AmEx stumbles as Superprime debt goes unpaid.

[SirNitram]

Link

Late Monday, New York-based American Express (AXP:
American Express Company 37.15, -3.75, -9.2%) reported a 38% drop in second-quarter earnings and warned that it won't be able to meet long-term financial targets until the economy improves.
American Express shares, which are part of the Dow Jones Industrial Average (INDU: +46.33, +0.4%) , fell to $37.12 in morning trading.
The company said that even its most creditworthy, long-standing customers felt the effects of the economic slowdown currently sweeping the U.S.
Without giving specifics, AmEx said it plans to cut staff and reduce other costs, noting that the resulting charges will hit results in the second half of 2008.
"With bad debt occurring even in the superprime card segment, AmEx's earnings clearly show that the credit crisis is going upscale, which does not bode well for the U.S. economy," Red Gillen, senior analyst at consulting firm Celent, commented via email.
American Express is known for catering to wealthier customers, so some investors expected the company to withstand the economic slowdown relatively well.
However, Gillen noted that richer clients were often given cards with bigger credit lines. Now that some of these customers are missing payments, the losses are bigger, he said.
American Express said second-quarter net income came in at $653 million, or 56 cents a share, down from $1.06 billion, or 88 cents, earned in the same period a year earlier.
The latest results include $600 million that the company added to reserves to cover bad loans in the U.S., the company said. There was also a separate $136 million charge and a tax benefit of $101 million.
American Express had been expected to earn 83 cents a share, according to the average estimate of 16 analysts in a Thomson Reuters survey.
Hunkering down
"We do not expect to meet or exceed our long-term financial targets until we see improvements in the economy," Kenneth Chenault, chief executive of American Express, said in a statement.
The company had previously forecast earnings-per-share growth of 4% to 6%, but that was based on business and economic conditions at the start of 2008.
"The environment has weakened significantly since then, particularly during the month of June," Chenault added.
The company said it wrote off 5.3% of loans during the second quarter, up from 4.3% in the first quarter and 2.9% in the second quarter of 2007. That's a net rate on a managed basis, which includes loans kept on American Express's balance sheet and other loans that were sold on to investors in securitizations.
Credit-card companies are being hit as slumping house prices, slowing economic growth and rising unemployment limit the ability of some customers to pay back debts racked up on their cards.

There's a saying I've seen in a number of economic discussions now, and I've probably used. It remains relevent. Insofar as this is a Subprime collapse.. We're all Subprime now.

[SirNitram]

Huh. can't get the link to dress.

[Rogue 9]

Huh. can't get the link to dress.

I'm not sure, but it's probably the } tag at the end of the URL messing up the code.

[Admiral Valdemar]

ASPX ones won't dress, annoyingly.

[Galvatron]

Alternatively, you could dress it with a tinyurl.

[The Duchess of Zeon]

Alternatively, you could dress it with a tinyurl.

I never click on tinyurls, ever.

[Raw Shark]

Huh. can't get the link to dress.

Yeah, that's happening to me too since yesterday.

On Topic: Shit, that's my card. I thought they were more careful than this, but I guess the steady increases in my limit for paying on time despite periods of nonexistant income should've tipped me off.

[Beowulf]

Alternatively, you could dress it with a tinyurl.

I never click on tinyurls, ever.

You can create a tinyurl that sends you to a preview of what the hell it goes to. Standard ones shouldn't be clicked on anymore.

[phongn]

ASPX ones won't dress, annoyingly.

Hail to the dressed links. The braces in the original URL choke phpBB's parser and have to be URL-encoded.