By Dan Wilchins
NEW YORK (Reuters) - American Express Co on Thursday posted a 6 percent decline in first-quarter profit, but results beat expectations and the company affirmed its full-year earnings forecast, lifting its shares after hours.
The fourth-largest U.S. credit card issuer said revenue rose 11 percent, and total spending on its cards rose 14 percent, with the biggest gains coming from outside the country.
However, American Express is cautious about the outlook for U.S. consumer spending, Chief Financial Officer Dan Henry said. And the company set aside another $881 million for credit losses during the quarter, up 52 percent from the year-ago period, citing higher write-off rates and rising business volumes.
"The biggest negative for anyone with a lending book is losses are going up," said Meredith Whitney, analyst at Oppenheimer & Co in New York. But American Express is better positioned than many banks, she added.
American Express said net income fell to $991 million, or 85 cents a share, from $1.06 billion, or 87 cents a share, in the same quarter last year.
Earnings from continuing operations were 84 cents a share, or 4 cents above analysts' average forecast, according to Reuters Estimates.
American Express said it still expects earnings per share to grow between 4 percent and 6 percent in 2008.
In a statement, Chief Executive Ken Chenault called the U.S. economy "weak and uncertain." CFO Henry said areas with significant decreases in housing values are seeing the greatest deterioration in credit performance.
American Express is not taking an extremely dire view of the economy, for fear of missing the business opportunities available now, CFO Henry said. The company tends to focus on wealthier clients, who do not suffer as much during any economic downturn, but who still seem to be slowing their spending.
RAYS OF HOPE
There are signs that an economic downturn may not be as bad as many have feared. Apple Inc posted a 36 percent increase in profits on Wednesday, and the number of U.S. workers filing initial claims for unemployment fell unexpectedly last week, according to a government report on Thursday.
Hope that the financial sector may be putting its biggest problems behind it broadly lifted related stocks on Thursday.
The company does not forecast the economy's direction, but does have contingency plans if its assumptions turn out to be too optimistic or pessimistic, CFO Henry said.
Revenue after interest expense was $7.2 billion, up 11 percent from the same quarter last year. Total spending on cards rose 14 percent to $166.4 billion. Total cards outstanding were 88 million, up 10 percent.
In extended trading, American Express shares rose 3.8 percent to $46.89 after closing up 80 cents at $45.18 on the New York Stock Exchange. The stock has have fallen 13 percent this year, compared with a 5 percent decline in the Standard & Poor's 500 index.
American Express shares trade at about 14 times expected 2008 earnings, which is much lower than pure credit card networks like MasterCard, but higher than banks that, like American Express, make loans and have credit risk.
(Reporting by Dan Wilchins, Editing by Toni Reinhold, Richard Chang)
