Lower Spending on Each Transaction Drops Dollar Volume for AmEx

As the economy continues to sputter, U.S. card-billed business at American Express Co. fell 15% to $104.8 billion in the second quarter, from $123.5 billion a year earlier, according to results the travel-and-entertainment giant reported on Thursday. Average U.S. cardholder spending during the quarter on so-called basic card issued directly by AmEx dropped 13% to $2,861 per card from $3,293 in 2008's second quarter. Card-billed business outside the U.S. fell 19% to $46.6 billion. Overall, global card-bill business dropped 16% to $151.4 billion in the second quarter from $180.9 billion in the year-earlier period. “Customers continued to pull the cards out of their wallets, so it's really a story of lower spending per transaction,” Daniel T. Henry, executive vice president and chief financial officer, said at an analyst's conference call late in the day. While billed business in the first five months was relatively flat, the year-over-year decline moderated slightly in June and July compared to May, he added. Discount revenue from cardholder spending on the AmEx merchant network dropped 17% on a 16% decrease in billed business during the quarter. The average discount rate was 2.55%, compared with 2.56% in the first quarter. Selective re-pricing initiatives, changes in the mix of business, and volume-related pricing discounts will likely result in further erosion of the average discount rate over time, AmEx said. AmEx's U.S. card base also declined in the second quarter, dropping 7% to 49.8 million from 53.5 million in the year-earlier quarter. However, the card base outside the U.S. increased 6% to 33.9 million, up from 36.6 million a year earlier. The total card count dropped 2% to 88.5 billion from 90.1 million in 2008's second quarter. AmEx canceled approximately 2.7 million inactive cards, primarily in the U.S., to reduce exposure to credit risk, Henry said. The net chargeoff rate in AmEx's credit card portfolio rose to 10% of managed receivables in the second quarter, from 8.5% at the end of the first quarter. Consolidated provisions for losses totaled $1.6 billion, up from $1.8 billion a year earlier. The increase in chargeoffs primarily reflects lower average cardholder receivables and loans, offset by higher writeoffs and past due loans, Henry said. However, the chargeoff rate was between 50 to 100 basis points better than anticipated for the quarter because of better-than-expected bankruptcy trends, he added. AmEx reported net income of $337 million for the second quarter, ended June 30, down 48% from $653 million a year earlier. “Worldwide sales continue to be significantly impacted by the economy,” Henry said.