American Express continued to attempt to attract small businesses. It launches a Business Platinum card. The card is designed specifically for business owners and provides a series of benefits in travel, insurance and rewards.
AXP's Q4 net income decreased from $831 million (72 cents per share) 1 year ago to $172 million (15 cents a share) in its most recent Q4. Revenue was down 11% to $6.51 billion from the year-ago period.
American Express's two subsidiary banks - American Express Centurion Bank and American Express Bank - can issue $13.3B in debt under the US-backed program. This is $4.4B more than originally expected. The money will be used to pay for the $3.6B debt that is maturing this 4th quarter.
AXP and Delta extended their co-credit card agreement. They also established a multi-year deal where AXP would buy $1B of SkyMiles from Delta, and possibly an additional $1B in the coming two years.
As part of a settlement in American Express's lawsuit against Mastercard, American express will receive damages of $1.8 billion. Starting in the third quarter of 2008, Mastercard will pay AmEx $150 million for twelve consecutive quarters. AmEx already settled with Visa in a similar lawsuit, alleging that the two competitors had unfairly blocked AmEx from competing for customers.
American Express announced on January 11, 2008 that it was taking a charge of $275 million related to rising delinquencies among its cardholders. According to the company, default rates rose to 4.3% in the fourth quarter of 2007 from 3.7% in the third quarter. Also, the company expects this rate to rise to as high as 5.3% this year as the housing slump hits credit card users.
In a November 6 filing to the SEC, Capital One raised its prediction for 2008 industry "charge-offs", or uncollectable balances that credit card issuers have to write off, to as high as the mid $5 billion range. This was an increase from its previous estimate of $4.9 billion. Shares of credit card issuers fell sharply during the following day.
On October 31, the U.S. Federal Reserve cut its target federal funds rate to 4.5%, down from the 4.75% it cut the rate to in September, 2007. American Express's stock price fell as a result, despite being on the upward trend since its earnings release on October 22nd. The reason is that, as a lender, American Express may not be able to charge customers as much in interest fees, which could put pressure on revenues.
On October 22, American Express reported a 10% increase in earnings over the third quarter in 2006. This growth topped most analysts' expectations and reflected solid performance throughout a period of general turbulence in the markets. In the wake of a steady decline throughout mid-October, this news drove American Express' stock price up several percentage points.
With a slew of companies releasing earnings during the week of October 15-19, American Express's stock declined steeply. Over the course of the week, reports of lower-than-expected earnings at financial firms, including giants Bank of America and Citibank, raised apprehension about financial services firms in general. As American Express hadn't released earnings yet, this bearish outlook took a toll on its stock.
Gary Crittenden leaves American Express to become CFO of Citigroup (C), causing stocks to drop from $59 to $55.43. He is credited for cutting costs at successfully American Express by laying off thousands of workers. Furthermore, he was the CFO of American Express when it spun off its Ameriprise Financial, Inc. (AMP) brokerage unit.
Dow Jones Industrial Average rally pushes American Express stocks up from $56.40 to $62.78.
1/12/06 - 12/14/06: Stronger than expected job growth rate within U.S. raises stock prices from $59.15 to $59.95.