Updated from 2:44 p.m. EDT

Credit card giant

American Express

(AXP) - Get Report

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.

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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


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because of its strong credit card franchise.