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Amex 3Q drops 60%
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October 22, 2001: 4:12 p.m. ET
Financial firm sees 60 percent earnings drop, blames terrorist attacks.
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NEW YORK (CNNmoney) - American Express reported a 60 percent drop in third-quarter earnings Monday as business declined because of the slowing economy and the Sept. 11 terrorist attacks.
For the quarter ended Sept. 30, American Express (AXP: up $1.00 to $30.32, Research, Estimates) posted net income of $298 million, or 22 cents a share, compared with net income of $737 million, or 54 cents a share, a year earlier. Analysts polled by earnings tracker First Call anticipated a 30 cents a share profit, including restructuring charges and charges related to the Sept. 11 terrorist attacks.
Excluding charges, the company earned $595 million, or 45 cents a share.
Although the company's results failed to meet Wall Street expectations, American Express shares rose 96 cents to $30.28 following the earnings report.
Revenue fell 1 percent to $5.5 billion from $5.6 billion.
American Express reported earnings just hours after Merrill Lynch said it had offered all of its employees severance packages in an effort to streamline costs due to falling profits.
The company, which did not provide any fourth-quarter or future earnings guidance, blamed the drop on a previously-announced $352 million pre-tax charge related to 6,100 job cuts and other cost-cutting measures.
The cost-cutting measures are expected to save about $325 million in 2002, the company said, adding that a portion of that savings will help boost the bottom line.
The company also incurred a $98 million pre-tax charge related to the Sept. 11 terrorist attacks on the World Trade Center and the Pentagon.
The attacks prompted a precipitous drop in consumer travel and purchases, which hurt the company's travel business and credit operations.
"While we were on target to meet prior consensus for third-quarter earnings, the terrorist attacks obviously had a significant impact on the overall economy and we saw clear evidence of that as consumer spending, business travel and investment activity slowed after Sept. 11," CEO Kenneth Chenault said in a statement.
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The credit-card issuer was forced to vacate its New York headquarters during the attack, in which hijackers slammed commercial jets into the twin towers, destroying that complex and damaging the World Financial Center, where American Express' corporate headquarters was located.
American Express also incurred $42 million in costs related to relocating facilities and replacing equipment, though insurance is expected to cover most of that and it did not affect third quarter results, the company said.
However, the company said it is still evaluating the costs associated with the damage to its offices, extra operating expenses and business interruption, a substantial part of which it expects insurance to cover.
Revenue from travel related services increased just 2 percent in the period, primarily reflecting a 28 percent drop in sales after the Sept. 11 attacks that offset gains in loan growth and fee revenues.
American Express Financial Advisors posted a 46 percent drop in net income for the quarter to $145 million from $269 million a year earlier. Net revenue declined 14 percent. The decline reflects the impact of restructuring charges in addition to insurance claims related to the terrorist attacks, the company said.
The unit's results also reflect continued softness in the equity markets as the economy slowed and investors held onto their money.
American Express Bank posted a net loss of $43 million compared with a $7 million profit a year earlier, the company said. The loss reflects the impact of restructuring charges. 
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