Monday October 20, 2008
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Shares of American Express (AXP) are climbing $1.50 or 6.16% in after hours trading, after the company reported its third quarter 2008 earnings.

Highlights from the report include:

Consolidated revenues net of interest expense rose 3 percent to $7.2 billion, up from $7.0 billion a year ago.

Consolidated expenses totaled $4.7 billion, up 4 percent from $4.5 billion a year ago.

Net income came in at $815 million. This was a 24% decline from the same period a year ago,

Earnings per share of $0.70, representing a 22% decline from the $0.90 reported 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 Wall Street seems happy with the news based on after hours trading of the company’s shares, there were several negatives in the earnings release that should raise concern about future earnings.

According to the company, “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. Card member 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.”

Additionally, provisions for losses rose to $941 million, up from $638 million a year ago. That represents a 47% rise. Third quarter net income for the U.S Card Services division was $244 million, down from $592 million a year ago, a 58% decline and the company said that human resources and other operating costs rose 7% as a result of increased tech spending and increased credit and collection costs.

Also of note was that net income from the International Card Services division, dropped 52% to $67 million, from $140 million.

Tags: American Express  Earnings