The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.



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American Express

(AXP) - Get Report

posted 12% year-on-year increase in profits for Q4 as consumers continued to spend greater amounts on their AmEx cards even in the midst of economic uncertainty. For the quarter, the company reported net income of $1.2 billion compared to $1.1 billion last year as total revenue rose by 7% to $7.74 billion.

A surge in card spending by customers, higher travel commissions and growth initiatives taken by the company, such as new prepaid cards, new card issuing partnerships worldwide and other collaborations in the digital commerce space, have aided the company's good quarterly performance.

Chairman and CEO Kenneth Chenault, while reiterating American Express' strength in delivering good results in a slow-growing economy, warned of challenges faced by the financial sector in the form of a deteriorating European debt situation. Competitors,


(V) - Get Report



(MA) - Get Report

, are due to release their fourth quarter results next month.

See our detailed analysis of

American Express' stock here.

Earnings per share improved 15% to $1.01, benefiting from the repurchase of 7 million shares during the quarter. Revenue growth was mainly due to the growth in worldwide billed business that grew 11% to $219 billion, though interest income declined slightly. Consumer average spending per basic card-in-force increased by 8% to $3,933, and the total number of cards-in-force reached 97.4 million. Higher customer spending in the last quarter underscores the improving consumer confidence in the recovery of the U.S. economy, even though markets are roiling with European debt worries.

American Express, which is known for its affluent customer base, maintained good credit quality through the quarter as delinquency rates for U.S card loans fell to 1.4% in Q4 compared to 2.1% same quarter last year, and write-offs were down to 2.5% from 4.8% last year. The company increased its provision for loan losses in Q4'11 to $409 million due to higher credit balances outstanding at the end of the quarter and larger reserve release in the prior year quarter. Expenses increased marginally by 1% y-o-y to $5.6 billion.

Outlook for Growth

American Express also invested in several growth opportunities that supported its performance. It established a $100 million fund catering to expansion needs in digital commerce. Also, with the launch of new prepaid card service, it intends to cater to emerging affluent customers and widen its client base.

Sustained efforts to efficiently manage expenses and credit will enable the company to deliver returns to investors even in the current uncertain business environment. American Express is well-positioned to seize any chance of growth that comes its way.

In 2012, we think the problems in eurozone, if not solved decisively, can adversely affect consumer sentiment and stall the company's card transactions growth.

We are in the process of updating

our price estimate of $51 for AmEx, which is in line with the market price.



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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.