American Express Earnings Strong as Expected

American Express Co. (AXP) said Monday fourth-quarter profit rose 17 percent, driven by strong holiday and travel-related sales, as well as gains in its asset management business.

The New York-based financial services company said card members posted record spending during the holiday shopping season for goods and services at retailers and at everyday spending locations like grocers, drugstores and gas stations. Travel sales were driven higher by consumers and businesses taking advantage of falling aio an improved stock market, which also attracted new customers.

The company, whose shares rose nearly 2 percent after the midday announcement, reported quarterly earnings of $896 million, or 71 cents per share, compared with $763 million, or 59 cents per share, a year earlier.

Analysts had expected earnings of 70 cents a share, according to Reuters Estimates.

Card-member spending rose 17 percent, helped by 4.9 million net new cards and greater spending by individual cardholders, especially during the year-end holiday season.

The financial services company said preliminary industry data for credit card spending (search) during the holiday season suggests American Express outpaced competitors and gained market share at one of the fastest rates in the past five years.

However, expenses were driven 11 percent higher during the quarter mainly by a 26 percent increase in marketing, promotion, rewards and card-member services expenses.

"It looks like they had a pretty strong quarter but their expenses rose faster than their revenues," said Wayne Bopp, analyst at Fifth Third Investment Advisors which owns 200,000 shares of American Express. "The negative operating leverage is a concern. People with positive operating leverage are the ones cutting expenses. We've focused on revenues growth for some time and now it seems like we are now focusing on expense management."

Revenue at American Express rose to $7.8 billion in the quarter, up 10 percent a year earlier.

Travel-related services quarterly net income rose 20 percent to $729 million, helped by a healthy jump in commissions and fees. Distribution and management fees at American Express's asset management business rose 8 percent in the fourth quarter because of higher levels of assets under management.

"Record levels of card-member spending along with higher client asset levels generated double digit revenue growth throughout the year," American Express's Chief Executive Officer Kenneth Chenault (search) said in a statement.

Consolidated expenses totaled $6.6 billion, up 11 percent from $5.9 billion from a year earlier.

Shares of American Express closed up 67 cents, or 1.3 percent, at $52.60 on the New York Stock Exchange (search) on Monday.