billion in the period, beating analysts’ estimate of $7.93 billion, according to FactSet.