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American Express Company's profit declined 33 percent in the second quarter, hurt partly by higher expenses, as the card company spent heavily on rewards to woo customers amid intense competition from big US banks. Shares of the company, up 16 percent so far this year, dipped 1.2 percent to $84.87 in after-market trading. New York-based AmEx has increased spending on rewards to prevent its generally affluent clientele from switching to JPMorgan Chase & Co and Citigroup Inc, which have rolled out lucrative rewards in an effort to boost their own credit card businesses.

For JPMorgan and Citi, post-financial crisis regulations have made the credit card business more profitable than businesses such as mortgages and capital markets trading. Both the major banks reported upbeat results at their card businesses in their earnings last week. AmEx said it spent $1.93 billion on card member rewards in the second quarter ended June 30, up 9 percent from a year earlier. That increase was the highest since late 2014.

As a result, total expenses soared 21 percent to $5.77 billion, denting profit, which declined but beat analysts' forecasts. Net income attributable to shareholders plunged 33 percent to $1.31 billion, or $1.47 per share, partly reflecting the loss of a longtime partnership with warehouse club retailer Costco Wholesale Corp as well as a $1 billion gain in the year-ago quarter on the sale of a related loan portfolio. Analysts on average had expected a profit of $1.43 per share, according to Thomson Reuters I/B/E/S.

Copyright Reuters, 2017


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