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NEW YORK: US finance giant American Express on Monday reported second-quarter net profit fell 38 percent from a year ago to 653 million dollars and said the outlook is clouded by a "weaker" American economy.
The credit card and financial group's results were disappointing at 56 cents a share, far below the average Wall Street estimate of 83 cents per share.
Revenues rose eight percent from a year ago to 7.5 billion dollars. But the company cited higher write-offs and set aside 600 million dollars "that reflects a deterioration of credit indicators beyond our prior expectation."
"Fallout from a weaker US economy accelerated during June with consumer confidence dropping, unemployment rates moving sharply higher and home prices declining at the fastest rate in decades," said Kenneth Chenault, chairman and chief executive.
"Consumer spending slowed during the latter part of the quarter and credit indicators deteriorated beyond our expectations. In light of the weakening economy, we are no longer tracking to our prior forecast of four to six percent earnings per share growth."
The company said the outlook has weakened "significantly" since the latest projections in January, with the impact of the housing crisis spilling over to other areas such as credit card payments even if cardholders are in a category called "super-prime."
"The scope of the economic fallout was evident even among our longer term, super-prime cardmembers," Chenault said.
"Newer cardmembers - whose write-off levels are typically higher than the total portfolio - are also feeling the impact, but we are confident that the relationships we've built during the last several years will generate attractive economics over their life cycle."
Cheault said the company will be trimming down in the face of the weak environment, including unspecified job cuts.
"Our aim is to free up resources by reducing overall costs and staffing levels," he said.
"While we have not yet quantified the impact of these activities, we expect them to result in restructuring-related charges during the second half. 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." - AFP/de
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