On Monday, January 22nd, American Express reported that they saw a 4th quarter increase in profits of close to 12 percent. American Express is ranked the number four credit card issuer in the United States.

The 12 percent increase results in a net income change from $669 million (about 53 cents per share) last year to $751 million (about 60 cents per share) this year. This is very close the 77 cents per share that was expected according to Reuters Estimates.

Why the increase in profits for Amex? The holiday season saw customer spending remained strong, despite an increase in the number of bankruptcies filed in 2005- with the average cardholder charging just under $3,000 for the quarter- up about $200 from the previous year, or an average of a 7 percent increase. Additionally, the number of American Express cardholders has increased about 9 percent.

One reason for an increase in spending on American Express cards is the rewards program and incentives for using them. American Express is able to offer incentives for using their card at specific supermarkets, or when buying from shops linked to the American Express website- and without the incentives costing Amex a fortune. This rewards program helps American Express stay a step ahead of the industry.

Out of the United States credit card spending, American Express controls a little over 23 percent, which is an increase of about 1 percent from last year. Additionally, American Express is experiencing growth in international markets. The first corporate card with the American Express logo was released in China in November of 2006.

American Express also sold certain businesses, one of which being Ameriprise Financial, Inc during the third quarter of 2005. Taking into consideration the costs of spinning off a business, and the results of businesses sold by American Express, their net income was $745 million in the fourth quarter, which was actually down 17 percent from the previous year, of $896 million net income.

Having a major impact on American Express profits is the recent networking they’ve been doing with Citibank, Bank of America and HSBC. At the end of 2005, Citibank began offering American Express branded credit cards, and partnerships were formed between Amex and HSBC as well as Bank of America. In 2006, American Express signed an agreement with GE Consumer Finance. Each of these partnership opportunities are helping to fuel the growth of American Express.

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