Eye on Earnings: American Express, USA Technologies, Fifth Third

Lending took a bit out of travel-and-entertainment card leader American Express Co.'s second-quarter profits, but discount revenue still grew. Meanwhile, Fifth Third Processing Solutions outperformed its struggling parent company, and USA Technologies Inc. reported that transactions on its network of unattended machines more than doubled while sales of contactless card-reading devices for vending machines showed strength. ? AmEx's second-quarter earnings fell 38% from a year earlier to $653 million as slower consumer spending and higher loan losses took their toll. Average spending on AmEx's so-called “basic” cards issued directly by the company in contrast to those issued by bank partners grew a paltry 1% from year-earlier levels to $3,293. But other parts of AmEx's card business showed more spark. While U.S. charge volume grew a modest 7% to $123.5 billion from $115.7 billion in 2007's second quarter, international volume rose 26% to $57.4 billion from the year-ago period's $45.4 billion. The international volume growth helped make for a total 12% increase in billed business and a 9% increase in discount revenue to $3.99 billion. The average discount rate was 2.56% of the sale in the second quarter compared with 2.57% in the 2007 period. ? Malvern, Pa.-based USA Technologies this week reported that more than 38,000 terminals were connected to its USALive Network as of June 30, more than double the 15,000 plugged in a year earlier. The network processes payment transactions and other data from vending machines equipped with USA Technologies' card readers, as well as laundry machines, PCs, copiers and other devices USA Technologies serves. The company also said that in its fourth fiscal 2008 quarter ended June 30 it processed 3.9 million transactions worth $10.4 million, up from 160% and 55%, respectively, from 1.5 million transactions worth $6.7 million in fiscal 2007's fourth quarter. More than 10,000 orders for USA Technologies' G7 ePort vending machine terminals that read contactless cards and traditional magnetic-stripe cards are in the pipeline. USA Technologies also reported that it is working with major cellular-telephone companies to introduce Near Field Communications (NFC) technology to vending, giving consumers the ability to make purchases from vending machines with cellular phones. The first pilot program is underway with manufacturer Nokia at Gonzaga University in Washington State. The company reported quarterly revenues of $5.02 million, up 105% from $2.45 million in the year-earlier quarter, but did not report earnings. It said it would disclose audited numbers for fiscal 2008 in September. ? Cincinnati-based Fifth Third Bancorp lost $202 million in the second quarter, but its Fifth Third Processing Solutions subsidiary, one of the nation's largest merchant acquirers, reported electronic payment-processing revenues of $235 million in the second quarter, up 15% from $205 million in the year-earlier period. Fifth Third also said its interchange revenue from issuing credit and debit cards grew 20% from the previous year, driven by higher card usage and an increase in the average dollar amount per debit transaction.