Credit card issuer American Express Co reported a better-than-expected second-quarter profit as it benefited from cost-savings after cutting jobs.
Stiff competition, a strong U.S. dollar and sluggish revenue growth in recent years prompted AmEx to announce in January that it would axe over 4,000 jobs this year.
Salaries and employee benefits, AmEx’s second-biggest expense, fell 25 percent to $1.25 billion in the three months ended June 30, pulling total costs down by 4 percent to $5.6 billion.
This helped AmEx report earnings of $1.42 per share instead of $1.32 per share as analysts had estimated, according to Thomson Reuters I/B/E/S.
AmEx’s net income attributable to common shareholders fell 5 percent to $1.44 billion as a stronger dollar cut into revenue from markets outside the United States. These markets account for about a sixth of the company’s revenue.
The dollar has gained about 21 percent against a basket of major currencies in the past 12 months.
Shares of AmEx were down 2 percent at $77.40 in after-market trading.
“(AmEx did) better than our expectations on earnings, but people might focus on revenue being slightly weaker, though a lot of that is driven by FX,” FBR & Co analyst Sanjay Sakhrani said.
Total revenue, net of interest expense, fell 4 percent to $8.28 billion, dragged by a 9.6 percent decline in revenue from card services from markets outside the United States.
Revenue from the U.S. Card Services business rose 6 percent to $4.7 billion, net of interest expense.
Costs at this business rose 4 percent to $3 billion, partly driven by expenses from previously renewed co-brand partnerships, AmEx said.
There is stiff competition in the industry to bag prominent “co-brand” deals, in which card issuers team up with prominent corporate partners – often supermarkets or airlines – to sell cards.
AmEx, whose image relies on catering mainly to wealthy corporate clients, lost a couple of lucrative co-brand contracts this year because it charges higher prices than rivals.
The company’s exclusive tie-up with Costco in the United States will be given over to Citigroup and MasterCard Inc in March. The deal accounted for 8 percent of spending on AmEx cards in 2014.
AmEx said in February that the loss of the U.S. Costco contract would hurt earnings for the next two years.
The company also ended a deal with JetBlue Airways. The contract was picked up by Barclays Plc and MasterCard.