American Express says exposure to Target breach 'minimal'
By Aman Shah
(Reuters) - Credit card company American Express Co (AXP), which reported strong quarterly results on Thursday, said it had seen 'minimal exposure' to the data breach at Target Corp (TGT) stores during the U.S. holiday shopping season.
American Express said it had fraud controls in place on accounts affected in the theft, one of the biggest card breaches on record.
About 40 million credit card records and 70 million other records containing data on Target's customers were stolen in the breach disclosed in December.
"The closed-loop is a big advantage for us, especially in situations like this," Chief Financial Officer Jeff Campbell said on a post-earnings conference call, referring to the company's system of issuing its own cards in addition to processing transactions.
Earlier in the day, American Express reported a two-fold jump in fourth-quarter profit as its affluent customers spent more in the U.S. holiday season and fewer users defaulted on payments.
"We ended the year on a strong note, with card member spending up 8 percent despite mixed reports during the holiday shopping season," Chief Executive Ken Chenault said in a statement.
Concerns over debit and credit card safety have increased after Target, the third-largest U.S. retailer, disclosed the breach that lasted 19 days through December 15.
Cards on American Express's platform are seen as safer than those on Visa Inc (NYS:V) and Mastercard Inc (MA) platforms due to the 'closed loop' system.
STRONG RESULTS
American Express benefited from the holiday shopping season in the United States, with billed business in its core market growing 9 percent in the quarter ended December 31, the highest growth in six quarters.
"Even though overall growth in consumer spending has been somewhat muted, the fact that American Express focuses on affluent consumers is helping it grow its billed business," said Janney Capital Markets analyst Sameer Gokhale.
For a graphic on the company's U.S. billed business growth over the past four years, click (http://link.reuters.com/vec26v)
U.S. retail sales increased 3.8 percent in the 2013 holiday season, according to data released by the National Retail Federation on Tuesday.
The same day, the U.S. Commerce Department said retail sales including automobiles, gasoline stations and restaurants rose 1 percent from a year earlier in the October-December period. (http://r.reuters.com/syk96g)
American Express, a component of the Dow Jones industrial average (.DJI), said fewer customers defaulted on payments in the quarter, with worldwide net lending write-off rate falling to 1.6 percent from 2 percent, a year earlier.
Delinquency rates at credit card companies usually rise in the fourth quarter as customers spend more during the holiday season and then find it difficult to repay loans.
American Express's net profit rose to $1.31 billion, or $1.21 per share, in the quarter from $637 million, or 56 cents per share, a year earlier.
Excluding merchant litigation settlements reached last month, earnings were $1.25 per share.
Total revenue, net of interest expense, increased 5 percent to $8.55 billion.
Analysts on average had expected the company to earn $1.26 per share on revenue of $8.54 billion, according to Thomson Reuters I/B/E/S.
American Express shares gained about 55 percent in 2013, outperforming the broader S&P 500 Index (.SPX), which rose 30 percent in the year.
The stock closed at $87.78 on Thursday on the New York Stock Exchange.
(Editing by Kirti Pandey)
