American Express Co. will eliminate 5,400 jobs this year, mostly in travel services, as consumers and businesses rely more on digital technology for bookings.
American Express Co. corporate credit cards. Photographer: Andrew Harrer/Bloomberg
The lender posted a 47 percent drop in fourth-quarter profit and recorded after-tax charges totaling $594 million, including costs tied to severance and changes in how the firm estimates future redemptions of credit-card rewards, New York- based AmEx said yesterday in a statement.
"Travel has gone through a great deal of change," Chief Executive Officer Kenneth I. Chenault said in a conference call with analysts. The economics of corporate travel has "changed more dramatically over the years than any part of the business."
American Express, the biggest U.S. credit-card issuer by purchases, also provides clients worldwide with travel-booking and advisory services. Competitors include Internet firms Priceline.com, the most valuable online-travel agency, and Expedia Inc. (EXPE)
The lender reported preliminary results ahead of its formal earnings announcement scheduled for Jan. 17. In the third quarter, travel commissions and fees declined 3.1 percent to $465 million from a year earlier, according to an Oct. 31 regulatory filing.
Fourth-quarter net income declined to $637 million from $1.19 billion a year earlier, according to the company. Adjusted profit, which excludes one-time items, was $1.09 a share, 3 cents more than the average estimate of 27 analysts surveyed by Bloomberg. The after-tax charges include $287 million in severance costs and $212 million tied to changes in how the firm calculates redemptions.
AmEx also took a $95 million charge that "deals with fees, interest and bonus rewards as well as an incremental expense related to the consent orders entered into with regulators last October," according to the statement.
The U.S. Consumer Financial Protection Bureau announced Oct. 1 that AmEx would pay $112.5 million to settle claims it deceived customers who signed up for a particular card, leading them to believe they would get $300 and bonus points. The firm also charged illegal late fees, discriminated against some older applicants and failed to report consumer disputes to credit- reporting companies, regulators said.
Source: Bloomberg | Dawn Kopecki