Thursday, January 10, 2008

American Express Has $275 Million Charge for Quarter (Update4)

By Hugh Son

Jan. 10 (Bloomberg) -- American Express Co., the third- largest U.S. credit-card network, will take a fourth-quarter charge of $275 million as more cardholders failed to repay their debts and the company forecast first-quarter earnings below analysts' estimates.

The stock fell 7 percent in extended trading. American Express, based in New York, said its first-quarter earnings from continuing operations will be less than the 90 cents a share in the same period in 2007, missing the 93 cent average estimate of 12 analysts surveyed by Bloomberg.

American Express adopted a ``cautious view'' for 2008 after cardholder spending slowed and delinquencies rose in December amid a slowing U.S. economy, the company said in a statement today. Capital One Financial Corp., the largest independent U.S. credit-card issuer, said today it may have $5.9 billion in unpaid loans next year, compared with an earlier forecast of $4.9 billion to the ``mid-$5 billions.''

``We did see some negative credit trends among U.S. consumers during December, particularly in California, Florida and other parts of the country most affected by the housing downturn,'' Chief Executive Officer Kenneth Chenault said in the statement.

Write-offs, or loans the company deemed uncollectible, rose to 4.3 percent in the fourth quarter from 3.7 percent in the third, the company said. The fourth-quarter charge will be about $440 million before taxes, the company said.

``Credit-card performance will noticeably deteriorate during the year, given spillover from residential mortgages, weaker economic trends, and higher levels of unemployment,'' Fitch Ratings said today in a report on the U.S. industry.

American Express dropped 17 percent in the past year in New York Stock Exchange composite trading.

The company is scheduled to report fourth-quarter earnings Jan. 28.

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