After reporting a bigger-than-expected drop in second-quarter earnings, American Express Co. offered additional detail on the characteristics of defaulting customers.

Despite a sharp rise in chargeoffs, much slower spending growth, and a suspension of its profit growth targets until the economy recovers, Amex continued to defend the profitability of a rapid buildup in accounts.

Several analysts cut their earnings estimates on Amex Tuesday in reaction to the earnings report. Its shares fell 7%, to $37.99, Tuesday.

During a conference call after the market closed Monday, Amex's chief executive, Kenneth Chenault, said regions where home prices have dropped significantly — Amex is heavily exposed to such markets — are still the source of its sharpest problems.

But "every slowdown is different" and Amex is "continuing to learn as we go through this slowdown," Mr. Chenault said.

One new factor has been a deterioration in performance among borrowers with good credit scores. "We're seeing" problems "creep into FICO scores with people who are between 650 and 750," Mr. Chenault said. Amex, he said, had observed a shift "in recent months" where "we're starting to see people with multiple mortgages who are actually having greater difficulty." He said the inverse had been true in the past.

Daniel Henry, Amex's chief financial officer, said on the call that the deterioration in June that the company warned about toward the end of that month was sudden, with the percentage of accounts progressing from 30 days past due to writeoff actually below the January level in February, March and May.

He said that, though "we're having more of an impact of that seasoning on our business than our competitors are, because they have not grown at the same rate that we have," all accounts the company added since 2003 showed damage this year. (Problems tend to appear early in a new account.)

The chargeoff rate in the U.S. card loan portfolio increased 120 basis points from the prior quarter and 280 basis points from last year's second quarter, to 6.5%, and Amex said it expects writeoffs to continue to rise for the rest of the year.

Nevertheless, Mr. Henry said, "for recent vintages, even if we experience higher writeoffs for two years, these investments still have very strong economic returns."

"To the extent there is a slowdown, to the extent we have more customers, we're going to have higher writeoffs … in the short term, but our focus is not the short term," Mr. Henry said. "Our focus is the medium to long term, and we think that those investments to bring in those customers were good decisions."

Amex said it would accelerate efforts to reduce costs and staff, and that the cuts would probably "result in restructuring-related charges during the second half" that it has not yet quantified. But it said it remains "focused on gaining profitable share" and plans no draconian tightening of lending standards.

Mr. Chenault said the New York company has "a number of relationships across 10 years and across products that we want to preserve and grow," so rather than cut credit lines indiscriminately, it is trying to be "very surgical against those customers that we believe based on our modeling have a higher risk."

Mr. Henry said, "We still are marketing at a healthy level across the company," though Amex has "shifted dollars to international."

Amex's net income fell 38% from a year earlier, to $653 million. Earnings per share of 56 cents were 27 cents below the average Wall Street estimate.

Scott Valentin, an analyst at Friedman, Billings, Ramsey & Co. Inc., wrote to clients Tuesday that though Amex has "the highest spending customer base among large issuers, the rate of spending growth is slowing and may reduce the near-term value of the 'spend-centric' model."

"Balances per card have grown at a much higher rate than spending per card," he wrote. "It appears that some of the incremental spend was being driven by higher credit lines. Considering a more cautious consumer coupled with the effect of reducing credit lines, we believe spending per card will continue to" wane.

Sanjay Sakhrani at KBW Inc.'s Keefe, Bruyette & Woods Inc. wrote that certain factors — including that the "lending business is only about 25%-30% of total revenues" and the company is still earning money and therefore "generating excess capital" — suggest good long-term prospects.

Still, Amex's U.S. chargeoffs had reached "levels that were near peaks during previous recessionary cycles." He predicted the chargeoff rate would peak at 9% in the second quarter of next year, though he acknowledged his own uncertainty about the prediction.

Craig Maurer, at Credit Agricole Group's Calyon Securities, slashed his earnings per share estimate for this year by 94 cents, to $2.58, and for next year by $1.24, to $2.71. But "our conviction in the value of the franchise" that Amex "has built has not wavered," he wrote.

For the near term, Mr. Maurer wrote, "clearly the most troubling aspect of the quarter was the drop in domestic consumer spending" growth in June, to 2% year over year, compared with 5% in May and 10% in April. "It's clear that the affluent and upper-middle-class have recognized that they're not immune from pressure on their income levels, driven by economic strife."

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