AmEx Vs. Capital One: Credit Card Sector Woes Prevailing (COF, AXP)

American Express Co. (NYSE: AXP) is a very different company from credit card rival Capital One Financial Corporation (NYSE: COF).  At this point in time, both are suffering as the credit card sector improvements had quite a few issues in the last week.

American Express beat its estimates for the fourth quarter but shares went down from rising loan loss provisions and as its revenues were short of plan.  AmEx managed to grow expenses at a slower rate to help its beat earnings expectations.  The company increased its provision for loan losses with some $409 million.  AmEx serves mostly higher credit customers.

Capital One serves the masses with its credit cards and few branches, but it also managed to have soft earnings as non-interest expenses and its sales and marketing costs rose.  Earnings were down to $0.88 per share, down from $1.52 in the fourth quarter a year earlier and under the consensus analyst estimate of $1.56. Capital One’s non-interest expenses rose to $2.62 billion from $2.09 billion in the year earlier.  Expenses of $2.0 to $2.5 billion are also apparently higher than what many analysts were expecting. It is important to keep in mind that Capital One has two major acquisitions which should close during the first half of this year.

AmEx ended up only losing a couple percent on Friday and its shares are up only marginally with a gain of $0.04 to $50.08; Capital One shares are up $0.16 at $46.19 after closing down about 5.6% on Friday.

JON C. OGG