American Express said today it will cut 7,000 jobs, slash expenses and scale back investments to save $1.8 billion next year, in its biggest restructuring since 2001 as it struggles with bad loans and surging funding costs.
The expected cost savings lifted the company's shares 2.3 per cent this morning.
The credit card company was among the first to warn at the beginning of the year that customer spending was slowing and delinquencies were rising and analysts said the coming months will not be any easier.
US consumer spending shrank at a 3.1 per cent annualised rate in the third quarter, the first decline since the last quarter of 1991, a government report said today.
American Express' cutbacks "will help us to manage through one of the most challenging economic environments we've seen in many decades", said Kenneth Chenault, chairman and chief executive, in a statement.
The fourth-largest US credit card lender said the layoffs, which amount to 10 per cent of its workforce, will result in a pre-tax charge of $370 million to $440 million in the fourth quarter.
These restructuring charges would be American Express' biggest since 2001, when the September 11th attacks cut into travel spending and forced the company to take $631 million in re-engineering charges over two quarters.
Reuters