American Express 3Q profits rise 8%

American Express says 3Q profits rose by 8%, helped by higher fees and more card members carrying a balance

American Express's third-quarter profits rose by 8%, the credit card company said Friday, as its members spent more on its eponymous cards and more carried a balance.

The New York-based company earned a profit of $1.76 billion, or $2.08 per share, up from $1.65 billion, or $1.88 per share, in the same period a year earlier. The results came in slightly above analysts' estimates, who were looking for per-share results of $2.07 per share, according to Zacks Investment Research.

AmEx card members spent more on their cards this quarter, and the company was able to grow customers despite raising the annual fees on its cards in recent months. AmEx customers spent $308.2 billion on its cards last quarter worldwide, up from $294.7 billion a year earlier.

AmEx earns most of its money by charging a fee to merchants for each transaction to accept its cards. The fee varies by merchant size and industry, but the average rate AmEx charged to accept its cards last quarter was 2.39%.

To drive revenue in the face of increased competition, American Express has been shifting away from its traditional charge card business model — where the balance needs to be paid off entirely at the end of each month — to a model that encourages more card members to keep a balance. While that allows AmEx to collect interest on those balances, it also puts AmEx more at risk if customers don't repay or fall behind.

This quarter AmEx saw both things happen. Interest income at the bank rose 12% from a year earlier. Meanwhile, AmEx also had to set aside more money to cover potentially bad loans it made.

AmEx has also been earning more money on annual fees on its cards. The company's Platinum Card saw its annual fee rise to $550 last year from $450, an increase that seemed to not impact demand for the card, and the company has raised fees on its other products like the Gold Card. Total net card fees earned by AmEx were $1.03 billion in the quarter, up 19% from a year earlier.

The credit card issuer and global payments company posted revenue of $10.99 billion in the period, also exceeding Street forecasts. Eight analysts surveyed by Zacks expected $10.95 billion.

American Express Co. expects full-year earnings in the range of $7.85 to $8.35 per share.