American Express' customers tend to spend more and have stronger credit histories than the average cardholder, so the company looks better shielded against a tough 2008 than many other lenders. Still, investors appeared concerned that AmEx is girding for deteriorating credit conditions and slower US spending.

American Express shares fell more than 2 per cent in after-market trading, having risen US$1.96 (S$2.78), or 4.3 per cent, to close at US$47.40 Monday. Last week, its shares hit a four-year low.

The credit-card issuer posted net income of US$831 million, or 71 cents a share, down 9.9 per cent from US$922 million, or 75 cents a share, in the previous year's fourth quarter.

Total revenue rose 10 per cent to US$6.42 billion from US$5.84 billion in the prior fourth quarter.

Excluding interest expense, revenue came to US$7.36 billion, up from US$6.68 billion a year ago.

The profit results were largely in line with the market's expectations, but sales fell a bit short. The company had previously estimated that fourth-quarter earnings would fall 70 cents to 72 cents a share, and analysts surveyed by Thomson Financial had predicted earnings of 71 cents a share on revenue of US$7.85 billion .

The sale a year ago of American Express Bank Ltd contributed to the tough year-over-year comparison, but the fourth quarter of 2007 did get a US$1.13 billion boost from American Express' settlement with Visa Inc over Visa's alleged stifling of competition.

Profit in American Express' US card services segment fell to US$7 million in the fourth quarter from US$473 million, and its international card segment posted a loss of US$68 million, compared with a profit of US$99 million in the previous year.

For the full year, the company posted net income of US$4.01 billion, up from US$3.71 billion in 2006, and revenue of US$24.14 billion, up from US$22.16 billion in 2006.

Struggle to pay debts
As people struggle to pay their mortgages and keep up with rising energy and food costs, more are failing to make their card payments - particularly in regions such as California, Florida, Ohio and Michigan. Rising bankruptcy rates from last year's unusually low levels have also boosted the number of defaults.

In US cards, American Express warned earlier this month that it would take a US$438 million charge for rising write-off and delinquency rates. Total provisions for losses and benefits - which include rewards for cardholders - amounted to US$1.52 billion, up 70 per cent from the prior year.

'The fourth-quarter additions to reserves were appropriate for an environment that is more difficult than we have seen in recent years,' said Chairman and Chief Executive Kenneth Chenault in a statement.

'While our outlook for 2008 remains cautious, and we continue to expect slower earnings growth in the year ahead, we are not changing our fundamental approach to managing the business.' -- AP