Card Strength Spurs American Express Quarterly Growth

American Express late yesterday announced that quarterly earnings rose 16 percent in the second quarter of 2005, with net income climbing to a record $1 billion from $876 million one year ago. American Express Travel Related Services also reported record growth, with second-quarter revenue rising 11 percent from last year and net income at $808 million, up 10 percent from $732 million in 2004.

"Strong momentum in our card business and excellent credit quality drove another quarter of record earnings," said Kenneth Chenault, chairman and CEO, in a statement, adding that Amex added 1.2 million cardholders over the past three months. "Cardmember spending rose sharply among consumers, small businesses and corporate clients. The volume growth was excellent throughout our card-issuing business and from our bank network partners." Amex's partnership with rival credit card lender MBNA presumably contributed to the quarter's record card growth, but the future of that relationship may be jeopardized the bank issuer's recent acquisition by Bank of America.

Chenault also noted that the company is on track to spin off its financial services division, American Express Financial Advisors, which reported a 19 percent decline in second- quarter net income, at the end of the third quarter.

In following with its card growth over the second quarter, Amex experienced an 18 percent spike in marketing, promotion, rewards and cardmember services expenses, which contributed to a 12 percent increase in total expenses. The company attributed a 13 percent increase in human resources to severance costs derived from recent restructurings, as well as increased employee benefits costs.