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American Express 2Q profit rises 9 percent

By WTOP Staff

ALEX VEIGA
AP Business Writer

American Express Co.’s net income grew 9 percent in the second quarter, as spending by cardholders increased and the credit card issuer set aside less money to cover potential credit losses. A one-time gain related to the company’s business travel division also helped boost results.

The New York company’s latest earnings beat Wall Street’s expectations, but its 5 percent increase in revenue fell short.

Spending by holders of American Express cards grew 9 percent during the April-June period, reflecting gains in the U.S. and abroad. That helped drive U.S. card services revenue up 6 percent to $4.5 billion, while international card services revenue rose 7 percent to $1.4 billion.

Card loan balances grew 6 percent in the U.S. from a year earlier and 5 percent globally.

“Our loan growth continues to come primarily from greater spending by our card members and is not due to any significant change in our underwriting strategy,” Jeff Campbell, American Express’ chief financial officer, said during a conference call with Wall Street analysts.

American Express cardholders tend to be more affluent than other credit card users, which is one reason the company has done well as the nation’s economy has gradually improved since the recession.

This year, the economy is showing more robust signs of growth, with employers adding an average of 230,000 jobs a month in the first half of the year, up from 194,000 a month in 2013. That’s helped knock down the unemployment rate to 6.1 percent, the lowest in nearly six years.

Meanwhile, consumer spending at retail stores picked up an average of 0.5 percent in the April-June quarter after a severe winter weighed on sales earlier this year.

Increased retail spending can help drive profits for credit card issuers like American Express. All told, U.S. credit card debt is up 2.5 percent over the past year, according to the Federal Reserve.

This spring, American Express sold half of its stake in its business-travel division for $900 million to an investor group led by Certares International Bank. The move created a joint venture that operates the business under the American Express Global Business Travel name.

That transaction, which closed at the end of June, led to the one-time gain of $626 million during the quarter.

Non-interest revenue, including card and travel commission fees, rose 4 percent to $7.34 billion.

American Express’ provision for losses declined to 6 percent to $489 million.

Expenses edged higher as the company spent more on marketing and cardholder reward programs.

All told, American Express’ profit increased to $1.52 billion, or $1.43 per share, from $1.39 billion, or $1.27 per share, in the same quarter a year earlier.

The average per-share estimate of analysts surveyed by Zacks Investment Research was for profit of $1.38.

The company said revenue rose 5 percent to $8.66 billion from $8.25 billion in the same quarter a year earlier. Analysts expected $8.67 billion, according to Zacks.

American Express shares tacked on 17 cents to $91.88 in after-hours trading. The stock closed down 15 cents at $91.71 in regular trading Tuesday.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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