American Express profits slump on higher costs but beat estimates
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July 19 (Reuters) - American Express Co's profit fell less than expected in the second quarter, as higher spending by card members made up for increased costs from offering rewards.
AmEx said card member spending was up 8 percent in the second quarter ended June 30, when adjusted for currency changes and the impact of losing a longtime partnership with warehouse club retailer Costco Wholesale Corp.
Discount revenue, which makes up the bulk of AmEx's total revenue and represents fees paid by merchants to the company, was flat at $4.82 billion.
However, net income attributable to shareholders fell to $1.31 billion, or $1.47 per share from $1.98 billion, or $2.10 per share, partly reflecting the loss of the Costco partnership as well as a $1 billion gain in the year-ago quarter on the sale of the related loan portfolio.
Analysts on average had expected a profit of $1.43 per share, according to Thomson Reuters I/B/E/S.
But the drop in net income was also the result of a 21 percent jump in total expenses.
New York-based AmEx has increased spending on rewards to prevent its generally affluent clientele from switching to JPMorgan Chase & Co and Citigroup Inc, which have rolled out lucrative rewards to woo customers as they seek to boost their credit card businesses.
For JPMorgan and Citi, post-financial crisis regulations have made the credit card business more profitable than businesses such as mortgages and capital markets trading.
Both companies reported upbeat results in their card businesses in their earnings last week.
AmEx said it spent $1.93 billion on card member rewards in the second quarter, up 9 percent from a year earlier.
Total revenue, net of interest expense, rose 1 percent to $8.3 billion in the quarter.
(Reporting by Pallavi Dewan and Nikhil Subba in Bengaluru; Editing by Sai Sachin Ravikumar)
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