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Jan 19, 2017

American Express profit falls following boost in marketing spending

American Express

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American Express Co posted a lower-than-expected quarterly profit on Thursday as the credit card issuer boosted spending on marketing and promotion to fend off rising competition.

The company said it now expects full-year 2017 earnings to be between US$5.60-US$5.80 per share. AmEx had previously expected to achieve at least US$5.60 per share in 2017.

"That outlook is built on a set of priorities designed to put us in a strong position for 2018 and the years ahead," Chief Executive Kenneth Chenault said.

AmEx's stock has rallied since the U.S. election as investors hope Trump will usher in a new era of looser bank regulations along with economic growth which should drive increased spending among AmEx customers.

The company's shares were down about one per cent in after-hours trading.

Chief Financial Officer Jeffrey Campbell, on a call with analysts, cautioned that quarterly earnings and revenue would be uneven in 2017, with lower growth in the first quarter.

During the quarter, AmEx added 1.6 million cards across its U.S. issuing businesses and 2.4 million on a worldwide basis, Campbell said.

"...we have now effectively replaced Costco as a distribution channel with our own proprietary activities," Campbell added.

AmEx, which has long catered to affluent customers, has struggled since the loss of a lucrative partnership with Costco Wholesale Corp. The portfolio accounted for about eight per cent of the spending on AmEx cards in 2015.

Net income attributable to common shareholders fell to US$825 million, or 88 cents US per share, in the fourth quarter ended Dec. 31, from US$899 million, or 89 cents US per share, a year earlier.

Total revenue, net of interest expense, fell to US$8.02 billion from US$8.39 billion last year.

Analysts on average had estimated a profit of 97 cents US per share, according to Thomson Reuters I/B/E/S.

Up to Thursday's close, AmEx stock had risen about 15.5 per cent since the U.S. election.