Magazine article American Banker

Marketing, Alliances Seen Paying Off

Magazine article American Banker

Marketing, Alliances Seen Paying Off

Article excerpt

Heavy spending on marketing and partnerships with other issuers appear to be paying off for American Express Co., which reported a 19% jump in first-quarter earnings, to $946 million.

While other issuers' receivables shrunk, Amex's grew 3.5%, to $46.3 billion.

Revenue rose 10%, to $7.6 billion. Michael D. Cohen, an analyst at Susquehanna Financial Group LLLP, attributed that growth to "heavy marketing investments" made in the second half of last year.

Such investments continued in the first quarter; marketing expenditures rose 29.7% from a year earlier, to $1.36 billion.

"While the continued rapid growth in marketing investments represents a positive indicator of future growth, we recognize the challenge of tougher comparisons for the remainder of 2005," Mr. Cohen wrote in a note to investors. "That said, we expect operating expense management to offset the impact of slower revenue growth."

Worldwide spending on Amex cards grew 15%, and spending on the cards issued by its network partners surged 35%.

That stable of partners has expanded since October, when a Supreme Court decision ended Visa U.S.A. and MasterCard International rules barring their members from partnering with Amex in the United States. MBNA Corp. has begun issuing Amex cards, and Citigroup Inc. plans to do so this year. Juniper Financial Corp. announced this month that it will begin issuing Amex cards with UBS AG's wealth management division in the fourth quarter.

"I think their partnerships are helping," said Craig J. Maurer, an analyst with Fulcrum Global Partners LLC. "They signed some pretty good partners."

The results were "excellent," Mr. Maurer said. "People would be hard pressed to argue when you are talking about nearly 15% growth in billed business worldwide and more than 7% growth in cards in force versus this time last year. …

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