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American Express Feels Credit Crunch

With defaults on rise, company taking hefty fourth-quarter charge

By Matt Cantor,  Newser Staff

Posted Jan 10, 2008 7:33 PM CST
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(Newser) – With consumer spending slowing and credit defaults on the rise, American Express said today it will take a fourth-quarter charge of $275 million to build up its charge-card reserves, the Wall Street Journal reports. The company, which cited housing turmoil as a contributing factor, also predicted earnings to come in lower than analysts' estimates.

Though “overall cardmember spending” stayed sound, said chief Kenneth Chenault, “we did see some negative credit trends among US consumers during December, particularly in California, Florida, and other parts of the country most affected by the housing downturn.” The company expects fourth-quarter per-share earnings to be 70-72 cents, down from last year's 73 cents and well under analysts' estimates of 87 cents.

Signs for American Express, Master Card and Visa credit cards are shown on a New York store's door on in this July 23, 2007 file photo. (AP Photo/Mark Lennihan, file)
Signs for American Express, Master Card and Visa credit cards are shown on a New York store's door on in this July 23, 2007 file photo. (AP Photo/Mark Lennihan, file)   (Associated Press)
An American Express card welcome sign is seen above all others at McGerks Pub & Grill in Baltimore in this Jan. 22, 2007 file photo. (AP Photo/Chris Gardner, file)
An American Express card welcome sign is seen above all others at McGerks Pub & Grill in Baltimore in this Jan. 22, 2007 file photo. (AP Photo/Chris Gardner, file)   (Associated Press)
Kenneth Chenault, Chief Executive Officer of American Express attends the 2001 Catalyst Awards dinner in New York, in this April 2, 2001 file photo. (AP Photo/Stuart Ramson, file)
Kenneth Chenault, Chief Executive Officer of American Express attends the 2001 Catalyst Awards dinner in New York, in this April 2, 2001 file photo. (AP Photo/Stuart Ramson, file)   (Associated Press)
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