(Reuters) - American Express Co’s (AXP.N) quarterly revenue narrowly missed expectations as cardmember spending remained muted, and the credit card company said it did not expect much impact from European Commission’s plans to limit fees on card transactions.
The company’s shares, which fell as much as 5 percent on the Nasdaq on Wednesday following the European Commission’s proposal to limit fees banks can charge to process card payments, were down about 2 percent in trading after the bell.
The company’s proprietary consumer and credit card business would not be covered by the pricing caps, outgoing Chief Financial Officer Dan Henry said on a post-earnings call. Unlike MasterCard Inc (MA.N) and Visa Inc (V.N), which are only payment processors, American Express issues its own credit cards.
Henry, however, said the EC proposal would have a direct impact on the company’s Global Network Services business, under which it partners with banks to issue cards on its network. The business contributes about 17 percent to the company’s revenue.
American Express, a Dow Jones industrial average component, said cardmember spending increased 8 percent in the second quarter after adjusting for foreign currency translations -- its fifth successive quarter of single-digit growth after more than two years of double-digit growth.
Corporate expense accounts have come under greater scrutiny in recent months as companies look to cut costs to protect profit margins, hurting American Express, which gets more than a quarter of its U.S. billed business from affluent corporate customers.
“It seems like they are keeping their expenses under control but clearly the hope is that while that happens, the top line will start to pick up,” Sameer Gokhale, an analyst at Janney Capital Markets, said.
American Express’ consolidated expenses rose slightly to $5.66 billion from $5.62 billion. The company said in January it would control costs and maintain a leaner operating structure by cutting about 8 percent of its workforce.
Analysts said the company is likely to see an improvement in results as spending trends ramp up amidst a recovering economy and a stock market rally.
U.S. consumer spending for the second quarter is expected to rise 8 percent, compared with 7 percent in the preceding quarter, according to a note from Credit Suisse.
“We’re still in a relatively sluggish macro environment, what is encouraging is that we did see acceleration in quarter-over-quarter growth,” Keefe Bruyette & Woods analyst Sanjay Sakhrani said.
American Express reported total second-quarter revenue, net of interest expense, of $8.25 billion, missing analyst estimates of $8.28 billion, according to Thomson Reuters I/B/E/S.
The company’s net profit rose to $1.41 billion, or $1.27 per share, for the quarter ended June 30, beating analyst expectations of $1.22 per share.
New York-based American Express' shares have risen about 20 percent since the company reported its last quarterly results, outperforming the 6 percent rise of the broader Dow Jones Industrial Average .DJI.
Additional Reporting by Aman Shah in Bangalore; Editing by Don Sebastian