American Express Profit Rises - TheStreet

American Express Profit Rises

Shares fall in late trading.
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American Express'

(AXP) - Get Report

second-quarter profit rose 12%, fueled by strong consumer spending in the quarter.

For the quarter ended June 30, the New York credit card and financial services company made $1.05 billion, or 88 cents a share, compared with the second quarter of 2006, in which it made $945 million, or 76 cents a share. Revenue, excluding interest expense, rose 9% to $7.1 billion.

Analysts expected the credit card giant to earn 86 cents on $7.5 billion of revenue.

The second quarter included a $65 million tax benefit from the IRS related to the treatment of certain prior years' fee income. American Express said that as a result of this benefit, it increased its investment in marketing and promotion programs for the second quarter by $68 million ($42 million after taxes).

"Continued growth in cardmember spending and excellent credit quality generated strong earnings for the quarter," said Ken Chenault, the company's chairman and CEO. "Given that momentum, we will be looking to capitalize on opportunities to further strengthen our lead in the payments industry at a time when some key competitors may be cutting back or dealing with weakness in parts of their business."

While the company's U.S. card services unit reported a 2% lower profit of $580 million, its international card and global commercial services had a 22% rise in profit to $277 million. American Express' global network and merchant services had a 33% jump in profit to $266 million.

The company's U.S. profit fell mainly to reflect higher interest expenses and provisions for losses due to increased spending and higher loan volumes on the credit cards, it said.

Shares of the company fell 41 cents to $64.25 after the market closed.