American Express Company reported its third quarter income from continuing operations of $861 million, down 23 percent from $1.1 billion a year ago. Net income totaled $815 million for the quarter, down 24 percent from a year ago. Consolidated revenues net of interest expense rose 3 percent to $7.2 billion, up from $7 billion a year ago.
Consolidated expenses totaled $4.7 billion, up 4 percent from $4.5 billion a year ago. Consolidated provisions for losses totaled $1.4 billion, up 51 percent from $905 million a year ago. The company's return on average equity (ROE) was 27.8 percent, down from 38.2 percent a year ago.
"While we continued to generate a substantial level of earnings this quarter, bottom line results were down from a year ago as growth in Cardmember spending slowed, lending volumes moderated, and we set aside significant additions to our loan loss reserves," said Kenneth I. Chenault, chairman and chief executive officer. "We saw clear signs earlier this year of a weakening environment and the recent volatility in the financial markets has reinforced our view that consumer and business sentiment is likely to deteriorate further, translating into weaker economies around the globe well into 2009. Cardmember spending is likely to remain soft. Loan growth will be restrained, in part because of the steps we are taking to reduce credit risks, and credit indicators are likely to reflect the continued downturn in the economy and throughout the housing sector.
"Against this backdrop, we are moving ahead with reengineering plans that will free up resources by reducing operating costs and staffing levels. We expect to complete aspects of this work shortly and, as indicated earlier, to recognize a restructuring-related charge in the fourth quarter to cover the costs of these actions,” Chenault said. "Our business model is well positioned to generate earnings and excess capital even in an economic environment that is likely to be among the weakest in many years. We believe we have the capital strength, funding resources and comprehensive liquidity plans to manage successfully through difficult market conditions.
"We remain confident in our ability to emerge from the downturn in a stronger competitive position and continue to see growth opportunities in the payments sector. For now, though, we plan to be very selective with our investment dollars, balancing near term performance with longer term profitability," Chenault said.
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