Credit card spending rose during the holiday shopping season from American Express Co. and Capital One Financial Corp. customers led to higher fourth-quarter profits for both firms, the companies reported.
Results for the companies, two of the country's largest credit card issuers, are viewed closely as a gauge of consumer spending trends. Recent positive economic data fueled optimism that consumer spending could pick up this year, providing a boost to credit card issuers.
AmEx, known for targeting affluent customers who use their cards often, said billed business, a measure of cardholders' spending, increased 7.9 percent globally to $254 billion in the quarter, which Chairman and CEO Kenneth Chenault noted came "despite mixed reports during the holiday shopping season." AmEx's profit more than doubled to $1.31 billion, or $1.21 a share, up from $637 million, or 56 cents a share, a year earlier, which included a restructuring charge. Revenue, net of interest expense, rose 5 percent, to $8.55 billion.
Capital One, which traditionally lends to a broader section of consumers, said profit rose 2.1 percent, to $842 million, up from $825 million a year earlier. Per-share earnings, which include the payment of preferred dividends, rose to $1.45 from $1.41. Net revenue decreased 1.4 percent, to $5.54 billion, driven by a decline in net-interest income.
Capital One, based in McLean, Va., said purchase volume on its domestic cards rose about 3 percent from a year earlier, to $50.4 billion. Excluding the company's portfolio of store credit cards, the figure increased about 8 percent.
"Key fundamentals are healthy and we could start seeing some modest improvement in U.S. card loan growth and card spend on the back of better consumer confidence and economic growth," Donald Fandetti, an analyst with Citigroup Inc., wrote in a Jan. 13 research note.
Capital One's net charge-off rate for its U.S. credit cards was 3.89 percent, down from 4.35 percent a year earlier but up from 3.67 percent in the third quarter.
AmEx said its net charge-off rate for U.S. card loans was 1.5 percent, down from 2 percent a year earlier and 1.7 percent in the third quarter.