Updated from 2:44 p.m. EDT
Credit card giant
said first quarter-earnings rose 12% from a year ago, reflecting a big increase in finance revenue and income stemming from the securitization of its loan portfolio.
The New York-based financial services firm had net income of $692 million, or 53 cents a share, compared with $618 million, or 46 cents a year ago. The firm beat the Thomson/First Call consensus estimate by a penny for the quarter.
Shares of American Express traded lower following the company's midafternoon release of its earnings report. The stock closed Thursday down 47 cents, or 1.25%, to $37.05.
Total revenue at American Express, the credit card of choice for many U.S. businesses, was $6 billion, up 5% from a year ago. Expenses came in at $5 billion, up 3% over the same time period.
"Despite some specific areas of weakness, we are seeing good overall momentum in our business," said American Express Chairman and Chief Executive Kenneth Chenault.
The strongest gains at the company came in its Travel Related Services division, which includes it credit card operation and lending operation. Net income in the division was $584 million, an increase of 25% from a year ago. Total revenues at the division were $4.5 billion, up 6.8% from a year ago.
The worst performing division at American Express was its financial planning arm, continuing a pattern that began last year as investors lost their taste for the stock market. American Express Financial Advisors earned $133 million, down 27% from a year ago. Revenues in the financial planning division slumped by 2%.
The strong earnings performance at the firm's Travel Related Services division mainly came from a 13% rise in net finance charge revenue and a 27% jump in securitization income. Net finance revenue -- fees and interest generated from the firm's credit card and lending business -- were $458 million. Securitization income, which includes servicing revenue from loans the firm has sold and securitized, totaled $486 million.
Securitization income, however, has been something of a bouncing ball at American Express the past few quarters. In the fourth quarter of 2002, it came in at $518 million; it was $540 million in the second quarter of last year and sunk to $383 million in the first quarter of 2002. In sum, its been a bit unpredictable.
Indeed, the big jump in securitization income this quarter has some Wall Street analysts wondering what to predict for future quarters. "It causes me some concern because I don't know how to project it,'' said Joshua Shanker, an analyst with Blaylock & Partners.
Still, others contend the worst is behind American Express, which had been plagued the past several years by huge losses in the high-yield loan market and a fall-off in business travel following the Sept. 11 terror attacks. Analysts at Egan-Jones Ratings, an independent credit rating agency, say American Express might make an attractive acquisition candidate for
because of its strong credit card franchise.