Credit Card Spending Lifts American Express

Updated from 4:52 p.m. EDT

American Express (AXP Quote) said earnings rose 11% in the second quarter, thanks to increased spending on its credit cards, higher lending balances and better market conditions.

The nation's third-largest credit card issuer also expects to beat analysts' estimate of $2.26 a share this year, but said profit isn't likely to exceed $2.29, as the company increases spending on business-building initiatives.

For the second quarter, American Express earned $762 million, or 59 cents a share, compared to $683 million, or 51 cents a share, last year. Sales rose to $6.36 billion vs. $5.95 billion last year.

Analysts surveyed by Thomson First Call had been looking for a profit of 57 cents a share on sales of $5.9 billion.

"It was a great quarter, very solid metrics," said Michael Cohen, an analyst at CIBC World Markets. Cohen said the quarter was driven mostly by the firm's Travel Related Services unit.

The TRS unit, which includes the firm's credit card and lending operations, saw profit rise 12% to $634 million during the quarter. That was helped by a 17% rise in securitization income and a 9% increase in net finance revenue, or fees and interest. American Express has been attempting to broaden the AmEx card's use and has encouraged merchants to accept the card for day-to-day purchases.

"The company has done an outstanding job of offsetting weakness in corporate spending with growth in consumer, small business and purchasing card initiatives," Cohen said.

After a disappointing first quarter, American Express Financial Advisors reported second-quarter net income of $157 million, an 8% increase over last year, thanks to a 31% jump in investment income.

Still, Chairman and Chief Executive Kenneth Chenault said despite recent improvements in the financial markets, average equity values were below last year's levels. "This, along with net outflows, contributed to lower levels of assets under management and management fees compared with year-ago levels."

Profit at American Express Bank rose 45% to $27 million.