American Express Co and Capital One Financial Corp both reported better than forecast fourth quarter earnings, but expressed concern about the growth outlook for credit cards.

American Express, the largest U.S. credit card company by purchases, posted much higher fourth quarter earnings, beating forecasts, helped by rising consumer spending and lower credit losses, but revenue was flat.

Executives for the two U.S. credit card companies were cautious about the industry's prospects for growth in 2010, amid changing appetites for consumer credit, and new looming regulations.

The lack of consumer demand for credit, across our businesses, is striking, said Capital One Chief Executive Richard Fairbank during the company's earnings call late on Thursday.

Fairbank said he expected the industry's growth to stagnate under pending fee curbs imposed by the CARD Act, passed last year by the U.S. Congress. He said the industry may even contract slightly in 2010.

American Express Chief Financial Officer Dan Henry told investors on a conference call that growth would remain slow going forward.

We expect the global economy to continue to recover gradually, and the resulting environment to be characterized by billings growth that is more modest than we experienced before the recession, as consumers and businesses remain cautious about their spending, he said.


At American Express, the credit card lender and payment network said net income rose to $716 million, or 60 cents a share, from $240 million, or 21 cents a share in the same quarter a year earlier. [nN21176738]

Revenues net of interest expense were roughly flat at $6.5 billion, beating analysts' forecast of $6.1 billion.

Still, the lack of revenue gains, may have disappointed some investors. American Express shares were down 2.3 percent in after-hours trading.

A huge chunk of the income gain was derived from reduced credit losses -- although this is to be very much applauded, it is important to point out that overall revenue was basically stagnant, Celent analyst Red Gillen said in a prepared comment.

While this may be relatively acceptable in a recessionary environment, it will not be well-received by investors in a growing world economy.

Capital One -- which operates a major commercial banking franchise alongside its better-known credit card business --

reported net income available to common shareholders of $375.6 million or 83 cents per share, down from $393.5 million in third quarter 2009. In the year ago fourth quarter the company reported a net loss of $1.45 billion, which was at the height of the financial crisis.

Total revenue rose to $3.37 billion from $3.17 billion in the year ago fourth quarter.

The McLean, Virgina-based company beat analyst expectations of 40 cents per share, but shares were off by 3.2 percent in aftermarket trading. [nN21236936]

Capital One reported its credit card business was the biggest profit driver for the quarter, reporting $509.9 million in net income from the unit, a 74 percent rise from the prior quarter's income. Credit card revenue was $2.9 billion, down 2.2 percent from the prior quarter.


In the most recent quarter, American Express' loan loss provision fell 47 percent from the year ago, to $748 million.

At Capital One, credit card delinquencies remained high from the third quarter of 2009, as charge-offs remained roughly the same at 9.58 percent.

American Express suffered big credit losses in 2008 and 2009 after boosting its lending earlier this decade, but losses began stabilizing last year. Capitol One's credit losses remained elevated through the end of 2009.

American Express' shares rose more than 115 percent last year, outpacing the Standard & Poor's 500 index's <.SPX> increase of 23 percent, as it turned in earnings throughout the economic downturn and emerged as one of the stronger financial companies.

Capital One's shares rose 18 percent last year.

(Additional reporting by Dan Wilchins; editing by Carol Bishopric)