Impacted by slowdown in cardmember spending, record credit losses and restructuring charges, American Express reported a steep fall in Q2 earnings. It has reported Q2 income of $342 million, down 48% from $660 million a year ago. Diluted earnings per share from continuing operations were $0.09, down 84% from $0.56 a year ago. The per share results include a reduction of $0.18 from a repurchase of preferred shares from the US Treasury Department. Excluding this impact, adjusted diluted earnings per share from continuing operations were $0.27.
Consolidated total revenues net of interest expense declined 18% to $6.1 billion, down from $7.5 billion a year ago. At the end of the quarter, the company’s tier-one risk based capital ratio was 9.6%. Its tier-one common risk based ratio was also 9.6%, which compared favourably to the regulatory benchmark of 4%. The lower tax provision for the quarter reflected lower pretax income and the impact of recurring permanent benefits.
Kenneth Chenault, chairman and CEO, American Express, said: Although it is still too early to point to any sure signs of an economic recovery, the number of cardmembers who are falling behind in their payments, the volume of bankruptcy filings and the level of loan write-offs were better than we had expected. Despite continued weakness in cardmember spending and historically high levels of loan losses, we generated $342 million of earnings from continuing operations, strengthened our capital base and further expanded our deposit gathering initiatives.
Given the cutbacks in discretionary spending among affluent consumers, small businesses and corporations, our overall level of billed business is performing well relative to most of the other major card issuers, he added.
